Welcome to the Block Rewards blog, where we summarize the latest on Bitcoin and compensation practices, and provide helpful, comprehensive resources for employers and employees looking for better wages and benefits.
Canada is quietly emerging as a leader in the Bitcoin revolution. In fact, Canada surpassed the United States in launching the first registered Bitcoin exchange-traded fund, enabling Canadians to hold Bitcoin in their RRSPs or TFSAs—something few countries offer. What's more, in December 2024, Vancouver's Mayor, Ken Sim, boldly proposed that the city invest some of its treasury reserves in Bitcoin, putting Bitcoin squarely on Canada's political map.
With Bitcoin increasingly gaining media attention, the question arises: Can Canadian employees legally be paid in Bitcoin? The short answer is "yes"—paying employees in Canada using Bitcoin is completely legal. However, navigating this landscape requires some consideration. As trusted experts in this space, we felt compelled to share our insights.
While Bitcoin isn't considered legal tender like the Canadian dollar—yet!—it functions similarly to assets like gold. This means that if an employee wishes to convert part of their paycheck into Bitcoin or an employer wants to offer it as part of employee benefits, that's perfectly fine!
However, there are a few things to keep in mind:
1- Bitcoin doesn’t change the state of play on Canadian labour laws
2- Bitcoin has unique tax implications related to its treatment by the Canada Revenue Agency
3- Employees should consent to Bitcoin and it should be voluntary
Canadian Employment Rules and Bitcoin
While Bitcoin introduces innovative ways to pay employees, it doesn't exempt employers from following Canadian employment laws.
For instance, if part of a paycheck is paid in Bitcoin, employers must ensure it complies with minimum wage regulations, regardless of Bitcoin's price fluctuations. Employers must also still deduct income taxes, CPP, and EI contributions—even if part of the payment is made in Bitcoin. Additionally, overtime pay, vacation entitlements, and statutory holiday requirements remain unchanged. Whether wages are paid in Canadian dollars or Bitcoin, employees must still receive accurate pay stubs and transparent accounting of their earnings.
Bitcoin may transform how we think about money, but the rules are non-negotiable when it comes to Canadian labour laws.
Understanding the Tax Implications of Bitcoin in Canada
Bitcoin is classified as a commodity, not currency, by the Canada Revenue Agency (CRA). So, when employees are paid in Bitcoin, the Canadian dollar value of Bitcoin at the time of payment becomes their "cost basis" for capital gains purposes. This means that if the value of Bitcoin increases after it's received and the employee decides to sell or use it to purchase something else, they'll be subject to capital gains tax on the difference between the initial cost and the value at the time of disposal.
Employees will need to keep detailed records of when they received the Bitcoin, at what price, and the price at the time they sell or use it. It's important to note that if Bitcoin is given as a bonus, the cost basis is the original Canadian dollar value of what the bonus would have been if paid out in CAD. This means that if the bonus was intended to be, for example, $1,000 in Canadian dollars, the cost basis for the Bitcoin would be $1,000, regardless of the value of Bitcoin at the time it's paid out. Any appreciation in value from that point onward would be subject to capital gains tax when the Bitcoin is sold or spent.
Understanding these tax implications is crucial to ensuring compliance and avoiding surprises down the road.
Employee Consent and Agreement
While Bitcoin payments are legal, employers should ensure that employees are fully on board with being paid in Bitcoin or having part of their compensation in Bitcoin. It's good practice to have a clear agreement with the employee outlining the specifics of Bitcoin payments—how it will be handled, the conversion process, and any associated risks. This ensures both the employer and employee are aligned and reduces the potential for future disputes or misunderstandings.
On that note, given Bitcoin's inherent volatility, we can't recommend more highly that employers have clear communication with their employees regarding how salary payments in Bitcoin might fluctuate in value. Employees should understand the risks of price swings and be aware of how this impacts their paychecks or benefits. Providing education on these factors will help manage expectations and foster trust within the workforce. Though Bitcoin has been a proven long-term savings engine for many
To wrap up, while it's clear that paying employees in Bitcoin is legal in Canada, it's equally important to recognize the regulatory requirements involved, including compliance with employment laws, tax implications, and employee consent. Employers must ensure that Bitcoin is treated just like any other form of compensation, with full adherence to minimum wage laws, tax withholding, and other employment standards. And it's crucial to educate employees about the potential for price volatility and ensure transparency regarding the tax implications of receiving Bitcoin.
Where do we, Block Rewards, stand as a company in the space?
Our goal is to ensure that employers and employees can approach Bitcoin payroll without the complexity.
Our platform enables employers to offer employees a Bitcoin savings plan, complete with detailed transaction reporting that makes it easy for employees to track and manage their Bitcoin holdings, as well as understand the associated tax implications. This transparency helps employees stay on top of their finances without the confusion often associated with cryptocurrency. Plus, we're constantly expanding our educational resources to ensure both employers and employees are well-informed and empowered to confidently navigate Bitcoin in the workplace.
Block Rewards operates in full compliance with Canadian financial regulations. Our customers can rest assured that their Bitcoin is managed with industry best practices, keeping it safe and secure.
Don't want to be left behind by new technology and emerging compensation trends in your quest to attract and retain top talent? The Bitcoin Savings Plan could work for your company to get started. This is a turnkey solution that sits seamlessly alongside the rest of your benefits solutions - and allows your employees to get a portion of their benefits in Bitcoin with expert guidance and rapid onboarding that takes days, not months.
Subscribe below if you want monthly updates and resources on the future of compensation and Bitcoin - and more critically, how employees and employers can achieve financial freedom with better wages.