May 19, 2014

Paying Workers in Bitcoin May Be Illegal Under Swiss Law

Paying Workers in Bitcoin May Be Illegal Under Swiss Law


Despite the growing interest digital currency employers have shown in paying their workers in bitcoin and its alternatives, a new report suggests that the practice may not be legal in Switzerland, one of the global leaders in banking and finance.

Entitled ‘The Legality of Wage Payment in Bitcoin under Swiss Labour Law’, the report was penned by Swiss Socialist Party member Jean Christophe Schwaab, who was notably called upon to draft a study on the dangers of bitcoin last December.

Schwaab’s report could have broad implications, as it suggests that the payment of any potentially volatile assets in exchange for employment services is not legal under Swiss law.

Schwaab told CoinDesk:

“According to Swiss labour law, it is lawful to pay all or part of wages in kind or in foreign currency, provided that the amount paid matches the amount in Swiss franc contractually agreed by the parties or required by the collective labour agreement.

However, the payment of wages in kind or in foreign currency must not cause a postponement of economic risk on the worker, because this risk must in all cases be borne by the employer.”


The report comes just weeks after bitcoin-focused payroll solution provider Bitwage released a survey suggesting that nearly one in two bitcoin companies are open to compensating workers in digital currency.
Volatility a key issue

Schwaab asserts that the central roadblock to bitcoin wage payments is bitcoin’s price volatility, which cannot be legally passed on from an employer to an employee per the country’s Federal Act on the Amendment of the Swiss Civil Code.

Because of bitcoin’s rapid fluctuations in value, Schwaab says, workers would be unable to anticipate their income. The regulation in question, he says, mandates that any salary payments should be sustained in value for at least one month after the payment.

Furthermore, he said, the rules are mandatory, meaning Swiss workers are not able to waive this right under the law to accept bitcoin wages.
Bitcoin bonuses are lawful

The report did not fully limit bitcoin transactions between employers and employees, however.

For example, Schwaab noted that there is no law that prohibits employees from exchanging the wages they earn for bitcoin. Further, he suggested that payments that are unrelated to a regular full-time salary would be allowed:

“A bonus (for example, at the end of the year) in bitcoin is generally lawful.”
Community reactions
Speaking to CoinDesk, members of local digital currency trade organization Bitcoin Alliance Switzerland (BAS) weighed in on the report.

BAS president Luzius Meisser disagreed with Schwaab’s findings, noting how Swiss workers are regularly compensated in payments that do not include the country’s native currency, the Swiss franc (CHF), and that a similar discussion also took place when Swiss lawmakers evaluated the legality of salary payments in euros.

“Swiss workers regularly receive part of their salary in non-CHF form. For example, when a company provides free food to employees – above a certain level – its value is added to the income and taxed like the regular salary,” Meisser said.

BAS vice president Alexis Roussel believes that even with the findings of the report, it would be possible for digital currency businesses to pay workers in bitcoin, provided “specific measures are taken by the company to hedge the risk for the employee to ensure [their] revenues are stable”.

Meisser went on to suggest Schwaab’s report may be skewed due to his political associations, stating:

“I am not an expert, but I would take everything that comes from Schwaab with a grain of salt as he is member of the Socialist Party, which was in 2011 also against paying employees in euros.”
Despite the report’s findings and implications, Meisser doesn’t believe it will have a negative affect on the local startup scene:

“Founders and employees at startups are risk-takers by definition. Here, minimal fixed salaries (sometimes zero) and a high variable bonus (be it in form of equity or bitcoins) are normal.”

“Regardless of what Schwaab’s opinion is, startups will continue to do what makes sense to them,” he added.

Swiss town via Shutterstock

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