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CRYPTO PAYROLL


RISE GUIDE TO HYBRID CASH & CRYPTO PAYROLL: PAVING THE FUTURE OF GLOBAL
WORKFORCE PAYMENTS

October 24, 2023
by
David Gardner




TABLE OF CONTENTS

 1. What is Hybrid Fiat and Crypto Payroll
 2. The Best Ways to Pay Workers in the Crypto Industry
 3. Introducing the Future of Payroll: Hybrid Fiat and Crypto Payroll
 4. The Differences between Hybrid Payroll and Traditional Payroll
 5. Companies that are Onboarding with Hybrid Solutions 
 6. The Benefits of Using Hybrid Fiat and Crypto Payroll 
 7. How to Choose the Right Crypto Payroll Platform for your Business
 8. How to Get Started with Hybrid Fiat and Crypto Payroll
 9. The Future of Crypto Payroll

 1. test

Dive into The Rise Guide to Crypto Payroll to understand how businesses can
integrate cryptocurrencies into their compensation structures, explore its
benefits, challenges, and envision the future of payroll in the web3 era.


WHAT IS HYBRID FIAT AND CRYPTO PAYROLL

Hybrid fiat and crypto payroll is a payment system that blends traditional fiat
currencies with crypto to compensate workers. This innovative payroll method is
pioneering a more flexible future of compensation as well as a cost-efficient
and scalable means of cross-border remuneration. 

Allowing for diversification in compensation options, hybrid payroll aligns with
the growing interest in crypto as a form of payment. 

Recent findings revealed that one third of millennials and half of gen z would
enthusiastically receive a portion of their salary in crypto. With forecasts
indicating that in five years these two generations will comprise 58% of the
workforce, integrating their demands into business strategy is integral for
maintaining a competitive edge in recruitment. 

On the flip side, many crypto-native businesses, including decentralized
autonomous organizations (DAOs) operate on-chain and hold their treasuries in
crypto. Providing traditional fiat payments to their teams becomes no easy feat
as they have to first off-ramp their crypto through a centralized exchange,
incurring multiple swaps and fees, and significant delays before funds reach
their bank accounts. 

For those that are paying their contractors and contributors in crypto, many are
spending countless hours issuing manual wallet to wallet transfers, which are
prone to human error and accounting issues. 

A seamless hybrid payroll solution designed for the modern workforce offers
crypto-friendly businesses and DAOs a solution to both the complications
associated with fiat to crypto payments as well as crypto to fiat payouts, while
even automating  crypto to crypto batch payments without needing to complete
manual wallet to wallet transfers each pay period.


CAN YOU PAY EMPLOYEES IN CRYPTO?

In the United States, while it is perfectly legal to remunerate contractors in
crypto, the legality shifts slightly with regard to paying salaries to
employees. This is influenced by several factors which include state-by-state
discrepancies and the volatility of crypto’s value, which, in the face of
matters such as minimum wage, can present challenges. 

There are, however, inconsistencies in statements made by the Federal Government
and the IRS. While the Fair Labor Standards Act requires regular or overtime
wages to be paid in cash, the IRS, in it’s FAQ section on Virtual Currency
Transactions, gives the following response to the question of whether crypto
paid by an employer constitutes wages:     

“Generally, the medium in which remuneration for services is paid is immaterial
to the determination of whether the remuneration constitutes wages for
employment tax purposes.”

LEGAL AND REGULATORY CONSIDERATIONS WHEN PAYING EMPLOYEES IN CRYPTO

If an employer is determined to offer some form of compensation benefits in
crypto to their employees, there are legal and fully compliant methods by which
this can be achieved. 

To start, an employee’s base salary must be paid in fiat currency. From there,
however, any additional bonuses can come in the form of crypto. As a best
practice, although it is not a legal obligation, it is highly recommended to
obtain written consent from an employee to document their agreement to this
alternate form of remuneration.

Consider engaging a third-party crypto payroll provider to streamline the
process and ensure compliance with tax and legal regulations. Since paying
employees in crypto does not exempt a company or its employees from tax
obligations, a comprehensive crypto payroll solution that can handle tax forms
is a critical tool for avoiding the costly fallout of noncompliance. 


THE BEST WAYS TO PAY WORKERS IN THE CRYPTO INDUSTRY

The rising demand from the global workforce for expanded opportunities to
receive hybrid crypto and fiat payments has left many employers grappling with
how to implement such payments effectively. 

DIRECT CRYPTO PAYMENTS VS. CONVERSION SERVICES

As the payroll sector evolves, the debate between direct crypto payments and
currency conversion services intensifies. Currency conversion services provide
convenience, but direct crypto payments offer greater flexibility and typically
lower fees.

Choosing direct crypto payments allows employers to grant employees immediate
access to the crypto world, staying true to the decentralized spirit of
cryptocurrencies. This is crucial for DAOs, which operate as on-chain entities.
Handling all HR tasks within the decentralized framework not only saves time but
also aligns with their core values.


Moreover, this approach minimizes reliance on conventional financial middlemen,
leading to additional savings from avoiding conversion service fees.

TAX IMPLICATIONS AND REPORTING

Despite being an alternate form of payment, crypto wages are still subject to
the same taxation as fiat wages. The IRS gives a clear outline of exactly what
is expected when it comes to paying taxes on virtual currencies: 

“Consequently, the fair market value of virtual currency paid as wages, measured
in U.S. dollars at the date of receipt, is subject to Federal income tax
withholding, Federal Insurance Contributions Act (FICA) tax, and Federal
Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax
Statement”


INTRODUCING THE FUTURE OF PAYROLL: HYBRID FIAT AND CRYPTO PAYROLL

In today’s dynamic economic landscape, offering packages for compensation and
benefits that encompass a diverse range of currencies is a business imperative
for future-facing organizations. 

Hybrid fiat and crypto payroll allows for flexibility on both ends for the
employer and the worker. Solutions that are built to facilitate hybrid
transactions ensure that a company can fund payroll in the treasury of their
choosing- fiat in a traditional bank account or crypto in a digital wallet,
including popular stablecoins, such as $USDC- and workers can choose to cash out
their paycheck in their preferred currency. 

Hybrid systems have advantages across various types of organizations. For
US-based companies that want to remunerate employees in crypto, these systems
provide a compliant framework to pay wages in fiat currency and benefits and
incentives in crypto. 

For DAOs that want to expand their payout options to contributors, incentivizing
work with fiat compensation is made possible with on-chain hybrid payroll
solutions. 

Expanded remuneration that includes payment in stablecoins has risen as a
particularly appealing option. While crypto has not fully shed its reputation as
a high-risk asset, stablecoins represent a middleground for those wanting to
hold funds in a non-government controlled currency without taking the full leap
to investments in crypto. 

This is exhibited in the explosive growth that stablecoins have seen over the
last few years. In July of 2023, the market cap for USDt alone topped $80
billion, which marked an increase of more than 730 percent in just three years.
Stablecoins are expected to grow to nearly $5T over the next five years, up from
$125B as of August, 2023.

Adopting a contemporary approach to payroll that includes fiat, crypto, and
stablecoins balances traditional financial options with innovative new systems,
effectively catering to the diverse financial preferences of the modern
workforce. The integration of crypto into payroll and payment funding sources is
both a demonstration of a company’s adaptability and an investment in giving
their workers financial freedom and flexibility. 


THE DIFFERENCES BETWEEN HYBRID PAYROLL AND TRADITIONAL PAYROLL

While traditional payroll involves payments in fiat currency funded by a
treasury held in a traditional bank account, hybrid fiat and crypto payroll
involves the inclusion of crypto held in a self-custody digital wallet or stored
with a custodial service, such as Coinbase. 


TECHNICAL DIFFERENCES 

To start, traditional payroll relies on payees having access to a bank account.
With hybrid payroll, this is neither a necessity nor a limiting factor;
regardless of geographical location or access to banking services, with hybrid
payroll payees can choose the options to receive payouts via their digital
wallets. 

To process hybrid payroll, when compensation is in crypto, rather than going
through a centralized authority or a third-party intermediary, payments are
processed via blockchain technology. All transactions are recorded on a public
ledger, providing transparency and traceability. 

Due to the volatility of crypto, a different set of treasury management
strategies must be implemented when holding part of one’s treasury in crypto. A
key consideration is ensuring liquidity and mitigating the risks of currency
fluctuations. A lack of liquid assets can devastate a project, thus it is
imperative to have sufficient cash flow for executing payroll and covering
operational expenses. 


COMPANIES THAT ARE ONBOARDING WITH HYBRID SOLUTIONS 

Native to web3, DAOs have been early adopters of hybrid crypto payroll
solutions. While in many instances contributor compensation comes in the form of
a project’s native token, for well-established DAOs or those that have adopted a
more inclusive approach, a system for hybrid payroll is used.   

This follows in line with diversified treasury management strategies that aim to
ensure liquidity through not holding all of one’s treasury in a single token, in
this case, a DAO’s native token. Hybrid payroll also serves as an incentive for
contributors; rather than only receiving tokenized compensation, contributors
have more flexibility with the introduction of fiat options.

Another early adopter of this form of payroll are web3 startups who, like DAOs,
typically hold a large percentage of their treasuries in crypto. As entities
that are often deeply involved and invested in blockchain technology, using a
hybrid payroll system aligns with foundational principles of decentralization
and innovation.  

While web3-native organizations were first to implement crypto payroll and
hybrid payroll systems, traditional businesses that are crypto-friendly and
seeking versatile ways to compensate workers have been eager to jump on the
bandwagon. 

Whether as an option extended for contractor wages or as an alternate means of
receiving bonuses and incentive packages, crypto lends these traditional
companies a competitive hiring edge.


THE BENEFITS OF USING HYBRID FIAT AND CRYPTO PAYROLL 

The increasing popularity of employing hybrid fiat and crypto payroll systems
has opened new horizons in the world of compensation for web3-based
organizations and traditional companies alike. From attracting tech-forward
talent and accessing global hiring markets to reducing transaction costs and
increasing efficiency, crypto payroll brings with it many advantages.  

ATTRACTING TALENT 

In today’s fiercely competitive hiring landscape, the battle for top talent has
intensified and traditional compensation packages are no longer sufficient when
it comes to attracting the best and brightest recruits. Adopting cutting-edge
technologies like crypto payroll has become a strategic necessity. 

Beyond the many benefits crypto provides as a form of remuneration, payment in
crypto represents an alignment with the future of finance and technology. By
offering crypto compensation and integrating decentralized finance into HR,
companies not only gain a competitive edge but demonstrate a forward-thinking
approach that attracts tech and crypto-savvy talent. 

A pivot in the direction towards embracing blockchain technologies fosters
financial flexibility and signals a commitment to staying at the forefront of a
rapidly evolving global job market. 

STREAMLINED INTERNATIONAL PAYMENTS

A pre-pandemic trend that was accelerated by the mass-exodus towards remote
work, businesses are now more than ever before expanding their hiring practices
across international borders. Yet managing cross-border payments and complying
with a myriad of currency regulations can be a complex and costly endeavour. 

Hybrid crypto and fiat payroll thus takes center-stage as a transformative
solution. Leveraging blockchain technology, crypto payroll offers unprecedented
efficiency and transparency when it comes to international payments.

By sidestepping traditional financial middlemen and their associated fees and
delays, organizations can streamline payroll processes, ensuring that workers
receive their earnings promptly and in the currency of their choosing. This can
mean the difference between waiting on multiple days for the arrival of a wire
transfer and a matter of seconds for money sent via a blockchain transaction. 

The immutable nature of blockchain transactions further reduces the risk of
costly errors that can arise with greater frequency when navigating foreign
financial entities. When onboarding HR and payroll with a crypto-friendly
solution that takes care of international compliance, both risk and hassle are
exponentially decreased. 

REDUCED TRANSACTION FEES

A principal pull that has drawn many businesses to adopt systems for hybrid
compensation is the measurable reduction in transaction costs. Traditional
cross-border as well as local payments often incur substantial fees associated
with intermediary banks, currency conversions, and administrative overhead. 

Blockchain technology, however, provides an antidote to expensive and cumbersome
systems of the past. Hybrid crypto payroll offers a direct and cost-effective
channel for financial transactions. The elimination of intermediaries directly
translates to significant cost savings due to the circumvention of fees
associated with banks and currency conversions.

This is highlighted when comparing options for sending money, such as wire
transfers, with transactions on blockchain networks. Arbitrum for example,
averages a 15 second block time with transactions costing as low as $0.2 - $0.3.
Wire transfers in comparison appear increasingly archaic with their multi-day
delays in arrival and fees that can reach $50.  


THE CHALLENGES FACING CRYPTO PAYROLL

Despite their many benefits and transformative potential, crypto payroll and
hybrid crypto and fiat payroll are not infallible solutions.  

REGULATORY AND LEGAL HURDLES

Taxation of crypto payments varies greatly from one jurisdiction to the next.
Companies issuing crypto payroll must diligently adhere to tax regulations and
stay vigilant in monitoring the ever-evolving compliance laws governing its use
as a form of compensation. 

When companies issue crypto payments on a global scale, they face the choice of
either acquiring expertise in both local and global tax regulations or engaging
a service provider capable of managing this work for them. Figuring out the best
approach based on a company’s needs and resources is an essential first step in
order to ensure total compliance based on each country's unique laws governing
income reporting and tax withholding. 

While for many jurisdictions crypto earned as wages is reported no differently
than fiat, for others there exist specific reporting regulations.

If these are violated, the cost can be a high one; in Japan, a man was sentenced
to a year in prison and a fine of $20,000 for crypto tax violations.  

MANAGING CRYPTO’S VOLATILITY 

One of the main downfalls (or benefits, depending on the market) of crypto is
its high volatility. Fluctuations in the value of crypto assets can present
challenges when it comes to accurately calculating and maintaining a stable
payroll balance. As a result, questions of ensuring liquidity must be addressed
early on. 

Taking a proactive stance is not optional, but a fundamental feature of managing
a crypto treasury. A prudent recommendation is ensuring enough liquid assets to
satisfy payroll and operational expenses for up to a year.   

EMPLOYEE TRAINING AND ADOPTION 

While on the whole a diversity of remuneration options is a major plus, there
will always be workers who need extra incentivizing with regards to adapting to
new technology. This inevitably results in more time and resources invested in
providing employee training and education. Despite initially representing a
cost, the work put in at the onset quickly pays off once the cost savings and
time efficiency of the hybrid payroll system are reaped. 


HOW TO CHOOSE THE RIGHT CRYPTO PAYROLL PLATFORM FOR YOUR BUSINESS

In recent years, crypto payment platforms have begun popping up in a financial
landscape that, up until recently, was structured to primarily facilitate fiat
transactions. With more options now available for incorporating decentralized
finance in HR processes and crypto compensation into payroll, figuring out the
right hybrid or crypto payroll solution for your organization can be confusing. 

By taking into account an organization’s unique requirements and existing
infrastructure, solutions can be compared to identify which ones provide the
most comprehensive services and robust ecosystems to allow for a smooth
transition and optimized integration. 

KEY FEATURES TO CONSIDER 

One of the first elements to take into account when making a decision about
which hybrid payroll system to onboard with is its currency offerings. These
need to speak to the currency in which a company holds its treasury as well as
the currencies in which workers want to receive their compensation. 

An example of this can be seen with ZenAcademy, a digital space built with the
mission of empowering a robust web3 community. With a treasury held in crypto
and stored in digital wallets, they needed to find a platform that could support
payroll funded directly from a digital wallet rather than a traditional bank
account. 

Depending on the country’s in which a company’s workforce are based, if offering
a hybrid system with fiat options, these options must align with the respective
country’s currency. Similarly, if the organization is a DAO, ensuring that
payroll can include the project’s native token is nonnegotiable.  

PAYMENT FLEXIBILITY

In line with ensuring expanded currency options, payment flexibility not only
encompasses catering to employee preferences and company treasuries but speaks
to flexible routing and pay schedules as well. 

While there are many options on the market that allow for payments to be made in
crypto and withdrawn by employees in that same currency, there are few that
provide a built-in routing layer. It is a major benefit to onboard with a hybrid
payroll system that allows for companies to fund payroll in the currency of
their choice- whether fiat or crypto- and payees to receive payouts in their
preferred currency. 

COMPLIANCE WITH LOCAL TAX & PAYMENTS 

Depending on where a company is based and how far-flung their international
teams are, choosing a system that can provide compliance services across a wide
range of jurisdictions is key. Furthermore, not every crypto payment platform
handles tax forms. This additional benefit can represent significant time
savings as well as the avoidance of costly noncompliance errors.

Another compliance feature to prioritize is the currency in which payments are
issued to workers. For US-based companies and DAOs, the ability to finance
payroll in USD or USDC while allowing workers and contributors to receive
payouts across a wide range of currencies means the difference between ensuring
compliance and facing issues of noncompliance.

By issuing all payments in USD or USDC, tax complexities for both worker and
employer are mitigated. Additionally, swapping USDC for USD does not trigger a
taxable event in most jurisdictions, with the worker still technically getting
paid in USD thus allowing for simplified tax reporting.     

SECURITY AND RELIABILITY

When choosing a crypto payroll system, a multi-faceted approach to security and
reliability that offers a robust encryption protocol is of paramount importance.
This should include multi-factor authentication and comprehensive cybersecurity
measures to safeguard sensitive financial data from potential threats.
Evaluating a platform’s compliance with industry standards and regulations, as
well as seeking feedback from other users can provide valuable insights into the
system’s dependability. 


HOW TO GET STARTED WITH HYBRID FIAT AND CRYPTO PAYROLL

Whether you are a web3-native organization ready to onboard with a payroll
platform or a traditional company looking to incorporate crypto into current
payroll offerings, with the right solution, the process should be
frictionless.  

Once the best-fit payroll platform has been identified, the follow-up steps
include connecting either the company’s bank or digital wallet and onboarding
and educating employees. 

Depending on the services that the platform offers, additional steps may involve
the uploading of tax documents, drafting automatable professional service
agreements and SOWs, and creating automated pay schedules. 


CHOOSING A CRYPTO PAYROLL SOLUTION

As more crypto payroll solutions and hybrid fiat and crypto payroll services
emerge, understanding the distinguishing features and advantages of each one is
key for making the best choice for your business. 

RISE

Rise is a comprehensive crypto and fiat payroll and compliance solution designed
for both traditional companies and web3-native organizations. One of its
standout features is its unique flexibility; with Rise, companies can fund
payroll in the currency of their choice- from fiat in a traditional bank account
to stablecoins in a digital wallet- and payees can receive payouts in their
preferred currency, in 90 fiat currencies and 100 cryptos across multiple
blockchains, including Ethereum, Arbitrum, Optimism, Polygon, and Avalanche. 

With a core commitment to ensuring compliance across all fiat and crypto payroll
transactions, with Rise, all payments are recognized as being made in USD. So
while employers can fund payroll in fiat or stablecoins and payees have the
freedom to withdraw remuneration directly through Rise across 190 currencies,
tax ease and compliance are guaranteed through the initial issuance of USD-based
payments.  

Rise helps scale international payroll with automated global payouts and
enhanced security through the RiseID, the platform’s self-sovereign on-chain
identity minted by all Rise users. Beyond payroll, Rise streamlines the hiring
process by conducting KYC checks in minutes, automating professional service
agreements and SOWs, and handling global tax forms. 

REQUEST FINANCE

Request Finance is a blockchain-based payroll platform that caters to the unique
payment challenges of web3-native organizations, including crypto companies and
DAOs operating in a global and remote-first landscape. 

Companies can use the tools built into the Request platform to streamline
invoices and expenses all while leveraging blockchain technology.

While Request provides the payroll layer, what it lacks is the infrastructure
for streamlining HR processes and workforce management. 

UTOPIA LABS 

Offering banking service and treasury management for crypto firms and DAOs,
Utopia Labs began by tailoring their crypto-first solution to address the
diverse financial needs of blockchain-native organizations. Utopia prioritizes
cost-efficient and expedited transaction processing for crypto offramping, all
while maintaining strict compliance standards. 

Beginning in November, Utopia will no longer offer crypto payroll solutions to
crypto startups and DAOs. 

TOKU

Toku’s core mission is centered around streamlining token-based compensation and
ensuring tax compliance, offering tools for token payroll management and
streamlined, one-click global payouts. 

Recognizing the growing demand for compliant, international crypto compensation,
Toku is a dedicated expert in local and global regulations and employment laws
across 100 countries to guarantee full tax compliance for all of their token
payroll operations.  

While Toku is a great option for companies that are operating exclusively in the
crypto sphere, it is very limited when it comes to those that want to offer
expanded options for remuneration since it does not provide hybrid payroll
services.

FRANKLIN

Stepping up to meet the demands of a remote workforce that is constantly growing
and evolving, Franklin is a contemporary payroll solution built to adeptly
address cross-border payments and payroll administration. 

While Franklin supports ERC-20 tokens and over 300 digital wallets, it has
limited flexibility due to the fact that payments can only be crypto to crypto
or fiat to fiat, rather than a combination of the two. This is a major
disadvantage for companies that want the ability to fund payroll in crypto while
allowing payees the option to withdraw payments in fiat, crypto, or stablecoins
(or vise versa). 

DEEL

Deel serves as a simplified payroll solution for remote workforce management. It
offers companies the ability to onboard and oversee their employees while
ensuring compliance with labor and tax regulations. 

Deel provides a secure and versatile payroll processing system which
accommodates various payment methods including direct bank transfers and crypto
compensation. 

Despite allowing for crypto payments, Deel does not operate within the DeFi
ecosystem and instead goes through Coinbase, a centralized exchange. This poses
a major drawback for companies seeking a web3-native platform that supports
self-custody. 


THE FUTURE OF CRYPTO PAYROLL

Global crypto regulation is evolving at breakneck speed and the adoption of
blockchain technology across industries is keeping pace. 

As sectors from healthcare and insurance to fashion and finance begin
integrating blockchain technology and decentralized finance into HR operations,
there’s an increased demand for adaptable hybrid solutions that sit in the
middle of the web2 to web3 spectrum. 

This is further evidenced by projections that anticipate global spending on
blockchain solutions to reach $19 billion in 2024. With Starbucks accepting
Bitcoin and Goldman Sachs using POAP, to remain relevant in a competitive
market, organizations must prepare to integrate blockchain technology or risk
becoming obsolete. 

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