One of the fundamental promises of Web3 is trustless and transparent transactions through the blockchain. Contributors expect compensation structures that reflect this.

Web3 organizations that expect to attract the best global talent need to be able to provide payroll to their contributors through means other than just fiat currencies. But they need to be able to do so with a very clear understanding of the regulatory landscape in which they are operating in order to avoid inadvertently entering into (or violating) regulated activities.

This is a monumental undertaking. To achieve this organizations need a comprehensive understanding of the labor and tax laws in each regulatory jurisdiction that their contributors exist, such as:

• Employment laws (minimum wage, etc)
• Fiat tax laws
• Token tax laws
• Securities & equities laws
• KYC regulations
• Money transmitter legislation

This list isn’t even exhaustive — just a few of the most common regulations. And that’s under the assumption that the local authorities have even provided clarity on these laws and how they apply to token payroll. Extrapolate these across the number of jurisdictions your contributors live in… it starts getting incredibly complex.

But that’s only half of the battle. Upon receipt of compensation, the burden now falls squarely on the shoulders of contributors to be able to accurately calculate and distribute their tax obligations as required. Sure they can engage a specialist crypto accountant… if they can find one.

And, don’t think you can continue operating unnoticed by tax authorities. Regulators are starting to pay much closer attention. The U.S. has doubled the SEC’s Crypto Asset unit and are requiring crypto exchanges to issue 1099-B forms for transactions. Where the U.S. leads, the rest of the world tends to follow. Getting this wrong can have some serious, real-world consequences, and regulatory pressure is only going to increase over the coming months.

It’s not all bad news… we’ve built the solution.

WorkDAO’s token payroll and tax engine

Our token payroll solution is redefining compensation in Web3. It’s the only token payroll solution that provides legal and compliant token compensation to contributors, globally. Crypto, tokens, RTUs, RTAs, RTGs, NFTs — whatever compensation structure required, we can deliver — provided it meets regulatory requirements in local jurisdictions.

The tax engine then does all the heavy lifting to instantaneously calculate tax and token withholdings on the contributor’s income. After the Tax Engine calculates the relevant tax withholding, it performs a “sell-to-cover” transaction to exchange crypto for fiat to pay the local tax authorities and ensure the employee is paid the right amount.

How it works

In order to compliantly offer token payroll in each country, WorkDAO first undertakes a comprehensive review of a country’s legal, tax, and labor laws to ensure we are able to compensate contributors compliantly. We do this alongside local legal and tax experts. When rules aren’t clear, we will work with local governments and solicit tax rulings to ensure clarity.

The tax engine instantaneously calculates token taxes in each country based upon key demographic data from the contributors. Powerful backend tax logic is able to classify different types of token income and determine the appropriate amount of taxes that need to be withheld or paid depending on the jurisdiction. Once the taxes are calculated, the tax engine is able to summarize the outputs in a clear and easy manner that can be read and understood by contributors anywhere.

Why it matters

1) Contributors will receive a comprehensive, conservative and predictable tax bill each month.

No unexpected tax bills at the end of the financial year. No costly fees for hiring specialist accountants. No ambiguity around the legality or compliance of your compensation.

2) Organizations will be able to use crypto in their compensation package legally.

Compensate contributors the way they want. No costly establishment fees for licensing or registration. No wasted time understanding the convoluted and unclear regulations jurisdiction-by-jurisdiction.

Our token payroll and tax solution has taken tens of thousands of hours to get right, and it’s unique. We’ve engaged the local experts. We have applied for the necessary licensing. We understand the global payment regulations and we monitor them constantly for change. We’ve done it all so you don’t have to.

We understand the need for token payroll to meet the needs of the Web3 community but deeply believe in the importance of providing it in a compliant and legal manner. With WorkDAO’s token payroll and tax engine, Web3 organizations and contributors alike can rest easy knowing they are on the right side of global regulations as scrutiny increases.

If you want to find out more: https://www.theworkdao.com/