Highlights
- Cannabis businesses face significant challenges in paying employees due to federal banking restrictions.
- Non-compliant payroll practices, such as cash payments or misclassification, can have severe legal and financial consequences.
- Partnering with a specialized cannabis banking and HR provider is crucial for success. At Greenleaf HR, we help cannabis businesses navigate complex regulations and ensure compliant payroll. Contact us to learn how we can help.
The cannabis industry supports over 440,445 jobs in the U.S. Yet, as recreational marijuana legalization spreads across the country, cannabis business owners continue to face complex challenges in operating legally under federal and state regulations. Banking restrictions and constantly evolving tax requirements present unique obstacles, particularly when paying employees.
So, how do dispensaries pay their employees? This article explores common strategies in the cannabis industry and reveals the best payroll methods available to ensure fair and compliant compensation.
Let’s get started!
The Challenges of Dispensary Payroll
Cannabis business owners face multiple challenges when it comes to employee payroll.
The fact that marijuana is classified as a Schedule I controlled substance by the federal government severely limits access to traditional banking services for the industry.
Many reputable banks are reluctant to do business with cannabis companies, fearing legal repercussions and reputational damage. This creates a precarious situation for dispensary owners and forces them to seek alternative solutions for essential business functions like paying their employees, usually known as budtenders.
This lack of access to mainstream banking leaves dispensary owners facing a critical dilemma:
- Paying employees in cash or through informal channels carries significant legal and financial risks, including potential fines, penalties, and even criminal charges.
- Finding a compliant and reputable financial institution that serves the cannabis industry can be a time-consuming and challenging process.
This can be incredibly frustrating, as their ability to operate legally depends on factors that are out of their control.
Cannabis Payroll: The Wrong Ways to Pay Your Employees
Some cannabis businesses pay their employees by cash or using a product trade-out or bartering system. These practices are not only unethical but also illegal and highly risky for cannabis businesses. Paying employees “under the table” doesn’t withhold any state or federal taxes from their paychecks and can result in substantial fines and penalties for the business owner.
Another common, yet illegal, practice is classifying employees as independent contractors (1099 employees). The IRS and state labor boards actively investigate and prosecute businesses that misclassify employees, so this practice can lead to back-tax payments, fines, and even criminal charges, not to mention costly lawsuits and legal battles.
For example, any one of your employees could potentially come after you and your business for unemployment money they’re unable to collect from the government. If employment taxes have never been paid, how is that employee able to receive their unemployment?
Operating a cannabis business requires strict adherence to all applicable labor and tax laws. Ignoring these laws creates a significant risk to the business’s long-term viability and the well-being of its employees.
Finding the Right Solution for Your Cannabis Business
Now that we’ve explored the pitfalls of non-compliant payroll practices, let’s focus on finding the right solutions for your cannabis business.
A strategic cannabis banking partner can take all the guesswork out of your payroll and HR policies and regulations. By choosing the right team of specialized professionals, you can guarantee access to federally insured banking services while ensuring full compliance with all relevant federal and state regulations.
Many banks say they support the cannabis industry but have strict regulations on how much you’re able to deposit at once. A solid cannabis banking partner, however, offers flexible deposit limits, whether that be $400 or $40,000.
In a nutshell, a great cannabis banking partner is there to do the hard work for you when it comes to payroll, HR, workers’ compensation, safety, benefits, administration, and compliance. They provide the financial infrastructure you need, so you can focus on what’s most important: growing your cannabis business. It’s a true partnership.
Best Tips for a New Cannabis Business Owner
Starting a cannabis business can be challenging, especially when it comes to navigating the complex world of payroll and banking. Here are a few key tips for new dispensary owners:
- Find a trusted HR partner. Invest time in finding a reputable and experienced HR partner specializing in the cannabis industry. Avoid simply choosing the newest or most advertised company. Look for a partner with a proven track record and a deep understanding of the unique challenges and regulations facing cannabis businesses.
- Learn your local and federal laws. Thoroughly research and understand all applicable federal, state, and local laws and regulations related to cannabis businesses. Pay close attention to labor laws, tax regulations, and industry-specific compliance requirements. Requirements that you wouldn’t think pertain to your business, typically do. For example, workers’ compensation is not an option; it’s a legal requirement.
- Understand tax implications for cannabis businesses. Recognize that the tax obligations for a business differ significantly from personal income taxes. Seek expert guidance from tax professionals specializing in the cannabis industry to ensure accurate tax filings and avoid costly penalties.
Discover Greenleaf: Payroll You Can Count On
There’s a lot that goes into a thriving cannabis company. Having a strong banking partnership is crucial, but it’s just the beginning.
At Greenleaf HR, we understand the unique challenges and opportunities facing cannabis businesses. That’s why we offer a comprehensive suite of services, including payroll and tax services, but also HR management, employee benefits, and compliance guidance.
Our goal is to empower cannabis businesses and provide them with the resources they need to succeed, simplifying complex administrative tasks, and ensuring accurate, timely, and compliant payroll.
Experience the Greenleaf HR difference. Partner with our team of experts and find the solutions you need to succeed. Contact us today for a free quote.
