A troubling trend is emerging in the world of cannabis: established payroll and HR companies are suddenly dropping clients in the space, including many who are very remotely connected to the industry.
Unfortunately, provider shut outs apply not only to dispensaries and growers, but also to many other businesses that don’t necessarily sell, grow or transport weed, such as medical offices, technology platforms, and pharmaceutical operations.
To make matters even worse, cannabis companies are often given as little as 30 days to find and onboard a new provider that can address their specific needs. This concerning trend is putting cannabis companies in precarious positions as they scramble to ensure that paychecks and tax payments aren’t disrupted by sudden changes in payroll workflow.
“I’ve never witnessed anything quite like what’s occurring in the cannabis industry now. Having legitimate companies being dumped by their HR and payroll providers is a hugely overlooked and rampant issue,” says Keegan Peterson, founder and CEO of Wurk, a technology company that creates payroll and HR solutions for the cannabis industry. Peterson was inspired to create Wurk after learning that a friend’s company was dropped six times by mainstream payroll providers.
“This issue is another symptom of the disconnect between federal and state legislation around the legality of cannabis,” Peterson explains.
A Scheduling Problem
Major payroll and HR companies are backed by national banks that must abide by federal laws – which still classify cannabis as a Schedule I substance. This creates substantial obstacles for payroll companies operating in legal states when they try deposit funds into a national bank, because they can’t prove that cannabis companies are compliant with state laws.
To further complicate matters, reporting laws make it complex for banks to underwrite a cannabis company, and there is still no federal framework for providing legal cannabis businesses with financial services. Additionally, both banks and payroll providers can be fined for engaging with the industry by federal watchdogs.
Rather than figuring out a way around these obstacles, many large payroll providers are simply (and understandably) refusing to get involved.
According to Peterson, this dissonance generally plays out in one of two ways when it comes to payroll providers.
For a big-box company like Automatic Data Processing (NASDAQ: ADP), corporate messaging is strict about not supporting the cannabis industry. Notwithstanding, salespeople on the ground are still