“When a payment processor leaves, a business loses convenience. When a payroll provider leaves, people miss paychecks, and employer liability goes through the roof.”

By Leah Kollross, Roll With Paid

Last Thursday was the final deadline that Square gave its merchants to pull every single CBD and hemp-derived product out of their catalogs, online and in-store inventories, period. As Marijuana Moment previously reported, the company pointed to the upcoming federal redefinition of hemp as the main reason, and quietly took down a page that had once marketed its services to hemp beverage and edible sellers.

Most of the coverage has focused on the products themselves. The bigger story is what Square’s notice tells us about the financial plumbing underneath them, and what comes next for the industry. Point-of-sale was the first vital piece of infrastructure to go. Payroll is where it is going to really hurt.

We’ve Seen This All Before

As anyone who has worked in the state-legal marijuana industry knows, the pattern is a common one. In 2023, the largest payroll provider still willing to serve cannabis companies at the time suspended key services for the sector. By one industry estimate, more than 1,000 plant-touching businesses were left scrambling for a replacement.

Paychex was not an outlier. Operators have described being dropped by mainstream payroll and HR providers with as little as two to four weeks’ notice—often even with no warning beforehand.

The financial mechanism is not a complicated one. Payroll runs mostly on bank transfers. Payroll companies depend on their banking partners, and when a bank’s compliance review turns up exposure to a federally controlled substance, the provider is usually told to cut it loose or the bank could lose its charter.

The client didn’t do anything wrong. Unfortunately, its industry simply showed up on someone else’s risk report.

Hemp Is About To Look Much Different To Every Compliance Department

Congress bought the hemp industry some time this fall. The continuing resolution that passed in September pushes a scheduled federal ban on naturally derived hemp THC products from November 12 to December 11, though synthetic cannabinoids remain on the original November schedule.

Whatever lawmakers do before that new deadline, risk and compliance teams at many banks and processors are not waiting to find out. Square has already decided. And it will likely not be the last.

That matters enormously in a state like Minnesota, where hemp-derived THC beverages are made by craft breweries, sold in liquor stores and poured in bars and restaurants, alongside alcohol.

Many of these employers have never thought of themselves as “cannabis-related businesses.” Their payroll providers may not have either, or even be aware—until now, that is.

A brewery whose THC seltzer is one product line among many could find its entire payroll account under review, covering every restaurant staff worker, bartender and server, not just the people who touch the hemp products. Co-packers who don’t actually produce any hemp products that they sell themselves, are now suddenly in the legal weed business, unbeknownst to them or their investors.

How Workers Will Absorb The Shock

When a payment processor leaves, a business loses convenience. When a payroll provider leaves, people miss paychecks, and employer liability goes through the roof. Tax deposits go out late. Withholding errors pile up during a rushed transition and invite exactly the kind of federal scrutiny no operator in this space wants.

For licensed businesses, timely tax payments are often a condition of keeping the license itself, putting them at immediate risk of being shut down completely.

The people least able to absorb that disruption are the hourly workers who make up most of this industry’s workforce: budtenders, production staff, beverage line workers, bartenders. They didn’t choose their employer’s banking relationships, and they shouldn’t be the ones who pay for them. But inevitably, they will.

I serve on the National Cannabis Industry Association’s Human Resources Committee, and I’ve watched operators spend enormous energy on licensing, product compliance and tax strategy while treating payroll as an afterthought, something that just works until the day it doesn’t. Hemp businesses are about to inherit that blind spot at the worst possible moment.

Payroll Is Infrastructure. Let’s Treat It That Way.

There are three things every cannabis and hemp employer should do before December 11.

First of all, ask your payroll provider directly whether it knows what you sell, and whether its banking partners do. A provider that has never asked is not a safe provider. It’s an uninformed one, and you are one audit away from finding out.

Second, and probably most importantly, understand where employer liability actually sits. Payroll software calculates checks, but you remain the employer of record and carry every statutory obligation that comes with it. An employer-of-record arrangement moves that legal employer role, and the compliance obligations attached to it, to a provider built to carry them. These are different products solving different problems, and operators should know which one they have.

Third, have a contingency plan before you need one. Two weeks is not enough time to onboard a new provider cleanly, migrate employee records and get tax filings right.

Policymakers have a role here, too. Congress has spent most of this year debating whether hemp-derived THC should be legal. Far less attention has gone to whether the businesses selling it can access basic financial services.

Proposals like the Hemp Safety Enforcement Act from Sens. Rand Paul (R-KY) and Amy Klobuchar (D-MN), which would empower states and tribal governments to regulate hemp products rather than impose a blanket federal ban, point in the right direction. But any durable framework has to account for the banking and payroll access these businesses need to operate.

A product that is legal on paper but unbankable in practice is not a regulatory framework. It’s just a slower ban.

The Window Is Very Short

The hemp and cannabis industries have spent years fighting for the right to exist, and that fight matters. But legal status is only half of what a business needs to operate. The other half is the ordinary infrastructure every other employer takes for granted: a bank account, a payment processor, a payroll run that clears on Friday.

Cannabis operators learned that lesson the hard way, one terminated contract at a time. Hemp businesses have the advantage of watching it happen to someone else first. The ones that use the next few weeks to ask hard questions of their providers, understand their obligations as employers and line up a backup plan will be in a far better position than the ones that wait for the notice to arrive.

December 11 is two months away. Your payroll provider’s compliance team may not wait that long.

Leah Kollross is the founder of Roll With Paid., a Minnesota-based payroll, HR and employer-of-record company serving the cannabis and hemp industries, and of 23rd State, a Minnesota-based cannabis beverage brand. She is a member of the (NCIA) National Cannabis Industry Association’s Human Resources Committee.

The post Hemp Businesses Are About To Learn What Marijuana Operators Already Know: Payroll Can Disappear Overnight (Op-Ed) appeared first on Marijuana Moment.