As blockchain technology gains more mainstream acceptance, businesses are seeking ways to use it for operational optimization. Most people probably don’t associate blockchain with human resources. However, the HR department in any corporation deals with the most complex logistics and transactional issues. Naturally, blockchain can be an excellent resource to help resolve these HR problems.
Blockchain is a digital ledger that can keep immutable records. You can think of it as a decentralized database that keeps information in such a way that it’s almost impossible to change once recorded. This property means any record put on a blockchain doesn’t need the validation of a third-party. Today on the internet, every transaction requires a third-party validation to establish trust. Blockchain creates a trustless (no trust necessary) environment. This changes the fundamental way we think about transactions. It has the potential to change HR operations in multiple ways.
Blockchains will change job search and hiring
Most hiring portals are in the user data business today. Companies like LinkedIn and Facebook aggregate data about their users and provide services based on that information. As more information moves to the blockchain, businesses that depend on aggregated data wouldn’t have the same level of clout. It will change the power dynamics of the hiring game. LinkedIn might not even exist. Human resources will have direct access to candidate data.
Aggregation of data on blockchains also have other implications. Currently, most job seekers can change their resumes to reflect the job they are applying for. Human resources departments have to spend large chunks of time verifying the authenticity of job seekers claims. It involves checking educational and vocational records, calling references, running criminal background checks and more. It’s a time-consuming process. Blockchain has the ability to change this dynamics.
In the future, job seekers will be able to record their personal career information on blockchains. As a result, HR departments will be able to easily verify the information in a single location and candidates will be unable to manipulate the data. Blockchains can hold the employment history, reasons for leaving previous jobs, education, certificates and even performance evaluations.
So businesses can hire candidates with more confidence. It’s also good for the job seekers. They don’t have to consistently update their information. Blockchains can help create a more efficient resume-less ecosystem.
Blockchains will improve tax filings
Taxes are complicated. Companies are using global workforces, contractors, and temp workers. All these diverse ways of hiring has only complicated the HR landscape. There is more paperwork to handle. There is more rules and regulations to follow. Taxes for complex workforces can take up a lot of HR time and energy. Keeping track of the headcounts and tax rules are a huge burden for them.
When HR is dealing with tax issues, a large amount of time is spent ensuring all the tracked data is correct. Verifying data across departments is a tedious task. Blockchains keep track of records in a distributed manner. It means departments can maintain information more cohesively. It adds a new level of transparency to the whole system. Also, nothing is ever lost on the blockchain.
So if HR needs to go back to some data from the past, they know they will always have the necessary information. Blockchains can help the workers too. Employees who are contractors or freelancers have to go through the same level of complications as HR. They have to often query information from the companies they worked for. It can put additional burdens on these group of employees. There is always the fear of mismatched records and information between the companies and the contractors.
Blockchain puts the worker’s mind at ease. There is less chance of misinformation or miscommunication. Everyone can verify all invoices and receipts on the same blockchain. It also will save a lot of paperwork for human resources.
Blockchain will automate mundane human resources tasks
Blockchain is changing various aspects of financial transactions and legal contracts. When human resources are dealing with an international workforce, they have to deal with the banking laws of each and every country. The laws will not disappear.
But blockchains can help improve the flow of transactions by using smart contracts. Smart contracts are basically computer programs that run on blockchains. For example, smart contracts can handle payroll. When certain conditions are met, contractors and temp workers will get paid automatically. There are similar tasks performed using central databases. But central databases are always prone to attacks and manipulations. And somebody has to be responsible for these databases.
Blockchain provides a trustworthy alternative for payroll transactions without all the headaches of central databases. As cryptocurrencies gain more acceptance, it’s going to be possible to manage financial transactions without banks and governments. It will help HR departments maintain worldwide workforces more efficiently. Human resources will also be able to use smart contracts to replace legal contracts. These contracts will execute tasks at machine speed
Challenges of using blockchain in HR
Blockchain presents exciting possibilities to improve human resources. But there are some challenges too. Blockchain is a relatively new technology with unproven track record for distributed applications. The resilience of the technology in cryptocurrency is a good sign. But there is a lot more research and development that needs to be done.
Privacy might be one of the big issues in blockchain-based HR applications. Blockchain is maintained in an open-source and distributed manner. It is good for transparency, but bad for privacy. The issue might cause headaches for early adopters.
However, in the coming years, the definition of privacy might change too. We never expected to share the list of friends we have. But most of us do it on social networks without thinking about it twice. Because blockchain technology provides benefits for everyone involved, we can expect to see it adopted in HR departments across the world.
Blockchain is a fascinating technology that is capable of influencing every facet of modern life. HR departments can take advantage of this technology and improve their efficiency, performance and cost-effectiveness.
If you are looking for blockchain experts for your small business, our engineers and analysts at IoTCoreSoft are ready to help. Contact us today.