The rise of blockchain technology has been regarded as the next big thing in the field of distributed ledger technology. The ledger records information in a secure and encrypted form. Users can use it to maintain a database of accurate and genuine records.
This technology allows human resource managers to perform various tasks and functions efficiently, eventually creating a decentralized employee performance assessment system. Let’s explore how they can do this in detail:
Enhance Financial and Personal Data Security
The HR department is responsible for handling the various financial transactions of an organization. They also handle sensitive employee data such as performance records and disciplinary records.
Due to the nature of the data that the HR department collects, the company must have the proper safeguards in place to prevent unauthorized access and use. Blockchain technology is being touted as a solution in the face of increasing cybersecurity threats.
Blockchain technology’s security capabilities make it a game-changer for HR. Some of the world’s biggest organizations, such as Lockheed Martin, are already using blockchain to manage their software security.
Blockchain technology can help prevent both external and internal fraud regarding employees’ sensitive data. Its ability to limit the access of unauthorized individuals to the record makes it incredibly hard to make changes to it.
Due to the nature of the Internet of Things (IoT), there is a growing concern that hackers can easily access and manipulate the data stored in these devices. The HR department must have the proper safeguards to prevent unauthorized access. One of the most effective ways to prevent data tampering is by implementing blockchain technology, which can lock down access to the devices in the network and prevent them from being exploited.
The ability to store and manage data efficiently through blockchain technology can help prevent fraud and hacks. Data is a vital part of a company’s currency in today’s digital age. What would happen if you stored all your jewellery, cash, and other valuables in one location if a burglar broke into your home?
Because of blockchain technology, data is spread across a large network of storage spaces, which helps minimize the risk of being wiped out by a single attack.
Streamline Payroll, Contractor Payments & Vendor Tracking
One of blockchain HR’s most common use cases is eliminating manual payroll-related tasks. Blockchain technology can automate this process and eliminate time lags in the current systems. In addition, it can help companies pay contractors and vendors through smart contracts.
With blockchain technology, global companies can now benefit from the lower cost and faster processing of cross-border payrolls. Through its platform, blockchain can analyze exchange rates and communicate with banks to ensure that employees are paid quickly.
Some companies use blockchain technology to pay their employees, contractors, and vendors through smart contracts. According to a report, 45% of the early adopters of blockchain have already started implementing these contracts.
A smart contract is composed of a set of parameters that are written in code. These parameters make the payment process completely dependent on the said code. It can also be made irreversible unless the contract terms are updated.
When a certain amount of work has been completed, a smart contract will automatically pay the correct amount to the vendor, employee, or contractor. This process is carried out through the use of a remotely executable code that is linked to the bank account of the company.
Instead of contacting the bank or running a monthly payment run, HR can use blockchain technology to pay their employees, contractors, and vendors through a real-time ledger. That eliminates the need for them to wait for the usual processing time.
The goal of a smart contract is to ensure that the work is completed and that the correct amount is paid to the employee, contractor, or vendor promptly.
Verify Job Qualifications & Conduct Background Checks
We all know that sometimes, what we see on a candidate’s CV may not be true. According to a survey, 75% of HR managers have found a lie on a candidate’s CV. It is hard to tell how many of these fabrications go undetected. Also, 20% of hiring managers said they only spend around 30 seconds looking at a CV.
One of the biggest advantages of blockchain technology is the ability to rely on the authenticity of data. It is hard to determine if a candidate’s education and work history are accurate. A candidate’s forged credentials can trick even seasoned recruiters.
CVs have traditionally been the main method of verification for HR managers. Although references and LinkedIn can help verify certain details, these methods only provide a superficial layer of verification. Also, these processes can be time-consuming and challenging.
According to many HR professionals, conducting a background check can be time-consuming and costly. It can also place a strain on candidates. Blockchain can help reduce the time and expense associated with this process.
Despite the limitations of blockchain technology, it can still help reduce the number of incidents involving fake or misleading information. It can provide an accurate snapshot of a candidate’s background and credentials.
Through blockchain technology, candidates can apply for roles based on their qualifications. It can also help mitigate the concerns that other applicants might get ahead of them due to fraudulent credentials and resumes. This transparency ensures that all candidates are treated fairly.
Tax Automation & Audit Stress Reduction
The complexity of taxes plays a critical role in the operations of a business. HR professionals often have to deal with the changes brought about by the various regulations and laws in different jurisdictions. Besides taxes, other factors such as commissions and bonuses can also affect payroll processing.
The ability of blockchain technology to automatically update and record employee tax provisions and considerations is catching the attention of HR professionals. With its ability to secure and streamline the process of taxation, it is widely expected that blockchain-based platforms will eventually become the preferred choice of HR departments around the world.
No business wants to be audited, especially when it comes to taxes. However, many companies have difficulty maintaining their records due to the situation’s complexity.
Having the right technology in place is crucial for a business to avoid experiencing issues during an audit. Blockchain technology can help a company keep its records secure and efficiently share them with regulators in real time. That eliminates the time and cost associated with maintaining documents. In addition, the platform’s source and cryptographic verification capabilities can help prevent fraud.
Benefits Packages & Dynamic Expense Reimbursements
The ability of blockchain technology to quickly access benefits packages will allow employees and HR to make informed decisions regarding their employment. Before hiring, employers must first outline the terms of their employment. This process can be manual, leading to errors and preventing the proper delivery of benefits.
Instead of requiring HR to outline the terms of employment manually, they can use blockchain technology to deliver these benefits to employees automatically. For instance, if an employee’s healthcare benefits are due to start after a certain period, the technology can be designed to implement those benefits automatically.
Besides healthcare benefits, blockchain technology can also implement more flexible pay scales. For instance, it can provide employees with defined salary increases based on their skills and key capabilities. In addition, it can provide performance-based bonuses.
Even in expense reimbursement, blockchain technology can help improve the employee experience. In the present system, it can be very time-consuming and challenging for employees to get their reimbursements. That can also create pain points for HR.
The emergence of blockchain technology has disrupted the traditional way of doing business expense reimbursement. Organizations can now make their own reimbursements through its ability to create a company currency.
With the ability to create a customized cryptocurrency for their company, organizations can reduce the expenses associated with the current expense reimbursement process. That eliminates manual processing and allows them to focus on their core business. In addition, this eliminates the need for in-house HR staff and will enable businesses to reimburse their employees in different jurisdictions.
The current system of reimbursements can create conflict between the employer and the employee regarding what should be paid. With the help of blockchain technology, managers can achieve transparency through the link between company-funded transactions and the blockchain network.
Despite the initial success of blockchain technology in the cryptocurrency industry, it is now being used in various work areas. These include hiring, taxes, benefits administration, and data storage. Blockchain HR is still a strong candidate despite the current challenges related to scalability and cost.
Trust and transparency are two of the most important factors that HR professionals consider when it comes to improving the efficiency and effectiveness of their company’s operations. Despite the technical capabilities of blockchain technology, its success will still depend on how well managers can use it to enhance the transparency and efficiency of its operations.
Final Thoughts
Although the concept of blockchain technology is still in its early stages of development, many companies are already using it in their operations. Some of these include healthcare, HR management, and financial services. According to Statista, the number of B2B cross-border transactions conducted using blockchain technology will increase significantly over the next couple of years, reaching 745 million by 2025.