Five Promising Ways to Use Blockchain in Human Resources

The blockchain is slowly but surely making its way into human resources. For Dana Daher, an analyst at Info-Tech Research Group, the adoption of distributed ledgers in human resource digitization is still tentative, but the technology is gaining more and more ground in financial management, an area that intersects certain HR functions such as payroll. . But even beyond these overlaps, blockchain is sparking some interest among HRDs and HRIS publishers.

Principles and interests of the blockchain for human resources

Architecturally, a blockchain is a ledger distributed and shared (a ledger) between nodes (members of the blockchain), in which transactions are verified and recorded by the nodes of the chain, so that the writings are unalterable (unless you have control over most nodes).

In terms of use, the blockchain allows people who do not know each other to share data and carry out transactions, mainly financial, without intermediaries or trusted third parties (it is the blockchain that plays this role).

Its main advantages are trust (or more precisely the lack of trust between members is no longer a problem), security and data integrity and transparency.

The three main drivers of blockchain adoption in human resources are:

  • the greater need for transparency at the transaction level,
  • the need tospeed up transactions reducing clearing and settlement times,
  • and the usefulness of automation and simplification of processes work.

“In HR, the most relevant applications of the blockchain will concern the management of critical issues such as payroll, hiring, background checks or contract management,” predicts Dana Daher.

Summary of the 5 main promises of the blockchain for the management of human resources and HRIS

Relevant applications of blockchain in human resource management

Here are 5 possible applications of the blockchain in HRM:

  1. Paid. This is probably the most promising use case. By automating and securing payments made to employees, subcontractors and suppliers, blockchain simplifies payroll management. One of the first applications, proposed a few years ago by start-ups, is cross-border payment, often requested by subcontractors and freelancers in the “gig economy”. This type of payment makes up for the possible absence of a bank account, which is essential for the automatic transfer of pay. Blockchain pay replaces traditional electronic transfers, which are sometimes prohibited by certain laws or certain cybersecurity systems. Major publishers of HRIS software are interested in it. ADP, for example, is developing a blockchain application.
  2. Recruitment. Job applicants can use a blockchain to provide reliable and certified information (diplomas, CVs, etc.) to recruiters. Blockchain can facilitate the verification and secure transmission of these documents. It also avoids the usual recourse to subcontracting for carrying out such checks, thus reducing costs. This blockchain application is recent, but schools like EM Lyon are already starting to deliver their documents to students in this form.
  3. Employee data. Personal information can be encrypted and stored on a blockchain, which makes it unalterable and provides secure governance. But the authenticity of the information, of course, depends on the veracity of the original record. For this reason, some experts see the blockchain as a database of employee information, to be continually updated, rather than a reliable repository of past information.
  4. Contract management. The blockchain allows the establishment of “smart contracts”: types of “triggers” (or triggers), which cannot be modified, which automatically activate a procedure when pre-established conditions occur.

At the end of a final trial period, a smart contract can, for example, trigger a salary increase. Blockchains could also be used to manage some clauses such as non-compete clauses.

Smart contracts can be used in many ways by employers to impose contractual terms (and penalties) with employees or contractors. They can help speed up HR administration processes and improve their efficiency.

  1. “Personal” blockchains. A new use case for blockchain is on the horizon. It is called “personal blockchains”.

Personal blockchains encompass an employee’s entire professional identity (transcripts, diplomas, professional background, assessment and training). Employers can access these personal blockchains (which are not to be confused with private blockchains) to consult or complete them, with the authorization of their owner.

Employees will be able to grant them access keys and revoke them when they leave the company, in order to maintain control of their personal information. This use of the blockchain in human resources could give rise to “professional passports” that employees would constantly have with them and that they could enrich throughout their working life. For their part, HR managers could verify employee data in hours or even minutes.

Obstacles to the adoption of the blockchain in human resources

Blockchain offers great promise for HR teams, but it also poses challenges. Here are the most predictable obstacles to its use.

For Gartner, most blockchain applications in HR will mature between 2 and 5 years.

The first hurdle is that the blockchain is a non-trivial technology. Deploying one is an exercise that can be scary even today. However, this difficulty must be qualified. In fact, there are now more and more turnkey offers – a private blockchain is not that complex -; It is possible to use a public (or semi-public) blockchain in B2B that does not need to be implemented, and finally, publishers are infusing more and more blockchain-based functionality directly into their HRIS.

A second obstacle is certain immaturity of technology. The Gartner company estimates that most of the blockchain applications mentioned in this article are still in the early stages and will only be truly democratized in 2 to 5 years.

Dana Daher of Info-Tech Research Group classifies blockchain operational risks into 4 categories:

  1. IT security. The blockchain is still vulnerable to data leaks, both on endpoints (users) and in code (several digital asset thefts made headlines). This point needs to be addressed when dealing with sensitive data: personal and financial transactions.
  2. Compliance Risks. For now, the blockchain is floating in legal limbo, exposing companies to legal penalties for failing to respect employee data management rights. The compliance of a particular blockchain with the GDPR, for example, should be studied in close contact with the legal department.
  3. Counterparty risk. External partners need to access the blockchain to facilitate exchanges or transactions. The level of trust in the blockchain therefore also depends on the level of trust that can be had in the applications and information of these partners.
  4. Data privacy. For human resources, internal distrust is also a risk factor. Not all, and not always, employees welcome blockchain with open arms. The origin of the technology – which derives from cryptocurrencies (very volatile and sometimes used in dubious operations) – continues in the minds of some to give it a bad reputation. This judgment is currently unwarranted – blockchain technology in B2B is decorrelated from cryptocurrencies – but this mistrust must be addressed with adequate support, like any technological change.

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