Blockchain in human resources: A deeper look on its impact | CXC AMERICAS

Transformation is human resource management’s top strength. Blockchain and artificial intelligence are some of the new technologies that the whole HR industry should watch closely in order to keep up with the disruptions and revolution happening in the world of work.

Blockchain is an emerging technology that is innovatively disrupting various business processes at a steady rate. Several industries in the fields of banking, insurance, supply chain and health care have already adopted blockchain with significant results manifesting in their respective operations. Human resource management also believes in its potential to transform global HR functions. The opportunity lies in the technology’s unique ability to authenticate, validate and record information which also links to other business services like payroll and banking. Blockchain continues to grow its mainstream presence, yet, understanding what it does and why it exists may still be challenging for many. With promising possibilities to disrupt global businesses, let’s have a closer look at how blockchain can impact human resource functions and the benefits it will bring to the whole operation.

What is a blockchain?

Mostly associated with cryptocurrency and NFT (non-fungible token), a blockchain, in the simplest explanation, is a public and decentralized digital ledger where users can exchange data and perform transactions in digital environments. The data, organized into a stable chain of blocks, is permanent and encrypted. Since it is public and decentralized – meaning, a vast number of computers interact within the blockchain network with no single authority controlling the system – each user has a copy of the blockchain data. No matter how many times a transaction is confirmed or the process is repeated, every input is communicated to all users and will produce the same output that is irreversible and cannot be corrupted. All changes are traceable confirming legitimacy of information. Blockchain puts everyone on the same page. The system, built on trust and transparency in a virtual environment, has strong capabilities in data integrity, privacy and security.

Research and consulting firm Gartner predicts that this technology will generate $3.1 billion in business value by 2030 and will enable a paradigm shift in how societies, businesses and people create transactions and exchange value in the future.

Beyond the intricacies of this technology, human resource management will benefit from blockchain’s essential characteristics:

Decentralized structure

Applying blockchain in human resource function in a decentralized structure enables peer-to-peer connectivity where encrypted information between the business and employees are shared and  stored in real time.

Data integrity through immutability

Immutability means cannot be changed or deleted. Sensitive information such as employee credentials for background check is immutable removing the risk of fraud application.

High-level security and data privacy

 Blockchain’s improved end-to-end encryption secures transaction records that are unalterable and protected from fraud and unauthorized activities.


Reduced operational cost and process time

Processes such as user authentication, validation of transactions and data collection are streamlined reducing manual tasks and other conventional methods. Transactions are performed real time eliminating delays and speeding up the process time.

How will blockchain transform HR functions?

Human resource management’s ability to adapt to the constant and rapid changes in technology has allowed the industry to be open to innovative changes that will improve their methods and processes. Early adopters of blockchain in HR have identified best use cases that will transform HR processes at its maximum efficiency. There is incremental growth in the adoption of blockchain with pilot projects being rolled out. One of the changes to be expected is the reduction of administrative tasks and intermediaries in HR functions.


Streamline automated payroll process

 Payroll is the  key motivating factor that employees appreciate the most. Blockchain-based solution for global payroll transaction replaces manual tasks such as uploading employee information in the payroll system. Blockchain eliminates multiple bank or wire transfer processes due to fraud prevention, which can cause a delay in payments. With blockchain, identity verification and cross-border payments are easier to facilitate through direct mobile payments. Contingent workers in the gig economy will greatly benefit from this system.


Secured virtual employee credentials for talent sourcing

 Employee credentials such as resume, school transcripts, certificates, medical and work history are recorded and unalterable in the blockchain. This puts ease and speed in the recruitment process as verifying the identity of potential recruits and background checks by third party agencies will be eliminated. Companies will be able to match individuals to job roles accurately. Moreover, employee performance will also be stored in the blockchain data.


Immutable digital employee contracts

 A digital contract that runs on blockchain is called a smart contract. Since it is immutable, smart contracts help enforce agreements and obligations between the company and employees. Aside from removing the use of paper, part of the smart contract solution is automation of wages and benefits.

Employee-owned blockchain

 The possibility of employees having their own blockchain can happen in this system. Information exchange and transactions will become easier with individuals carrying their documents and professional identity through their personal blockchains.

What are the challenges of blockchain adoption in HR?

Majority of global organizations and industries are still scrutinizing the prospect of applying blockchain into their operations since its application in business processes is still in its experimental stage. There are still operational risks and obstacles involved which can affect the implementation of this technology in human resource management. The foremost concerns are cyber security and data privacy. Blockchain is still vulnerable to hackers which poses a risk to the bulk of personal information and financial transactions that human resources manage. Secondly, compliance risk is seen as another challenge due to lack of regulatory standards and legislation in different regions and territories. The European Union’s General Data Protection Regulation (GDPR) imposes legal penalties to companies not complying to its legal framework and employees’ right to have control over their personal data. Lastly, workforce adaptability and resistance to change and new technologies could slow down blockchain adoption in companies. Employees need time to adjust and understand the fundamentals of blockchain as its image is strongly linked to cryptocurrency. Furthermore, bias to the current technology and methods affect the interest to learn how blockchain can be applied in improving business operations especially in HR functions. When it comes to workforce, specialist and recruiter roles could potentially become redundant.

Transformation is human resource management’s top strength. Embracing new technologies to solve HR weak points constantly improves conventional systems. Companies open to adopting new technologies in order to perform better operations should come up with plans in preparing managers and employees to adapt to the new changes. Blockchain and artificial intelligence are some of the new technologies that the whole HR industry should watch closely in order to keep up with the disruptions and revolution happening in the world of work. With a forecasted global spending of $19 billion by 2024, blockchain has the potential to dictate the next big global changes in the future.

CXC is a global HR outsourcing organization with 30 years of experience in workforce management. Our innovative and cost-effective solutions help companies gain a competitive advantage by improving efficiency while reducing risks.

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