MARKNetwork Blockchain: Human Resources

Blockchain and Human Resources, do they really get along?

Short summary of the article:

“Do not get left behind”

»The Human Resources professionals have become an undervalued asset because most of their time is spent in redundant tasks. Blockchain technology offers right platform to HR departments to gear up to face the future challenges «

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In the early 2000’s Ray Kurzweil, the Futurist and Chief Engineer at Google predicted that the world is going to witness 20,000 years of progress which will be crammed in the next 100 years. Hardly did anyone predict that the Human Resources shall also play a role in taking the baton of growth forward. According to a recent report published by Grand View Research Incorporation, the global HR sector is about to witness a tremendous growth by 2025 which is projected to surpass the US $30 Billion.

That’s huge!

Despite such a huge responsibility, the Human Resources Departments are mired in complicated and sluggish practices. By definition an HR’s job is to design the people strategy, support the line leaders and drive the efficiency of the staff but what do they end up doing is heart-wrenching:

  1. Almost 8.1% of an HR’s time is spent in administrative work
  2. 9.0% of the time goes into operational management
  3. 1.5% in redundancy management
  4. Merely 1.1% of the time is spent in recruiting the right workforce

According to a PwC survey of 480 HR professionals across the globe, around 31% of the HR professionals agree the pressure is building to employ only the best and long-term employees. The old fashioned technology on which HR is trying to build strong enterprises is immensely flawed. The system lags transparency, speed and there is no single source of truth because of which the HR is not able to demonstrate its true potential.


Let us have a look at what the overburdened HR is attracting

The Business.com report of Q4 2018 hit the world like a lightning bolt. It reported that 71% of the employees are not fully engaged leading to the US $11 Billion loss.

The blockchain technology does not provide a direct solution to the challenges HR professionals face. But it can definitely cater to the micro-challenges of the routine processes they follow which add to the “Total Cost of Ownership” (TCO). Let us explore the use cases in your Human Resources department:

Credential Verification Frauds

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In our Academia use case blog, we discussed how monstrous is the diploma mill and CV Fabrication industry. It has become a nightmare for Human Resources. Almost 95% of the enterprises are putting pressure on HR to conduct a thorough background screening of the new hire. The rate of CV fraud is spread across geographies and has transitioned from private to public sectors too. The sacking of South Australian government chief information officer Veronica Theriault due to resume fabrication brought the government’s recruitment process under the knife.

According to an Indian background verification company, around 15.21% candidate’s misrepresented their previous employment information to the employers in 2017. Some of the industries that attract high volumes are imaginative resumes are Finance- 73%, Leisure and hospitality – 71%, Information Technology – 63%, Healthcare -63% and Retail- 59%.


Figures are really disturbing!

HR departments are highly concerned as such frauds are increasing the chances of an unsuitable hire which snowballs into issues like low employee morale, disengagement among other employees and more. Zappos estimated that the bad hires had cost the company over $100 million in 2016.

Blockchain offers its assistance to HR by providing them with a single source of truth which holds all the academic and employment history of recruits. Today an average HR professional spends few seconds to judge whether a CV is fabricated. But the screening process is not reliable. Blockchain will provide HR an immutable database with time-stamps so that the HR departments expedite the hiring process without spending too much time on credential verification. Projects like Recruit Tech in Vietnam are helping build enterprise recruitment suits backed by blockchain technology.

Phishing Attacks

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The HR and Finance department database is a soft target for most of the sophisticated phishing crimes. The year 2018 stood witness to 214 phishing-related breaches of employee databases across multiple businesses, government organizations, and finance organizations resulting in exposure of 3.3 million records. The situation is turning grave as in 2018 IRS issued a warning to HR professionals regarding the phishing risks their employee databases are exposed to. According to IRS, phishing attempts seeking W-2 forms of employees are on rising which is worsening the situation for HR employees.

Impact of such attacks is more pronounced than we can assess. The notorious “Morrison payroll data breach” muddled the supermarket into a pool of 5,500 claimants who are seeking a payout due to the data breach against their payroll information. The inherent inefficiencies of the legacy database systems makes the sophisticated data breaches a cake walk while HR keeps getting blamed all the time.

The security and immutability aspects of blockchain technology make a perfect use case in this situation. As HR databases will always hold sensitive information, it becomes a honey-pot for the data attacks. Implementation of a blockchain solution which will acts as an impenetrable database, the impact of threats can be eliminated completely. Projects like Froudx focuses to secure the document exchange between the new recruits and the HR so that exchange is not exposed to any kind of data leak risk.

Payroll Management

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From 2011 to 2014 there has been a gradual shift of Payroll management to the HR department. According to Deloitte’s Payroll operations Survey Summary in 2011 only 40% of the respondents reported that HR was taking care of their payroll while in 2014 the percentage rose to 48%.

The challenges HR is facing in maintaining the trail of records ranges from tracking travel expense data, global mobility payrolls processing, yearend processing and a lot more. Due to inefficient systems in place, the HRs “Total Cost of Ownership” is increasing while the costs due to deficiencies in the system remain hidden.

As wide as is the spectrum of challenges the HR is facing in handling the Payroll, blockchain technology offers a solution for almost every challenge. The focus area is keeping a clean and timed trail of all the payroll information, beyond that the smart contracts can be used to make the payments automatically and almost instantly.

Apart from that, the prime pain area blockchain address is making payroll transfers during global mobility. They can get rid of the exorbitant cross-border fees for the organizations. Some projects like Peacounts, Bitwage and 4th Pillar are offering HR payroll solutions to organizations driven by the features of blockchain technology.

Compliance Challenges

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HR departments are sitting on a burning stove while dealing with compliance issues. The rising uncertainties around federal laws and Affordable Care Act regulations in 2017 has kept the HR on toes. These regulatory uncertainties have a humongous impact on employees and employees and it is the HR department who makes sure the ecosystem is up-to-date. The reforms around tax laws, ACA issues and more need to be addressed and implemented. Apart from federal compliance implications, they need to keep an eye open for state and local laws around Pay equity, EEO, Salary history bans, Minimum wage changes, accommodation laws, paid leaves and a lot more.

A mid-size organization is spending 4% of its revenue to stay compliant. The costs are increasing day by day due to regulatory uncertainties. One efficient way to mitigate the challenge of rising costs is to adopt blockchain technology. The adoption provides a platform where all the compliance related documents can be stored in an immutable manner which will bring down the security costs, delay challenges, data manipulation issues and help meet stringent compliance standards.

Taxation Processes

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With the advent of globalization, the taxation challenges for organizations have become multifold. The HR department spends 35-40 hours per employee per annum to conclude their tax positions in home and host countries. The home country payroll tax system is itself so complicated in the US that the HR department juggles between Social Security taxes, Medicare, State unemployment and Federal Unemployment.

As per the Kronos Workforce institute, around 64 million Americans are not able to understand the complicated landscape of taxation. While 54% of these workers one time or the other faced some trouble in the paycheck due to taxation issues. Keeping the employee perspective aside, the employers are spending $40,000 and $100,000 to prepare for every regulatory changes around labor and pay rules. This massive figure encases all kind of hard and soft expenses. What the enterprises are able to see only the tip of the iceberg.

Blockchain presents advantages in resolving and deflating the taxation costs for the organizations. All the documentation costs will go down, the data manipulation will be eliminated and the compliance standards will be maintained. Projects like Peacounts are targeting to automate the taxation process of payroll management using blockchain solutions.


To wrap

Time is right for departments like HR, Finance and Payroll to navigate this unfamiliar landscape which is bound to disrupt the processes. The customized blockchain solutions will address the challenges that are leading to a rise in cost of “Total Cost of Ownership”. MARKNetwork is a blockchain solution service provider that is helping enterprise ecosystem to cut HR processing costs, bring in improved efficiency and service delivery to make the new age HR more flexible and responsive to changing the business ecosystem.

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