Business Technology

Could blockchain solve HR and payroll issues?

5 min read

03 December 2018

Blockchain technology can help build a generation of faster work-related platforms. It could even iron out the kinks in HR solutions, says NGA's Anita Lettink. 

As analyst firm Forrester states, Distributed Ledger Technology (DLT) is a “technology concept or architectural principle that can be realized in many ways”.

While companies are now experimenting with it, there is no single application of blockchain. That means you need to carefully evaluate the market to understand the DLTs that are out there and how these applications can be used in solutions.

Seeing through the hype

Blockchain is a bit of a hype. As read in Wired: “At this moment, few business trends can compete with the magic of blockchain technology”.

They are right to the point where adding the word ‘blockchain’ to a company name shows immediate stock price gains (eg. the announcement of a KodakOne blockchain network more than doubled the EastmanKodak share price).

But we don’t yet understand or apply the technology well enough to fully grasp its implications and benefits.

The World Economic Forum has published a white paper called Blockchain Beyond the Hype that includes a practical framework as well as a decision tree. It can assist you in determining whether blockchain is the correct approach for your business problem or not.

The high cost of energy

Blockchain transactions are verified using extremely complex algorithms. This provides us with increased security, but also comes at an energy cost.

The early blockchain networks, like Bitcoin, require no permissions. So anyone can join in on the algorithm, but the trade-off is that as the process becomes increasingly complex, the network requires large amounts of computing power and thus more energy.

Not all applications require the same kind of security as a cryptocurrency network.

As new DLTs come to market, companies are changing the platform characteristics so that security is maintained while levels of energy consumption are lowered.

Despite these alternatives, blockchains remain computationally intense when compared with traditional databases.

What will regulation look like?

At the moment regulation efforts seem to be focused on cryptocurrencies, but expect governments to closely watch what is happening with blockchain, especially as it relates to identities (of companies and people) and payments.

The European Parliament hosted a ‘Spotlight on Blockchain’ session in May 2018 to answer the question: “When and how should governments intervene?”

Some US states are moving forward with blockchain regulation and implementation, eg. Arizona (recognition of smart contracts) and Vermont (blockchain as evidence).

And, during an April meeting of ASEAN (Association of Southeast Asian Nations) there was a focus on DLT for cheap and secure transactions to promote financial inclusion for underserved and underbanked segments.

We could go the same way.

What should you do now?

We can’t give you an exact roadmap of how blockchain technology will evolve in coming years, but we are sure that you will see it become more mainstream as vendors, including NGA HR, start to bring DLT-based applications to market.

Continue to separate blockchain from bitcoin – there’s a lot of speculation around cryptocurrencies that has nothing to do with the benefits of blockchain applications in business environments.

DLT-based applications offer important benefits when it comes to transactions that involve personal and payment data: increased security, faster transactions and limited data disclosure for a predetermined purpose.

Blockchain and DLT developments go very fast, and there are many experiments as well as real-world applications. Educate yourself by following the news and reading up on which projects go well and which go bust, and then apply that knowledge to the HR and payroll space.

All main technology vendors explore use cases for DLT in their solutions. It could be equally interesting to follow what niche vendors are doing, as they are typically not bound to a segment or industry, more agile and will quickly shift into other applications.

Use cases outside of the HR domain provide the perfect inspiration and encourage you to stretch your thinking beyond the obvious.

Reach out to your HR and payroll vendors and ask which use cases they are currently pursuing. NGA HR is happy to talk to you about our blockchain innovations and keep you posted as we bring HR and Payroll applications to market.

Anita Lettink is head of strategy and alliances at NGA.