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Blockchain in HR [The Complete Guide]

Nov 09, 2021Editorial Team

When most people think of blockchain, the first thing that comes to mind is cryptocurrencies, bitcoin, and trading. But these technologies only touch the surface of blockchain applications. The use cases and operable functionalities of blockchain stretch far and wide in numerous domains and industries. One of which also happens to be human resource.

Blockchain is a new and decentralized technology that is gradually embedding into Human resources and recruitment. This does not come as a surprise when you consider the worldwide adoption of AI and machine learning technologies that are based on a blockchain framework. In 2018, the blockchain technology market estimated an accumulation of twenty billion dollars by 2024.

To understand why some of the most conservative sectors utilize this technology, such as the financial sector, you must understand what it’s all about. 

What is Blockchain?

Blockchain technology, in a nutshell, is a series of ledgers that consists of blocks through which entities make data transactions. In this transaction, there is no central intermediary that needs to provide approvals. All the nodes and networks within this block are responsible for approving and keeping tabs on a transaction before it is completed.

There are a lot of features to this transaction that make it better than having one that is conducted and legitimized by a third-party authority. For one, this transaction is immutable, which means that everyone has a copy and record of that transaction. This reduces the chances of any disputes that happen during the transaction. 

This transaction does not rely on a centralized server or party because it is decentralized. This means that data travels across each ledger in a randomized and unpredictable pattern.

These ledgers represent the servers of all internet-connected devices around the world. This prevents any manipulation or hacks in transactions made through banks that act as centralized bodies. Not only that, but it also eradicates the possibilities of human negligence.

Issues of the HR World

When you look at the world of HR, and the end all be all recruiting process, many issues have remained unresolved. This may be because HR individuals are comfortable with doing things a certain way.

The most common recruitment process involves using MS word CVs, in which about 50 percent of them are likely to have white lies on them. This is just one flaw in the recruitment system, and it shows the poor verification and quality of data that HR managers have to work with. 

Another issue is with the centralized model of the current recruitment process. About 600 million people will update their LinkedIn profiles and effectively use that software to their advantage.

This means that certain people own a lot of the data, making for a situation in which recruiters are spamming talented individuals. These are just some reasons why there is a need to rebuild the HR infrastructure by incorporating blockchain technology completely.

Having an autonomous and infallible mechanism such as blockchain will also solve the problems of bias, discrimination, and work visibility. Work visibility refers to the complications of finding the right job for an employee.

This also applies to the employer, as they also struggle to find qualified and trustworthy workers. Ultimately, blockchain technology can play a big part in the matching process. It can streamline the process and make it quick and efficient, saving plenty of time for both the recruiter and the worker.

Real-life cases of blockchain used in HR

Blockchain in HR can work under many different applications. One particular use case involves the reinvention of the CV. Instead of resorting to the MS word version, blockchain can help digitalize it and make it more verifiable and safe. The future of CVs can have all employee data, such as work history, references, certifications, test results, and personal details encrypted inside a blockchain wallet.

You will be the only one with access to this wallet, which will keep your data safe. Instead of sharing your data on open source platforms, you will be able to share it with parties that you trust selectively. This can be a potential recruiter, employer, or business representative. This gives you more ownership and control of your data.

Having the ability to monetize your data can change the complete structure of the recruitment marketplace. Moreover, the platform enables peer-to-peer transactions so you can find a job. What this means is that the transaction cost can go down, and it will be a great advantage for employers and workers.

Not to mention, the decrease in transaction fees can also benefit the freelancers in the gig economy since they will now own a share in these platforms. Another use case has to do with payrolls. When you think of all the workers in the space, not everyone gets paid consistently on a weekly or hourly wage. For instance, some freelancers have to wait months to get paid and deal with delayed payments.

By integrating blockchain technology into the payroll system, it can make the payment process more streamlined. It can do so by adding the elements of verification, validation, and checking in the process, ultimately making it more trustworthy. One example of such a system is a company called ChronoBank in Australia.

This company uses blockchain technology to pay construction workers right after they clock out after finishing their day’s work. This is good for the employer, as they can validate that the person has been on-sight and working.

It is also good for the workers as they are certain that will get paid at the end of the day. Nonetheless, for this to come into fruition, you will have to completely reconstruct the payable accounts, finances and processes, which will take plenty of time.

Blockchain Solutions for Recruiters

From the employer’s perspective, the entire employment history of a candidate will be on a blockchain. The moment the information goes into the blockchain, you cannot alter it, which makes it easier for recruiters to trace the employment history of a job seeker.

The second solution that a blockchain solution can offer has to do with the decline ratio. Many employers struggle with tackling high offer decline ratios. One way of handling this issue is through the blockchain’s validity model. As employers will now have an expansive view of the job seeker’s history, they will be able to tell about how many offers they have declined in the past.

With blockchain technology, you, as a recruiter, can verify the candidate’s data by pressing a single button before you issue an offer letter. This will save recruiters plenty of time as they can tell which candidate is less or more likely to decline the offer. This can be part of a per-resource cost process through the blockchain to verify the candidate. Overall, it saves plenty of effort, cost, and time.

The Future of Blockchain in HR

Blockchain technology helps to automate economies. It is the perfect solution when you are trying to coordinate activities between multiple competing entities. The big challenge in recruiting is that the most valuable asset of employers is people and the general workforce. Therefore, there is high competition between organizations. Employers do not want to train qualified people who will leave and work for another company, perhaps even their competitors.

With the rise in technology and the new emerging requirements of a different skill-set, the need for collaboration will significantly incresae in the future. Blockchain technology gives employers the ability to work together and collectively manage the privacy of individual information. This allows for more safety and security within the massive amount of data.

Once the blockchain technology integrates into the HR system in full flow, employers will be able to establish economic agreements between organizations with more efficiency. In today’s world, the HR systems in place are highly inefficient, and people are profiting from these inefficiencies. People are applying to many organizations at once, and this is causing them to re-recruit workers.

To Sum it up

From resources by blockchain experts, they see the use case for blockchain in HR to occur in numerous different segments of the recruiting process. These include:

  • Data management
  • Data verification
  • Auditing and compliance
  • Data Security
  • Data Monetization
  • Streamlining the process

Since the future will be completely data-based, securing the data will be the priority, and blockchain will help ease that endeavor. There are no official updates over blockchain for HR from homeland security, the Department of Labor, or the OFCCP.

Final Thoughts

Blockchain and HR technology is in its infancy stage. However, it is best to be educated about it because blockchain technology is the future. It will be all over the HR tech and conferences. Japan’s human resource industry is already transitioning to a more flexible model.

Employers are allowing workers more job flexibility and encouraging contract-based and freelance services. This comes as a sign of how the workspace will transform and hints at the possibilities of a blockchain revolution in the HR space.



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