How to build a blockchain-based payroll system. Article 7 of 10

This is article 7 of 10 forming the seventh part of a series of articles dedicated to my attempt at helping Payroll & HR professionals understand the potential impact that both Blockchain and Cryptocurrencies could have on the future of Payroll & HR.

To view the earlier article in the series – click here:

  1. Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR
  2. Article 2: Will companies start to payroll its employees in cryptocurrency?
  3. Article 3: How will blockchain affect HR Recruitment Processes?
  4. Article 4: What are smart contracts and how will they affect payroll and HR?
  5. Article 5: What benefits could blockchain bring to the payroll industry
  6. Article 6: Are Blockchain Payroll Companies the Payroll Future?

Also, check out The Payroll Podcast with Anita Lettink, SVP of Global Alliances at NGA HR which discusses ‘Blockchain and the Future of Payroll & HR’ in considerable detail if you wish to fast-track your learning. You can subscribe to the Payroll Podcast here: Apple Podcasts

How to build a blockchain-based payroll system

One company produced an interesting blog about creating a blockchain payroll system back in January 2017, before the explosion in the price of Bitcoin accelerated the level of interest from the media, government regulators, and from business service companies. It was this article that inspired these series of articles too, so it is worth a read.

Teemu Turunen of Finnish mobile software company Futurice tasked his team to experiment with using the Ethereum blockchain to recreate the company’s payroll system [https://futurice.com/blog/payroll-system-in-blockchain].

Turunen allows his team of programmers to experiment with open-source software problems in their own time.

When they do this, they report back to the company the number of hours they’ve spent and receive a paid bonus for these hours on top of their normal monthly paycheck.

Calculating these hours, and the relevant payment that should go to each member of staff, is tricky and time-consuming, because not every programmer takes advantage and so there is no “one-size-fits-all” payment that can be made to every employee.

“Some people report contributions every month, some once a year, some never,” says Turunen

“The popularity has been on the rise though and we haven’t had any automation in handling these reports. It’s been slowly becoming a time-consuming chore to collect all the data at the end of the month and report them to payroll.”

Instead of reporting their bonus hours to a central person, who then passes them on to the payroll department, the idea was for each employee to enter their bonus hours onto an Ethereum-based blockchain, where the payroll calculation would be done automatically.

Here’s how it would have worked.

  1. The employee logs on to an internal company webpage where she enters the time in hours and minutes of her free time she has spent on bonus work. She also adds a title of a publicly-accessible URL which helps the company identify the contribution. Along with the time spent, and the URL, is a short description of the contribution made, for example:

“Investigating how to speed up development between teams when we use open source code”.

  1. The above information, along with a unique ID for the employee, gets stored in the Ethereum blockchain.
  2. The same information is also sent to a company instant messaging channel.
  3. At the end of every month, an application is run on the blockchain to automatically calculate the bonus for every employee who has reported doing extra hours in their free time.
  4. This information is auto-forwarded to the Payroll Department and the monthly salary is paid with the bonus intact, if relevant.

 

In creating this experiment, Futurice ask an important question that is not often answered:

  • Why do we specifically need to use a blockchain to make this automatic calculation?
  • Why can this calculation not be made by an equation held in a centralised database?

At the most basic level this could look like an Excel spreadsheet. This spreadsheet is kept in-house and only the Payroll Department has administrator access to confirm that the correct calculation has been made.

  • The Ethereum blockchain is public, but is this level of privacy acceptable?
  • Would you want every one of your employees to be able to see what bonus payments have been made to every other of your employees?

The other fundamental challenge with public blockchains is scalability. As the size of a public blockchain grows (that is, as more information is entered into it), the speed at which transactions can be verified slows down. The storage, bandwidth and computing power required to maintain it also increases.

This is because every ‘node’ that verifies that the information is correct must run through every transaction that came before, as well as all the new ones, to make sure the master copy of the blockchain looks correct.

When we look critically at companies who are trying to sell you the idea of a blockchain-based payroll system, we find the same kinds of issues.

It all comes down to these two linked questions.

  1. Do you as a business owner need to understand every function of a payroll database system? Probably not.
  2. Do you as a business owner need to have an understanding of why using blockchain-based payroll will save you money, over any other compatible programme or system currently available? Probably yes.

Futurice’s conclusion?

“There’s no reason why this couldn’t have been done without using blockchain.

“Deciding on what to use blockchain for is a difficult question, and also a question most companies investing in blockchain implementation are currently asking themselves.

“One thing that is quite certain though is blockchain is mainly suitable for creating data storage systems that work using predefined rules but are not controlled by any single entity.

“In cases where giving away control is not acceptable, it is also possible to create private blockchains with no third-party involvement whatsoever.

This, however….

“would reduce the blockchain to a simple fault-tolerant distributed database…which is quite unlikely the most suitable technology for the job.”

Which basically suggests that we don’t need blockchain at all!

What do you think?

Please share and comment – I will try to interact with as many as possible!

Future articles in the series will include:

  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Thanks 🙂

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.

Visit our website to access more blogswhitepapersThe Payroll Podcast and more content about all things “Payroll and HR”.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please contact me and I would be delighted to discuss how we can help.

Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: nick@jgarecruitment.com | Tel: 01727 800 377

Sources:

  1. https://futurice.com/blog/payroll-system-in-blockchain

Images:

Are Blockchain Payroll Companies the Payroll Future? Article 6/10

This is article 6 of 10 forming the sixth part of a series of articles dedicated to my attempt at helping Payroll & HR professionals understand the potential impact that both Blockchain and Cryptocurrencies could have on the future of Payroll & HR.

To view the earlier article in the series – click here:

  1. Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR
  2. Article 2: Will companies start to payroll its employees in cryptocurrency?
  3. Article 3: How will blockchain affect HR Recruitment Processes?
  4. Article 4: What are smart contracts and how will they affect payroll and HR?
  5. Article 5: What benefits could blockchain bring to the payroll industry

Also, check out The Payroll Podcast with Anita Lettink, SVP of Global Alliances at NGA HR which discusses ‘Blockchain and the Future of Payroll & HR’ in considerable detail if you wish to fast-track your learning. You can subscribe to the Payroll Podcast here: Apple Podcasts

So, today, I would like to highlight some blockchain payroll companies that have already launched so that we can ask the question: Are Blockchain Payroll Companies the Payroll Future?

If you have read my previous articles on this subject, it may come as a bit of a surprise to you to hear that there are already a number of blockchain-based payroll companies which have launched and exist over the past couple of years.

Several of those companies mentioned also raised seed capital and funding by using ICOs (Initial Coin Offerings).

These are cryptocurrency-based funding rounds bypass venture capitalists and banks by instead, promising future value to individual and retail investors.

In fact, to date hundreds of millions of dollars have been raised by ICOs, the cryptocurrency version of IPOs (Initial Public Offerings) in which companies sell off proportions of their public stock to raise funds for expansion.

The neat trick with ICOs is that blockchain companies do not have to give away any equity in their company to reach astronomical funding sums.

Accountants KPMG advised on the £5m launch of Etch, a Dublin-based service https://www.accountancydaily.co/kpmg-advises-launch-blockchain-payroll-company which claims to be “the first innovation in payroll since the Industrial Revolution”. It employs the Ethereum blockchain to allow employers to pay workers in real time.

Chris Mills, head of blockchain for KPMG UK told the press:

“Etch is a superb initiative because it provides guaranteed payments in real-time for all work completed, something that no other platform is currently known to achieve.

Etch pays workers in the currency of their choice, and they can they forward on some or all of that currency to overseas family members or dependents.

It would appear a good system, especially as it focuses on the construction industry which has a relatively higher proportion of workers who send money overseas on a regular basis.

The question we must ask is:

Do companies always have employee payrolls ready to be paid at the point of commissioning work? Would real-time payments really work well?

Phillipines-based Salarium is one of the more established and better-known blockchain payroll companies.

Salarium has raised tens of millions of dollars with the ICO (Initial Coin Offering) of their SALPay token (SAL).

It claims to automate payroll using its own proprietary software – but appears to have some of the same flaws that affect the more modern cloud-based, mobile-first payroll systems.

  • You cannot outsource your payroll to Salarium
  • You still have to input the payroll data yourself
  • You have to enter into their proprietary payments system

One prominent blockchain-for-business skeptic is journalist David Gerard. In a talk titled Blockchain: From Hype to Reality[https://davidgerard.co.uk/blockchain/2018/04/19/welcome-to-the-blockchain-slides-from-berenbergs-blockchain-from-hype-to-reality/ he noted the questions you should ask any blockchain salesperson.

  1.  Does the software do everything that you are telling me it does?
  2. Are we confusing ‘could’ with ‘is’? How many other companies have already successfully integrated this into their systems?
  3. What does blockchain-based payroll do that a centralised database does not?
  4. Will the system scale to the size of the payroll data you produce? If so, how?
  5. If the system you want to implement to deal with people you already trust? If so, why use blockchain?

Ultimately, the fact that payroll companies based on blockchain already exist suggests that more will follow this trend in the future. However, these companies (at present) do seem to be focused within the FinTech space. For blockchain payrolls companies to become more widespread, I think that we still need to answer the following fundamental question:

Will using blockchain-based payroll software save me money, improve security and enhance efficiency over and above any other compatible programme or system currently available?

What do you think?

Please share and comment – I will try to interact with as many as possible!

Future articles in the series will include:

  • How to build a blockchain-based payroll system
  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Thanks 🙂

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.

Visit our website to access more blogswhitepapersThe Payroll Podcast and more content about all things “Payroll and HR”.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please contact me and I would be delighted to discuss how we can help.

Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: nick@jgarecruitment.com | Tel: 01727 800 377

Images:

  1. Photo by Danial RiCaRoS on Unsplash

Sources:

In a World of Great Social Sites, Is LinkedIn Still the Best Platform for Driving B2B Sales?

 

Marketers have to manage multiple campaigns across a variety of social media sites. Sometimes it can become a challenge because of continually changing algorithms. Whenever that happens, it can make even the savviest B2B marketers anxious.

For example, Facebook and Twitter recently changed their algorithms to boost user experience. However, these same changes have more or less limited the organic reach of posts (from brands) which in turn restrict their ability to generate sales leads on these platforms.

However, B2B marketers need not stress as LinkedIn is still the leading social media site for driving B2B sales. In fact, it’s still a goldmine for generating leads and driving traffic to company websites through promoted thought leadership content.

Why Does LinkedIn Continue to Dominate B2B Marketing?

LinkedIn continues to reign supreme within the B2B marketing space because people use it differently when compared other social networks. For example, people invest time in LinkedIn because they’re looking to solve professional problems.

So if your content has all the answers they’re looking for, you’re more than likely to get some excellent results. This is evidenced by the fact that 80% of B2B leads are generated from LinkedIn. It’s also the primary reason why 94% of B2B marketers use LinkedIn to engage potential clients with relevant content.

If you’re still not convinced, take a look at the following statistics:

  • 46% of social media traffic to corporate websites originate from LinkedIn
  • 79% of marketers consider LinkedIn to be the most effective source for generating B2B leads
  • 43% of marketers state that they have sourced at least one customer via LinkedIn
  • 51% of companies have acquired a user via LinkedIn

As a result, it’s safe to conclude that LinkedIn, home to over 500 million users and three million businesses across 200 countries, is still by far the best platform for driving B2B sales.

 

 

Still don’t believe me?

Let’s take a look at the percentage of B2B leads that have been generated through social media networks:

  • LinkedIn – 80.33%
  • Facebook – 6.73%
  • Google+ – 0.21%
  • Twitter – 12.73%

So if you’re hoping to drum up some new business and you’re looking for new customers in the market, LinkedIn is definitely the place to be.

In fact, it should be the first place to look for new customers. This is because engaging with a potential client on this social platform can boost the chances of them buying from you by as much as 50%.

How Do B2B Marketers Leverage LinkedIn to Generate Sales?

Running a successful marketing campaign on LinkedIn or any other social media network starts with strategy. When you formulate a robust strategy, you’ll be able to ensure that your marketing endeavors stay on point.

However, regardless of the marketing strategy you choose to go with, you should only use this professional social network to engage with your peers, followers, and prospective clients with content that’s relevant to them. This can be achieved by posting compelling brand stories or thought leadership pieces.

Once the content is ready, an excellent approach is to post these on group discussions. This is a great tactic to get potential customers to start a dialog with you. However, whenever you do this, be aware that your competition will be doing the same.

Although it can be highly competitive, it’s certainly worth the investment because LinkedIn is the most popular social media platform for Fortune 500 companies. In fact, according to a study of 488 companies, a whopping 98% were using LinkedIn regularly.

Research suggests that discussion groups are the most effective places to post your “lead generating” content:

  • Company Pages – 0.59% of posts (10.07% of conversions)
  • Discussion Groups – 96% of posts (86.30% of conversions)
  • Personal Profiles – 3% of posts (3.63% of conversions)

Unlike the retail market, B2B sales and purchasing cycles are long and involve a large amount of money. So it’s quite natural for potential customers to gather as much information as possible before making a commitment.

Getting involved in group discussions helps B2B marketers provide relevant information to potential buyers in various stages in the buying cycle. It’s also an approach that can provide additional leads like email addresses in a non-intrusive way.

From LinkedIn video ads to Sponsored InMail ads, the platform offers a wide range of advertising opportunities through the LinkedIn Campaign Manager. However, it’s important to identify decision makers and create a roadmap that will effectively support your marketing plan.

While all the tools available on this platform are useful, it’ll be critical to use the right approach when targeting a potential B2B customer. If you have ever received an irrelevant sponsored message on this platform, you’ll know what I’m talking about.

While LinkedIn continues to be derided, B2B marketers shouldn’t be fooled. If you let that happen, you will undoubtedly end up overlooking the best platform to generate B2B sales.

 

Please share and comment — I will try to interact with as many as possible!

 profile-_0016_ChrisP

Chris Hall

Marketing Recruitment / Group Social Media and Marketing

James Gray Associates Ltd, Marketing, Payroll, HR & Reward Specialist Recruiters

Email: chris@jgarecruitment.com Twitter: @JGA_Marketing Tel: 01727 800 377

Why not visit our website where you can access more blogswhitepapers and social content. You can also download our latest Whitepaper: A Payroll Blueprint Towards Successful Transformation with Marketing Whitepaper ‘Digital Marketing in the New Virtual Experience Economy’ and HR Whitepaper ‘Employee Engagement: A Critical HR Problem in the 21st Century’ also available

 

Photo by Elena Koycheva on Unsplash

Photo by Marc Schäfer on Unsplash

 

References:

Llewellyn, G. (2018). The implications of Facebook’s most recent algorithm update | Smart Insights. Retrieved from https://www.smartinsights.com/social-media-marketing/facebook-marketing/implications-facebooks-recent-algorithm-update-can/

Wong, J. (2018). Twitter announces global change to algorithm in effort to tackle harassment. Retrieved from https://www.theguardian.com/technology/2018/may/15/twitter-ranking-algorithm-change-trolling-harassment-abuse

Rynne, A. (2018). 10 Surprising Stats You Didn’t Know about Marketing on LinkedIn. Retrieved from https://business.linkedin.com/marketing-solutions/blog/linkedin-b2b-marketing/2017/10-surprising-stats-you-didnt-know-about-marketing-on-linkedin

Elder, R., & Gallagher, K. (2018). Linkedin reaches a half billion users. Retrieved from https://www.businessinsider.com/linkedin-reaches-a-half-billion-users-2017-4

Sabbouh, A. (2017). Social Media Marketing: What social media is Best For B2B Marketing. Retrieved from https://www.linkedin.com/pulse/social-media-marketing-what-best-b2b-ashley-sabbouh/

Ganim Barnes, Ph.D., N., & Pavao, S. (2018). The 2017 Fortune 500 Go Visual and Increase Use of Instagram, Snapchat, and YouTube. Retrieved from https://www.umassd.edu/cmr/socialmediaresearch/2017fortune500/#d.en.963986

Hunt, E. (2018). LinkedIn is the worst of social media. Should I delete my account?. Retrieved from https://www.theguardian.com/culture/2017/jun/09/linkedin-is-the-worst-of-social-media-should-i-delete-my-account

The Rise of Micro-Influencers within Marketing

Influencer marketing is without a doubt a credible component of the marketing mix. In fact, research suggests that as much as half of young people in the U.K. purchased products that were promoted by influencers in 2017.

According to a survey of 2,293 adults aged between 18 and 30, consumers in the U.K. were five times more likely to buy products that were reviewed or promoted by an influencer (than someone who wasn’t). These results can be attributed to the fact that influencers bring authenticity to sponsored posts and that adds value to marketing campaigns.

While influencer marketing campaigns originally began with celebrities and brand ambassadors, brands have started to figure out that it’s not all about celebrity endorsement.

This is because while celebrities might have hundreds of thousands or even millions of followers if they don’t have the ability to change behaviours or influence the masses with their tastes, they don’t have influence over their audience.

Who are Micro-Influencers?

Micro-influencers are individuals who have gained a considerable amount of respect within a particular niche (travel, wellness, fitness, etc.). These individuals are deeply connected to their audience, and they can change the behaviours and tastes of others.

While the number of followed required to be considered a micro-influencer is always up for debate, anywhere from 10,000 and 500,000 followers on social media channels will suffice. In the grand scheme of things, it’s not the number of followers that really matter, it’s audience engagement.

Why are Micro-Influencers Important?

Compared to celebrity social media channels, micro-influencers have far fewer followers. However, engaging them in promotional activities can be more profitable because they have built trust and have nurtured a close relationship with their audience (and this is critical when it comes to purchase decisions).

Micro-influencer marketing is important because the influencer’s opinion is trusted, their audience is brand relevant, and they have the power to turn fans into loyal brand advocates. But to get the maximum exposure for your micro-influencer campaigns, a single mention by one influencer might not be enough.

Instead, it’s better to engage multiple micro-influencers to extend your reach. However, this won’t be easy as you’ll have to find relevant candidates, engage them, evaluate their channel, and this will be time intensive.

Micro-influencers on Instagram with over a 100,000 followers can command as much as $5,000, and that doesn’t include all the free stuff (that usually goes along with an endorsement).

When micro-influencers grow their audience and become more prolific, their fees will also increase. But marketers will need to tread carefully because engagement tends to drop as the audience grows.

For example, research suggests that individuals with less than 1,000 followers generally attracted likes on their posts about 8% of the time and generated comments about 0.5% of the time. When that number rose to over 10 million followers, the likes they received fell to 1.8% and generated comments about 0.04% of the time.

So there’s a clear downward correlation that can’t be ignored. So if you’re looking to engage a micro-influencer, what should you look for?

While there isn’t a sweet spot when it comes to the number of followers a micro-influencer should have, experts believe that the 10,000 to 100,000 range offers the best combination of broad reach and engagement.

In this scenario, the likes and comments rates often exceed those accounts with a higher number of followers. As the audience is keyed into their niche, you can get a higher return on your investment at a fraction of the cost you would typically have to pay a celebrity.

Micro-Influencer Marketing Today

Today, micro-influencers are more popular than ever within marketing. In fact, it’s one of the most successful strategies employed by marketers in the digital age.

This can be attributed to the fact that enterprises can gain as much as $7.65 in earned media value for every dollar spent on influencer marketing. So it’s not surprising that 57% of marketers have dedicated budgets for micro-influencer campaigns while another 37% plan to do so shortly.

As micro-influencer marketing grows exponentially, brands have to make an effort to identify the right influencer for their product and campaigns. Often, brands will look at a variety of statistics ranging from authentically grown audiences for individual campaigns, relevance, and the growth of their own USP.

However, whenever these statistics include personal data, regulations like the General Data Protection Regulation or GDPR will come into effect. Whenever this is the case, both the brand and the micro-influencer will have to have a reasonable justification for collecting and using this information.

Going forward, it will be imperative for brands to build a long-term relationship with relevant micro-influencers to connect with their target audience. As these advocates cover a wide range of niche markets, there’s a micro-influencer for just about any type of business.

For brands and micro-influencers, it will be critical to build strong and mutually beneficial relationships to help create authenticity and credibility without breaking the bank.

 

Please share and comment — I will try to interact with as many as possible!

 profile-_0016_ChrisP

 

Chris Hall

Marketing Recruitment / Group Social Media and Marketing

James Gray Associates Ltd, Marketing, Payroll, HR & Reward Specialist Recruiters

Email: chris@jgarecruitment.com Twitter: @JGA_Marketing Tel: 01727 800 377

Why not visit our website where you can access more blogswhitepapers and social content. You can also download our latest Whitepaper: A Payroll Blueprint Towards Successful Transformation with Marketing Whitepaper ‘Digital Marketing in the New Virtual Experience Economy’ and HR Whitepaper ‘Employee Engagement: A Critical HR Problem in the 21st Century’ also available

 

 

 

References:

Mirreh, M. (2018). Half of UK Adults Have Bought Products Promoted by Influencers. [online] PerformanceIN. Available at: https://performancein.com/news/2017/12/06/half-uk-adults-have-bought-products-promoted-influencers/

McLaren, L. (2018). What would you do if your teenager became an overnight Instagram sensation?. Retrieved from https://www.theguardian.com/technology/2018/jul/22/what-would-you-do-if-your-teenager-became-an-overnight-instagram-sensation

Instagram Marketing: Does Influencer Size Matter? – Markerly Blog. (2018). Retrieved from http://markerly.com/blog/instagram-marketing-does-influencer-size-matter/

The Remarkable Rise of Influencer Marketing [INFOGRAPHIC]. (2018). Retrieved from https://influencermarketinghub.com/the-rise-of-influencer-marketing/

EUGDPR – Information Portal. (2018). Retrieved from https://eugdpr.org/

Photo by Verena Yunita Yapi on Unsplash

Photo by Adam Jang on Unsplash

What benefits could blockchain bring to the payroll industry? Article 5 of 10

This is article 5 of 10 forming the fifth part of a series of articles dedicated to my attempt at helping Payroll & HR professionals understand the potential impact that both Blockchain and Cryptocurrencies could have on the future of Payroll & HR.

To view the earlier article in the series – click here:

  1. Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR
  2. Article 2: Will companies start to payroll its employees in cryptocurrency?
  3. Article 3: How will blockchain affect HR Recruitment Processes?
  4. Article 4: What are smart contracts and how will they affect payroll and HR?

Also, check out episode 09 of The Payroll Podcast with Anita Lettink, SVP of Global Alliances at NGA HR which discusses ‘Blockchain and the Future of Payroll & HR’ in considerable detail if you wish to fast-track your learning. You can subscribe to the Payroll Podcast here: Apple Podcasts


Today, I would like to help you understand what benefits blockchain could bring to the payroll industry. 

So, lets start with the (in theory) obvious benefits that blockchain technology could bring to the payroll industry:

  1. Blockchain-based payroll systems should be more secure, and cheaper, than non-blockchain-based systems.
  2. The distributed ledgers are practically impossible to change once information has been entered and the data confirmed by all participants on the network.
  3.  Transaction fees between parties should be much lower, because blockchain-based payroll cuts out the need for a middleman (usually a bank) to process payments.
  4.  Any technology which can both speed up and simplify payroll will be of huge benefit to the millions of businesses worldwide.

Of course, blockchain enthusiasts will know all of the above which is why they are busy trying to apply their technology to this system.

Clearly, then the field is ripe for innovation. What’s not yet clear is whether blockchain is the right innovation.

So let’s examine the practicalities a little closer to see if we can get to grips with the reality.

Firstly, any company that has in excess of probably 500 employees, will likely require a dedicated payroll function that is responsible for processing payroll and potentially also for invoice management too if they are running large contractor payrolls.

As the payroll employee volumes increase, so do the risks and chances of errors occurring which can result in disputes, problems and payment delays.

Removing the possibility of human input error by using a tamper-proof blockchain like Ethereum would appear to be a step in the right direction.

In addition, it appears that the companies who will really benefit from blockchain-based payroll are those with international workforces, at least part of which are based remotely.


Why?

Because blockchain promises faster cross-border payments, less expensive cross-border payments and less error-prone payments, thus solving one of the biggest costs associated with international payroll.

Fewer errors and faster payments means fewer disputes between a company and its employees.

For companies with many international employees applying themselves to projects all across the globe, it would seem that blockchain-based payroll systems would work well.

But few serious developments have been made for companies like yours to easily integrate blockchain-based payrolls into your current systems, or to move your entire payroll away from user-controlled databases and into a blockchain system.

ADP is one of the world’s best known payroll software companies. In a report from May 2018 to the Global Payroll Association, ADP noted that it is currently investigating how blockchains could be used

ADP’s vice president of corporate strategy Tashina Charagi told the GPA:

“As far as blockchain applications and payroll [go], one of the first things that comes out is…not only faster cross-border payments but less expensive and less error-prone cross-border payments.”

Put that statement alongside this rather critical one, published by newswire Reuters on 13 June 2018.

“Banks are unlikely to use distributed ledgers [another word for blockchains] to process cross-border payments for now because of scalability and privacy issues, according to Ripple, one of the most prominent startups developing the technology.”

Remittances and payments

The main issue that blockchain is thought to be able to solve in payroll is remittances – sending money across international borders more quickly and without the hefty transaction fees that workers face when converting salary or contract payments back to the local currency.

International businesses with many overseas employees feel the pain of payroll more than smaller, domestic, companies.

There are the costs of currency volatility – Deloitte’s 2017 report on blockchain notes that:

“Hourly changes in exchange rates are routinely taken advantage of by intermediaries”. However, it continues: “So, time is money and an international payroll blockchain solution simply offers a faster solution than existing models.”

Is this strictly true? Are blockchain payroll systems “simply faster” than existing models?

Not necessarily, given our earlier focus on how the size of blockchains increase as more data is inputted.

The longer your company’s blockchain-based payroll is running, the harder it becomes – and therefore the more time it takes – to verify transactions.

The calculation of the hash function that every block requires to be added to the chain scales up in difficulty along with the size of the blockchain. Does this sound “simply faster”?

Essentially, it is clear that blockchain could bring a number of benefits to improving a payroll processing operation. However, at present, it is unlikely we will see the technology become widespread until concerns regarding privacy, scalability and integration are tested and improved.

What do you think?

Please share and comment – I will try to interact with as many as possible!

Future articles in the series will include:

  • Blockchain payroll companies
  • How to build a blockchain-based payroll system
  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Thanks 🙂

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.

Visit our website to access more blogswhitepapersThe Payroll Podcast and more content about all things “Payroll and HR”.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please contact me and I would be delighted to discuss how we can help.

Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: nick@jgarecruitment.com | Tel: 01727 800 377

What are smart contracts and how will they affect payroll and HR? Blockchain Article 4/10

This is article 4 of 10 forming the fourth part of a series of articles dedicated to my attempt at helping Payroll & HR professionals understand the potential impact that Blockchain and Cryptocurrency could have on the future of Payroll & HR.

To view the earlier article in the series – click here:

1. Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR

2. Article 2: Will companies start to payroll its employees in cryptocurrency?

3. Article 3: How will blockchain affect HR Recruitment Processes?

Also, check out episode 09 of The Payroll Podcast with Anita Lettink, SVP of Global Alliances at NGA HR which discusses ‘Blockchain and the Future of Payroll & HR’ in considerable detail if you wish to fast-track your learning. You can subscribe to the Payroll Podcast here: Apple Podcasts

Today, I would like to help you understand what a “Smart Contract” is in relation to blockchain technology and how these are likely to affect payroll and HR processes.

4. What are smart contracts and how will they affect payroll and HR?

Before I explain what a smart contact is, the reason we are likely to encounter them in the future is because they could be used to payroll employees in a way that is near-instant. Smart contracts could streamline existing payroll and HR functions significantly, thereby saving businesses considerable money on its back-office function expenditure.

Smart contracts, in theory, could be used by payroll departments to pay contractors and freelancers who only interact with companies on an infrequent basis to complete specific portions of work.

More pertinently, is the fact that they are already being used on the Ethereum blockchain, which is the second-largest public blockchain in the world.

So what are they, how do they work and why are the relevant to payroll and HR?

A smart contract is a set of promises written out in code which works by using statements like: ‘If This, Then That’ (IFTTT). Once set in motion, it is designed to be entirely dependent on its code and irreversible.

Let’s imagine then, a smart contract between our company and a contractor.

When a certain number of hours of work have been completed (If This), our smart contract automatically pays our contractor (Then That) by deploying this piece of remotely executable code, which is linked to an instruction from our company bank account to the contractor’s bank account.

We wouldn’t need to contact our bank on a monthly payment run, along with all the payroll processing time that entails; instead, we just deal direct with one another, with the smart contract as a guarantee that work is completed.

While banks are investigating the use of smart contracts, they’re not so keen just yet to use public blockchains like Ethereum to link accounts together because of both privacy and security concerns.

Not many companies would be happy for all their transactions to be publicly available to anyone who wanted to view them, but this is possible on Ethereum.

Still, there are some up-and-coming pilot programs in development.

Because Ethereum is a public, open source blockchain, any person or company can view the source code and copy it to develop their own blockchain system.

JP Morgan has done this with their Quorum application, which itself is open source [https://uk.reuters.com/article/us-blockchain-jpmorgan/jpmorgan-mulls-spin-off-of-blockchain-project-quorum-sources] and could be built upon or modified by other parties.

We know that freelancers and contractors face horrendous difficulties getting swift payments for their work, and delayed payments can put fledgling businesses in serious difficulties.

JP Morgan’s Quorum platform is an upgraded version of Ethereum and is being trialled to offer faster royalty payments to the thousands of independent game developers working on Microsoft’s Xbox games.

Currently, payments are slow and laborious, taking up to 45 days to be agreed and arrive. Quorum promises daily payments triggered by smart contracts.

Smart Contract Risks

As we mention above, smart contracts are in theory a sound application of blockchain technology. But there are risks to consider.

In order to function as it was intended, the code behind a smart contract must be perfect.

All software, including professional, enterprise-grade software, contains bugs. Only a very tiny proportion of code is technically perfect.

Developer Steven McConnell writes in his seminal book Code Complete [https://www.amazon.com/Code-Complete-Practical-Handbook-Construction/dp/0735619670] that the industry average is around 15 to 50 errors per 1000 lines of code.

In its code released to the general public, Microsoft manages errors at the lower level, at about 10-20 bugs per 1000 lines.

The only people producing code with no errors at all are software developers at NASA working on the space shuttle, writes McConnell, “who achieved a level of zero defects (bugs) in 500,000 lines of code.”

Smart contract payments are irreversible, so there is no way that a company could get its money back if a bug like this were exploited.

In 2017, nearly $55 million-worth of Ethereum’s cryptocurrency Ether was stolen because a still-unknown hacker exploited that bug in the source code.

The bug allowed a payment receiver to request payment multiple times, getting away with repeat payments before the blockchain system had a chance to update itself.

Covering this story, Bloomberg’s Matthew Leising reported [https://www.bloomberg.com/features/2017-the-ether-thief/] how unforgiving tiny errors really are.

He writes: “The order of commands [in this piece of code] allowed cryptotoken holders to withdraw any profits made on their investments….Instead, it became one of the biggest backdoors in hacking history…If the capital T inline 666 had been a small t, that would have prevented the hack.”

For security’s sake, hosting smart contracts on our in-house private blockchains, instead of in the public Ethereum blockchain, could be the future for smart contracts in business.

But private blockchains ultimately have one major flaw.

If only a handful of people are allowed to update transactions on a private blockchain, they become single points of failure and an easy target for hackers, who could gain control of an entire blockchain by attacking only a small number of computers.

If your payroll department looks after the blockchain, any hardware failure or file corruption would be extremely serious – because there is not a backup network of computers also updating the correct copy of the blockchain.

Conclusion

Ethereum, which launched in 2015, can process transactions at a much speedier rate than its older cousin Bitcoin.

Scalability is a significant issue for Bitcoin, as the more blocks of transactions are added to the chain, the longer it takes to verify transactions. It takes around 10 minutes to update the Bitcoin blockchain. With Ethereum, it takes approximately 12 seconds.

Still, 12 seconds is a very long time compared to modern databases, which store and process information in milliseconds.

Smart contracts may well be the future of contract payments for payroll operations of the future, and these early forms of private blockchain could be used to streamline payments and processes. But there are few tangible products for businesses to adopt as of yet.

It is likely that private companies will continue to develop private blockchains for smart contract development.

However, pilot projects are still at an early stage and will not reach smaller businesses or mainstream adoption for some years.

What do you think?

Please share and comment – I will try to interact with as many as possible!

Future articles in the series will include:

  • What benefits could blockchain bring to the payroll industry?
  • Blockchain payroll companies
  • How to build a blockchain-based payroll system
  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Thanks 🙂

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.

Look around our website to access more blogswhitepapersThe Payroll Podcast and more content about all things “Payroll and HR”.

SME’s are the New Tech Innovators. Be Prepared…The Robots are coming…

SME companies are no longer playing catch up. Today, just about every single mid-market company is using some form of augmented or virtual reality while at least half of them are using interactive tools and demos to improve both employee and customer interactions. Within payroll and HR we see a huge rise in the implementation of Robotic Process Automation (RPA) too, and it seems this is a trend that is set to stay. Attitudes have shifted greatly, and SME companies are now embracing technology. Especially new technologies. They can see that these technologies can significantly impact on efficiency leading to considerable savings integral to business growth strategies.

 

 

New technologies and Robotic Process Automation (RPA) is automating management and people requests; reducing process delays; cleansing data to ensure consistency and accuracy; streamlining information across platforms; handling notifications and more. These technologies can be attributed to delivering significant ROI (return on investment) by improving cost savings and increased productivity.

Where before most mid-market companies viewed IT as more of an administrative function, they now view it as something that can drive strategy, technology adoption, and integration. Payroll and HR Managers are also at the heart of this, realising that a new HRIS or Payroll system can dramatically impact overall efficiency. This change began with companies moving to the cloud which has allowed businesses to adopt emerging technologies. By embracing new technologies and Robotic Process Automation (RPA), they can maximise growth quicker than ever before. Subsequently, we see more and more IT, Payroll & HR leaders taking control and setting the technology agenda within businesses. By harnessing the latest innovations, SME’s are no longer forced to play catch up with their larger competitors.

Companies are always looking for the next innovation, and we are now seeing a rise in the implementation of IoT (Internet of Things) into business / IT programs. The building of IoT capabilities will do nothing but increase forward momentum. Cloud computing evolution has laid the groundwork for an acceleration in emerging technology adoption. This is helping SME’s to grow faster as they anticipate and track business processes and performance more accurately and in real-time allowing them to develop a corporate strategy quickly and proactively in response.

In addition to new tech, RMA and IoT is the increased usage and reliance on cognitive and predictive analytics to allow SME’s to gain valuable insights into employee and customer behaviours. These analytics help firms to become leaders in their sectors – leading to both economic growth and new employment opportunities.

HR and Payroll software is now more affordable than ever due to the increased competitiveness of the industry. This new-found affordability is allowing businesses to obtain and access complex tools and systems that can significantly contribute to corporate growth. Implementing excellent human capital solutions allow fast-growing companies to expand much more quickly without the dilution of their corporate culture and it is evident recent HRIS and Payroll technology trends are already driving changes in the workplace.

Not so long ago, a lot of HR departments thought that they could lure Millennials in with free snacks, massage chairs, and ping-pong tables. Millennials don’t want bean bag chairs anymore. They want effective monitoring and appraisal from senior management and more efficient collaboration in the workplace. With this in mind, the companies that embrace these new technologies are now able to attract the top talent that they’re looking for more quickly. This stronger corporate culture and the new outlook on the values in the workplace is what employees in their twenties and thirties are seeking. They want a work environment that reflects their core values and embraces current technologies.

Though the idea of people analytics isn’t new, HR and payroll professionals will be applying them in a variety of new ways over the next few months and years. Attracting top talent remains and developing employee branding remain key HR priorities, and this often hinges on the implementation of smarter / better HR technology.

The bottom line is that Payroll and HR managers have started to recognise and accept these changes. However, they need support from the company the directors who hold the purse strings to enable them to implement technical change. The ever broadening advancements in HRIS and Payroll Technologies are often behind current corporate surges in growth. I suspect that as these purse strings loosen, we may see a few more growth surges yet too from unexpected players.

Be prepared. The robots are coming!

I would welcome your views on how your business is embracing new technologies and how you see the future HR and Payroll technologic landscape shaping up for the future?

 Thanks for reading.

 

Please share and comment – I will try to interact with as many as possible!

—————————————————————————————————-

This article was written by Nick Day, Managing Director at JGA Recruitment – the leading Global Payroll and HR Recruitment Specialist Employment Agency.

If you are looking for expert talent or advice on anything Payroll or HR related, then please contact me for a 15-minute call and I would be delighted to help.

Nick Day | Managing Director

JGA Payroll & HR Recruitment | Email: nick@jgarecruitment.com | T: 01727 800 377

Image: https://www.123rf.com/profile_niserin

Links:

JGA: https://www.youtube.com/watch?v=karSfuXYfh4

Payroll: https://www.youtube.com/watch?v=7ICEI1qpeBY

HR: https://www.youtube.com/watch?v=BBIZznZogW8

How will blockchain affect HR Recruitment Processes? Article 3 of 10

This is article 3 of 10 forming the third part of a series of articles dedicated to my attempt at helping Payroll & HR professionals understand the potential impact that Blockchain and Cryptocurrency could have on the future of Payroll & HR.

To view the earlier article in the series – click here:

  1. Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR
  2. Article 2: Will companies start to payroll its employees in cryptocurrency?

Also, check out the latest episode of The Payroll Podcast with Anita Lettink, SVP of Global Alliances at NGA HR which discusses Blockchain and the Future of Payroll & HR

 

Today, I would like to discuss how I think Blockchain may affect Human Resources in relation to recruitment-related administration and storing personal data…

Article 3: How will blockchain affect HR Recruitment Processes?

A large proportion of time in the life of an HR professional is spent repeating the same actions over and over again. This is especially true with recruitment, vetting and onboarding.

Now, if I was to say that we could automate some of these repeated actions: chasing down references, checking work histories, verifying credentials etc., etc., I am sure you would be very interested in understanding how. Not only would this save time, but it would also save money, and it would allow HR professionals to spend more time on strategy and less time on repetitive HR administrative tasks!

You will soon begin to hear many firms peddling their technological wares claiming

“Blockchain is the answer”.

You will discover how blockchain technology could speed up the hiring and recruitment process, by removing the need to contact third parties to confirm information.

Right now, there are even pilot programs automating such repetitive tasks already. For example, in this group of Greek universities [link], they are experimenting with ways to add student diplomas to a blockchain database.

However, the truth is that despite these pilot projects existing, industry-wide adoption remains a problem for blockchain-based technologies.

There are various reasons for this.

Let’s explore…

 

Using Blockchain in Recruitment

There are two major strands of how blockchain systems could affect recruitment. Each relates to a different kind of blockchain: the first is private and permissioned, and the second is public and permissionless. We go into more detail about this in the latest episode of The Payroll Podcast.

However, for now, let’s consider the analogy IBM use of the internet (public) vs intranet (private) to help describe the differences between these two types of blockchains.

  1. Public blockchains: publicly available, decentralised blockchains – where anyone can view the information on a blockchain without first having to ask for permission, login credentials or a password – also known as permissionless blockchains
  2. Private Blockchain: private, in-house, centralised blockchain-based databases where only a select few people can gain access – also known as permissioned blockchains

So how does this affect recruitment for Employers?

Firstly, companies who want to be seen as being ‘ahead of the curve’ and ‘technologically advanced’ they may consider employing some form of blockchain solution to help with their recruitment and HR systems.

Why? Because right now it is likely that those who do decide to implement these new types of systems will use it in their marketing in an attempt to attract forward-thinking, technologically-curious applicants to the business. It could also appeal to companies desperate to attract ‘millennials’ to their brands.

However, one of the main issues with recruiting great employees is the fact that we know the references, job successes and credentials can easily be faked or exaggerated.  CV ‘padding’ is a significant issue and candidates will often overstate levels of responsibility, inflate or even invent credentials, or use fake or inflated job titles to fill gaps on a CV.

This is a genuine problem for HR departments and recruiters alike, and it takes a lot of time (and sometimes poor hiring decisions) to establish the wheat from the chaff. Sadly, at present blockchain doesn’t really offer a solution to this problem either.

Blockchain would only really work as a solution if candidate information was all available in one place. It would be a dream if there were one place that all credentials, qualifications and career histories were stored that HR professionals could access. If this did exist then this would be the hook for blockchain-based databases. However, this reality rarely matches the dream.

One possibility for blockchain, however, can be found within educational establishments (if indeed they all decide to adopt the technology). If they started to store results on a blockchain database then these would be great, uneditable databases HR professionals could access to easily look-up a candidate’s educational qualifications to see if the results listed on a CV matched those on the block-chain database. As blockchains are uneditable, they would even exist even if the educational institution dissolved.

Interestingly, some educational institutions are already beginning to record qualifications on the blockchain. However, at present, this is far from being universally adopted. Subsequently, until this becomes the process for all educational institutions, it is hard to see how blockchain, at least in the immediate future, will improve recruitment from an HR process perspective

The reality is that vetting candidates correctly remains an extremely time-consuming task for HR professionals and recruiters and there is no “quick-fix” solution. Until an all-in-one place solution exists which keeps accurate records of all aspects of an applicant’s profile, this is unlikely to change either.

While blockchain could, in theory, allow us to check qualifications quickly and reliably, it only really works as a process if all businesses and educational establishments adopt the technology. Even if this part of the vetting process becomes a universal norm, it still won’t change the fact that HR departments and recruiters still would not have one central place to check for CV inaccuracies.

Okay, but what about blockchain databases for storing personal data on employees?

Personal Data and Blockchain

Personal data and blockchains is a tricky subject. While blockchain evangelists may see it as a natural fit, in reality, there is a rather devastating argument against their use.

Personal data on a blockchain cannot be removed. This is in the permanent nature of a blockchain and exactly how it is designed. Blockchains are uneditable.

As a result, blockchain databases containing personal data cannot comply with the UK’s Data Protection Act, nor with the EU’s General Data Protection Regulation (better known as GDPR). This is because the legislation explicitly states the individual’s right to require organisations – including universities and private companies – to delete the data about herself or himself unless it must be kept on record for legal reasons. This is also known as ‘Right to Erasure’ (Art. 17 of the GDPR)

Securing Personal Data

The above applies to public blockchains. Private, permissioned blockchains, however, could be used in their place.

In private blockchains, you need to depend on an individual person to manage access to the blockchain, and this person needs to be a trusted third-party who has the confidence of everyone concerned. Here, inherently lies the problem because this one person also becomes the potential point of failure.

Why would anyone want to use a blockchain-based database instead of a traditional database which already works perfectly well? It is a bit like paying your employees in bitcoin or any other cryptocurrency – why bother when we already have a perfectly useful currency (the British Pound) we can pay people with, that is both more financially stable and more universally accepted.

I love Einstein quotes (for those of you who have previously visited our website you will know this already), and here a good one comes to mind…

“We can’t solve problems using the same kind of thinking we used when we created them” – Einstein.

Also, when we talk about viewing personal data on a blockchain, we are really talking about hashes (the shortened, cryptography-secured representation of that data). To access the personal data in full – in this case, presumably, degree or course certificates, a person’s full name and attendance record, or list of publications – another application outside the blockchain are needed to decode the hashes and provide this information.

I appreciate that following this can be difficult so perhaps Bart Jacobs, Professor of Software Security at Radboud University in The Netherlands who has researched this issue can put it more directly. He writes [Dutch translation: https://ibestuur.nl/weblog/reason-yourself-out-of-blockchains]

“The blockchain only plays a very limited, subordinate role in [decoding personal data]. Besides, the energy consumption of blockchains borders on madness.”

Because a blockchain is an ever-growing list of all the data entered into the database – and the cryptographic proof-of-work required to verify the information on it – the energy and electricity consumption required to maintain them become impractical for most businesses.

Jacobs adds:

“The next time a blockchain guru approaches you with promises, ask ‘Where is the really sensitive data, and how is it protected? How do you regulate how parties are authenticated? And therefore, why is the blockchain really needed?’”

However secure a blockchain-based database – and there is no question that the cryptographic standards used are pretty secure – where that technology is forced to touch down and interact with the rest of the world, there are significant security compromises to be made.

Conclusion

Organisations looking to cut back-office costs may see blockchain-based databases as a cure-all panacea for slow and costly recruitment processes and HR verifications.

In reality, I don’t believe public blockchains are really suitable for hosting personal data. Besides, while using private blockchains may address some legislative concerns, they are redundant because of the need for a trusted third party to maintain them and regulate access.

In this way, they overlap with existing, non-experimental database technologies.

Subsequently, while it is inevitable that we will see blockchain technology begin to infiltrate many business processes, I personally think that when it comes to HR and Payroll, companies should take time to understand if and how products that promise blockchain as a solution really work before jumping in to implement it.

What do you think?

Please share and comment – I will try to interact with as many as possible!

Future articles in the series will include:

  • What is a smart contracts and how will they affect payroll and HR?
  • What benefits could blockchain bring to the payroll industry?
  • Blockchain payroll companies
  • How to build a blockchain-based payroll system
  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Look out for article 4 in the series: What is a smart contracts and how will they affect payroll and HR?

Thanks 🙂

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it. 

Visit our website to access more blogswhitepapersThe Payroll Podcast and social content about all things “Payroll and HR”.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please call me or email me and I would be delighted to discuss how we can help.

Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: ck@jgarecruitment.com | Tel: 01727 800 377

Will companies start to payroll its employees in cryptocurrency? Article 2 of 10

This is article 2 of 10 forming the second part of a series of articles dedicated to my attempt at helping Payroll & HR professionals understand the potential impact both Blockchain and Cryptocurrency may have on the Payroll & HR industries in the future.

If you missed the first article in the series – click here: Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR

Also, look out for the next Payroll Podcast, which is with Anita Lettink, SVP of Global Alliances at @NGAHR which discusses ‘Blockchain and the Future of Payroll & HR‘, due for release on Sunday 12th AugustSubscribe here to ensure you do not miss it!

Today, I would like to explore Cryptocurrency and whether or not companies will soon begin to start paying its employees in this new, exciting form of tender…

The blockchain is the most popular technology jargon of 2018 and Bitcoin; the most famous of all cryptocurrencies has become something of an investor’s buzzword too. I am sure everyone reading this have experienced being bombarded by one of the many emails and advertisements that remind us of the potential gains possible by investing in crypto.

Subsequently, among the social noise, it has become hard to separate the hype from reality, but I hope these articles may do just that.


Will companies start to payroll its employees in cryptocurrency?

It would seem a natural evolution of the workplace that businesses should start paying their employees in cryptocurrencies right?

Believe it or not, some companies already are! However, the companies who currently pay their employees in cryptocurrencies tend to be in the industry themselves. Japan’s GMO Internet announced in February 2018 that it would allow workers to take home up to $890 a month in Bitcoin [https://www.newsbtc.com/2018/04/12/gmo-internet-group-prepares-to-launch-its-bitcoin-payroll-option/]. But for many employers, the rapid fluctuations in the price of cryptocurrencies are a considerable barrier to early adoption.

There are also tax implications for being paid in Bitcoin or other cryptocurrencies, especially if you are converting your Bitcoin back to a fiat currency (fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity – https://www.investopedia.com/terms/f/fiatmoney.asp) like the British pound.

HMRC has warned that traders, investors and holders may have to pay Capital Gains Tax on any profits made [https://blocktax.uk/guide/]

For some companies that do pay employees in crypto, the cryptotokens are considered a fair exchange for perceived company value, in much the same way as stock options would be for tech workers in startups or in large firms based in Silicon Valley.

It requires a certain implicit level of trust from the employee in the viability of a cryptocurrency to accept payment in that cryptocurrency. It also follows, logically, that those who already work in the blockchain field are more likely to implicitly trust the value of those cryptocurrencies.


Ecosystems

As of 2018, the trend is that companies are attempting to create proprietary ‘ecosystems’ of cryptocurrencies.

These ecosystems force workers and employers into a narrow field whereby the cryptotokens that makeup salary or contract payments are the same ones they can spend on goods and services.

No one cryptocurrency has achieved mainstream market acceptance and so there is a ongoing struggle for supremacy.

Consider the iOS and Android operating systems for mobile phones. Apple (for iOS) and Google’s parent company Alphabet (for Android) have total market dominance. In the UK, iOS has 49.48% market share, while Android has 47.11% market share [https://www.statista.com/statistics/487373/market-share-mobile-operating-systems-uk/] Blackberry, once a supreme force, now has just 0.81%, and Symbian, once the world’s most widely-used smartphone operating system, is at 0.02%.

The point being, no cryptocurrency wants to be Blackberry or Symbian. At this time, it’s not clear which cryptocurrency will take prominence to the exclusion of all others.


For employers

The main issue that employers face is the wild volatility in the prices of cryptocurrencies as compared to fiat currencies.

It’s not unknown for the price of Bitcoin, Ethereum or any of the better-known cryptocoins to increase or decrease by 10% to 20% in a single day.

“Say, for example, you are a P ayroll Manager who is required to pay a freelancer or contractor for a single piece of work. The agreed payroll payment is £1,000. You work out how much that is in Bitcoin (BTC). As of 7th August, that equals 0.183 BTC. While the payment is going through, the price of Bitcoin rises by 20%. Your company has just paid the freelancer not 0.183 BTC, but 0.2196 BTC, equalling £1219.60″

Such volatility would make it very difficult for your company to budget appropriately, especially if this payment is repeated for multiple workers, or across multiple cryptocurrencies, each with their inbuilt variability.


For employees

The problem that employees face is that there are limited places to spend cryptocurrencies. In the UK, there are now fewer high-street shops than there were in 2017 that will accept payment in the form of cryptocurrency. This is because Bitcoin is increasingly seen as a store of value, like oil or gold, as opposed to a viable currency.

Why would it make sense to pay your employee in a cryptocurrency when there are already mainstream currencies that do the job well enough? You can already spend your British pound to buy food, flights, or any other product on the open market.


Conclusion

So, do I think there will ever be a wide-scale company adoption of the idea of payrolling its employees in cryptocurrency?

Despite the hype, it’s unlikely that this trend will spread into mainstream company life in the next three to five years, given the uncertainty over tax, price volatility, and country-by-country regulation of cryptocurrencies.

However, what we do know is that HMRC is already preparing for it following their warning to traders, investors and holders, so it is feasible to believe that they are also preparing for broader revenue tax implications as well, particularly if employers do start to payroll its staff in crypto.

It appears that while in theory paying employees in cryptocurrency may seem like an attractive option for employees, the benefits for employers are also not so clear-cut.

“Why would employers want to pay employees in cryptocurrency when there is already a mainstream currency that works – the good ol’ English Pound!” – Nick Day

For me, this currency already does the job well enough and can be spent much easier on the open market too.

What do you think?

Future articles in the series will include:

  • How will blockchain affect HR and Payroll data?
  • What is a smart contracts and how will they affect payroll and HR?
  • What benefits could blockchain bring to the payroll industry?
  • Blockchain payroll companies
  • How to build a blockchain-based payroll system
  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Look out for article 3 in the series: How will blockchain affect HR and Payroll Data?

Thanks 🙂

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.

Please share and comment – I will try to interact with as many as possible!

Visit our website to access more blogswhitepapersThe Payroll Podcast and social content about all things “Payroll and HR”.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please call me or email me and I would be delighted to discuss how we can help.

Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: ck@jgarecruitment.com | Tel: 01727 800 377

Sources:

  1. https://www.newsbtc.com/2018/04/12/gmo-internet-group-prepares-to-launch-its-bitcoin-payroll-option/
  2. https://www.investopedia.com/terms/f/fiatmoney.asp
  3. https://blocktax.uk/guide/
  4. https://www.statista.com/statistics/487373/market-share-mobile-operating-systems-uk/
  5. https://www.statista.com/statistics/487373/market-share-mobile-operating-systems-uk/

Image Credits:

Copyright: https://www.123rf.com/profile_vitacop / 123RF Stock Photo</a>

Copyright: https://www.123rf.com/profile_artmagination / 123RF Stock Photo

How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR. Article 1 of 10

This is article 1 of 10 forming the first part of a series of articles dedicated to my attempt at helping payroll & HR professionals understand what Blockchain, Cryptocurrency and DLT technology are, and perhaps more importantly, how it may affect Payroll & HR processes in the future.

Please also look out for the next Payroll Podcast, which is with Anita Lettink, SVP of Global Alliances at NGAHR which also goes into significant detail about this subject, which is due for release next week.

Why do I think it is essential that payroll and HR professionals understand these complicated and much-hyped technologies? Well, wild volatility in the trading price of Bitcoin has been the main entry point raising up cryptocurrencies, Distributed Ledger Technology and blockchain from a technological oddity to the front pages of the Wall Street Journal, Bloomberg, Forbes, The Guardian and The New York Times.

The payroll industry today contributes some £418m to the UK economy every year and ranks as one of the most expensive back-office functions for the vast majority of small businesses.

These series of articles seek to explore the intersection between the payroll and HR industries, and the most popular technology of 2018: blockchain. Rampant speculation on the price of Bitcoin has forced blockchain and cryptocurrency into the mainstream but it appears that the majority of us are still not quite familiar with what the technologies are.

Blockchain itself has become something of an investor’s buzzword, and it has become hard to separate the hype from reality, but I hope these articles may do just that.

Take the example of Long Island Ice Tea Company. On 21 December 2017 this New York drinks brand announced a startling pivot: it was to change its name to Long Blockchain Company. Company stock rose as much as 289% on the back of the announcement, even though it had no blockchain-based products to sell and had no concrete plans to develop any blockchain technology. The change of direction failed. By 10 April 2018 Long Blockchain Co learned their stock was to be de-listed by the NASDAQ exchange for misleading investors and the company formally abandoned plans to purchase Bitcoin mining equipment.

So easy was it to convince investors that they were worth investing in, all with a simple name change.

It would be foolish to ignore blockchain technology and the impact it could have on both payroll and HR industries. However, this should come with the caveat that blockchain will also not solve all of your payroll problems, nor is it a magic bullet to, overnight, cut your HR or back-office costs in half.

It is still highly experimental technology, so to set the scene of understanding, in thie article , I would like to focus on what Blockchain, Cryptocurrency and DLT Technologies are, an introduction if you will…

Article 1: An introduction to Blockchain, Cryptocurrency and DLT Technology.

What is blockchain?

A blockchain is a type of distributed online accounting ledger which is essentially, an ever-growing list of records. Blockchains are stored across multiple computers and need agreement from each computer to update the entries on the ledger.

Blockchains collect blocks of transactions together in groups, which are then added to the chain of previous blocks and linked together using a form of encryption called ‘cryptographic hashes’ or ‘hash functions’.

These hash functions assign a fixed-length string of letters and numbers to each entry on the ledger. It would take more computer power than there is in existence in the world to randomly guess these hash functions, which is what makes a blockchain so secure.

Blockchains are also tamper-proof because their structure only allows new blocks of transactions to be added, and previously agreed blocks cannot be edited or changed.

While interest in blockchain technology has been growing in the wake of the rocketing (and plunging) price of Bitcoin, driven by speculative mass trading, there are still few enterprise-level blockchain-based products for businesses to use.

The blockchain employs a method of verification for each transaction called ‘proof-of-work’.

Specific computers called mining nodes (miners) each hold a copy of the blockchain and compete in a race to solve a mathematical puzzle to prove that each block of transactions is correct. The winning miner receives a cryptocurrency reward for doing so.

Because of this proof of work, no-one can fraudulently forge new Bitcoin without the agreement of the rest of the blockchain network.

However, proof of work takes a long time and uses up significant electricity as each computer runs through millions of calculations to update the blockchain.

It’ is estimated that Bitcoin mining ‘farms’ using thousands of high-powered computers now use up more electricity each year than the population of Ireland

This is quick overview of what blockchain is. Of course, my future articles will explore the technology in much more detail over the coming weeks, but I hope this gives you a platform of understanding. So, next up, cryptocurrency…

What is cryptocurrency?

A cryptocurrency is a digital, virtual currency. Transactions are secured not with the agreement of banks, but by doing it person-to-person, relying on a kind of encryption called cryptography.

Cryptocurrency transactions are recorded on a blockchain and are linked to a database which is shared (distributed) across multiple computers. This creates a permanent and irreversible online ledger of every transaction made using the currency.

Bitcoin is the first and most widely used cryptocurrency, and it is, in fact, possible to view every Bitcoin transaction that has taken place since it was created.

It’s no coincidence that the idea for Bitcoin, a payments system that deliberately does away with the need for banks and financial institutions, came in the wake of the 2008 global financial crisis. Developers wanted a way to bypass the banks – seen as greedy and corrupt – and still, make financial transactions safely and securely.

The idea behind Bitcoin was to create an online store of value that would work without a central point of control.

It is deflationary because it is different from bank-controlled money: no-one can create their own Bitcoin out of thin air, unlike central banks who print millions in the form of quantitative easing.

Cryptocurrencies like Bitcoin and Ethereum are built using public, open, ‘permissionless’ blockchains that anyone can view, use and contribute to without asking first.

These contrast with private blockchains, which we’ll discuss later in a future article. Hopefully, you are still following me up to this point right? Okay – so finally we have distributed ledger technology, also known as “DLT”…

What is Distributed Ledger Technology?

Distributed Ledger Technology or DLT is an umbrella term which describes a type of online database which is copied across multiple computers and needs the agreement of each machine to make changes to the entries in that database.

The blockchain is one form of DLT.

Not all DLTs employ a chain of linked blocks as blockchain does, but all DLTs are databases which are spread out across different computers in a network. So, every blockchain is a DLT, but not every DLT is a blockchain.

The agreement on the one correct copy of the ledger is called ‘consensus’, and each computer which stores the ledger contributes to updating it.

In theory, this technology should be able to increase the speed of payments and reduce costs for financial institutions.

This is because recording payments in fiat (national) currencies like the US dollar or the British pound requires a network of participants including banks, governments, regulators, lawyers and compliance officers, which slows down the whole process. DLTs could work autonomously, agreeing to payments automatically and cutting out back-office waste.

So hopefully, now that we have an understanding of what blockchain, cryptocurrency and distributed ledger technology (DLT) are, we can explore how and indeed if, we should expect companies to start to pay their employees in cryptocurrency in the future.

I hope you have found this very quick introduction into very complex technologies useful. This article will form the foundation for the future articles I will be releasing on the subject so please save it to your favourites and refer back to it if you need too!

Future articles in the series will include:

  • Will companies start to pay their employees in cryptocurrency?
  • How will blockchain affect HR?
  • How could smart contracts affect payroll and HR?
  • What benefits could blockchain bring to the payroll industry?
  • Blockchain payroll companies
  • How to build a blockchain-based payroll system
  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is Blockchain and Crypto the future?

Look out for article 2 in the series: Will companies start to pay their employees in cryptocurrency?

Thanks,

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.

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Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: nick@jgarecruitment.com | Tel: 01727 800 377