Are payroll systems sold meeting expectations?

In the payroll industry, there are hundreds of systems and services that companies can choose that enable them to carry out payroll operations more efficiently and effectively. Compared to manual processes, a payroll system will usually speed up payroll processes tremendously, and help to reduce human error. In theory, payroll systems allow more significant levels of control over wages and provide opportunities for faster reporting and compliance. Big software companies offering payroll systems highlight these and the numerous other benefits available – such as being able to manage payroll in different countries better. However, some companies are finding that payroll systems and services sold are not meeting their expectations.

Let us explore why this is happening…

Perhaps one of the issues is that companies seeking payroll systems are not necessarily doing their due diligence before they get started. As a result, major players in the payroll software and services space are winning contracts based on very effective marketing campaigns. Substantial investment in search engine optimisation, sharp sales teams and compelling presentations impress potential customers and win them over – often before clients really understand what the solution they need should look like. However, this is a problem because we all know that payroll is not a one-size-fits-all type of problem. Subsequently, clients are being enticed into a sales pitch, signing early and, and the system is implemented, it may well then fail to live up to over-sold expectations.

We all like to be wooed…

In getting wooed away by large providers that sell all-singing-all-dancing systems, some companies are missing out on finding systems and services solutions that may better meet their needs. There are numerous excellent providers that offer innovative solutions that are not even being considered.

Why is this?

  1. Is it because the smaller providers do not have the budgets to secure a coveted place on page 1 of Google?
  2. Perhaps it is because options provided to payroll managers are being dictated to them by HR Directors or Finance Directors who want to rely on the security of only considering a well-known or proven brand?
  3. Or is it just because the smaller providers are not doing enough to get noticed in the first place?
  4. Perhaps smaller providers are spending too much investment in product and innovation but are neglecting investment in marketing?
  5. Or are the larger suppliers, the major players just offering better solutions?

Whatever the reason, the problem is compounded when some businesses (or procurement departments) limit their opportunities even further by requiring that only large companies may tender for contracts – meaning that smaller players do not get a look in.

Don’t get caught out

To me, it seems illogical to engage with new payroll services or systems provider before reviewing what your requirements are. If you meet with vendors prior to getting to grips with your needs, then you leave yourself more susceptible to being wowed by amazing solutions, or notable market names that “everyone” seems to be working with but that in reality, are often failing to deliver. This leads to suboptimal solutions being implemented in relation to your specific requirements.

For example, we regularly speak to payroll managers that have been left disappointed by new solutions and to compound the issue, they have also paid way too much for aspects of solutions or services that looked great during the sales pitch but actually, are not needed at all. Every payroll is unique, and so implementing big-brand generic systems designed to suit more substantial companies may not actually be the right solution for you.

So what can be done?

To understand the root cause of the problem we need to revert back to the very beginning of the process. Expectation mismatches come about as a result of not defining project requirements thoroughly and clearly enough from the outset. After all, if you do not understand the problem you want solving, it is difficult to understand what an effective solution looks like. In addition, it is also impossible for a solution provider to know what it is you really need!

This article is not intended to lambast the established, major payroll providers. Clearly, for the right organisation,they offer fantastic solutions and they are also often at the forefront of innovation too. A quick listen to my Payroll Podcast with Anita Lettink of NGAHR will highlight this. In addition, in order to become a major player in any market, you must be doing something right. However, what I do want to emphasise is that there is more choice than many people realise and therefore, try and resist the temptation of committing to a solution as a result of a slick sales pitch too early.

Sometimes, instead of committing to the obvious, consider the underdog. An alternative solution from a lesser-known player in the payroll market may actually suit your particular payroll operation better and be more cost-effective too.

(Note: I would strongly recommend that you take a look at our free JGA Recruitment whitepaper titled: A Payroll & HR Blueprint Towards Successful Transformation as there is a lot of advice here that will help you prepare for any new payroll-related transformation project you may be considering.)

Some factors for consideration include:

Size of your payroll | Payroll Frequency and Structure | Payroll Employee Locations (UK or Global) | Compliance Requirements | Budget | Other systems used in the business that may need integrating | User Access Requirements | HRMC Approved and Compliant | Links to HMRC gateway | Self-Service Reporting | GDPR Compliant Payslip Portals | Secure delivery and data exchange | HMRC and auto-enrolment compliant |  Sector Specific Solution

There are of course 101 other requirements to consider, but hopefully, this quick list will put you on the right path to success. Once you have your essentials in place, it is recommendable to try and identify suppliers that can actually meet these needs, rather than those offering generic solutions where you end up paying for more than you need. One way of doing this is searching for niche terms online to identify boutique suppliers. You could be pleasantly surprised by what you find! In doing this, you will likely identify a range of different potential suppliers and not just those that can afford a hefty SEO bill from Google each month.

For example, if you work for a healthcare provider, rather than searching for “Payroll Systems” try searching for “Healthcare Payroll Systems” and you will see new results that may be more closely aligned to your requirements.

References:

Once you have pinpointed relevant suppliers, it is worth asking for a reference, rather than relying on testimonials published on the company’s website – though beware that there is the potential that the recommendations provided by suppliers may be getting kick-backs for positive reviews. Instead, try carrying out further searches in Google, or on appropriate forums like LinkedIn and ask for feedback from other users. You can ask for recommendations too. You will likely be surprised at how many people will be willing to help you, and you may just find the information you are looking for that will validate whether the solutions and/or systems offered are robust and fit for purpose.

Managing Expectations:

In short, having your expectations met means clearly defining what those expectations are upfront. Do this, and you should be able to navigate away from falling into the trap of investing in an ineffective system or service that does not meet your needs or expectations.

Please leave a comment if you have found this article helpful!

Let me know in the comments if you agree with me or if you have a different opinion or experience?

If you have enjoyed this article, please visit my LinkedIn profile to view more! I have been writing about payroll-related topics since 2008.

Please follow me or connect with me on LinkedIn for more payroll, HR and marketing related strategies, podcasts and articles to ensure you never miss a future article or update!

__________________________________________________________________________

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.

Why not visit our website where you can access more blogs, FREE whitepapersThe 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: nick@jgarecruitment.com | Tel: 01727 800 377

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Credits: Photo by israel palacio on Unsplash

Blockchain for Payroll & HR: My Conclusions. article 10 of 10

This is article 10 of 10 forming my final part of my 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. I hope you have found the journey an interesting and helpful one. Please do share your thoughts if you have enjoyed them (or not) – I would love to know! I will be creating a full (free) whitepaper soon that will include all of these articles in one place for easy reference so look out for this and let me know if you are interested in receiving a copy!

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

  1. Article 1: How will blockchain and cryptocurrency 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?
  7. Article 7: How to build a blockchain payroll system
  8. Article 8: When should businesses start planning for blockchain?
  9. Article 9: blockchain for Payroll & HR: The Risks & Costs

Also, check out The Payroll Podcast with Anita Lettink 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

Blockchain for Payroll & HR: My Conclusions

Before we get into my conclusions regarding blockchain, I think we should first tackle cryptocurrency.

You may have read other media articles and feel that paying people in cryptocurrency would be a natural evolution for businesses. After all, companies involved in the crypto industry are already doing this such as Japan’s GMO Internet which announced in 2018 that it would allow workers to take home up to $890 a month in Bitcoin. However, cryptocurrency is also extremely volatile, and it’s not unknown for the price of Bitcoin, Ethereum or any of the better-known crypto-coins to increase or decrease by 10% to 20% in a single day. Therefore, I believe it is highly unlikely that we will see any wide-scale adoption of cryptocurrency as a genuine payment option.

Also, the HMRC has recently warned that traders, investors and holders may have to pay Capital Gains Tax on any profits made in cryptocurrencies. With this in mind, you have to wonder why employers would even want to pay employees in cryptocurrency when there is already a mainstream currency (the good ol’ English Pound), that already does the job well enough and this can be spent more easily on the open market too!

So with Cryptocurrencies covered, let us get back to Blockchain for payroll.

If you have followed my previous nine articles to date on the subject of blockchain, then you will already know that the future pathway for blockchain technology in relation to payroll applications, is challenging to predict for two main reasons:

  1. Enterprise-level applications of blockchain technology are so new that it means there are few unique, “battle-tested” products available to test in the field.
  2. Because parts of the technology are based on some very advanced mathematical concepts of cryptography and probability, it is sometimes difficult to explain to those without a computer science background.

While several companies have launched as blockchain-based payroll firms, their client base is unclear.

So what are the pros and cons?

My research tells me that at present, there are still blockchain security and risk issues concerning its use within payroll related applications that need to be ironed-out before widespread commercial solutions will be made available in the marketplace.

The main blockchains such as Bitcoin and Ethereum blockchains are ‘permissionless’ – that is, public and not password-protected which continues to be a significant barrier for many companies in adopting the technology. I am not convinced that any business would be happy for all its transactions to be publicly available to anyone who wanted to view them – but that is what is possible on both the Bitcoin and Ethereum blockchain networks.

Of course, you can create private, permissioned blockchains but these also ultimately have one major flaw, which is, if only a handful of people are allowed to update and validate transactions on a private blockchain, they become single points of control – and therefore single points of failure. I think this could make them an easy potential target for hackers, who could (in theory) gain control of an entire blockchain by attacking only a small number of computers.

There are other risks too. 

For example, for blockchain to function as it was intended, the code behind a smart contract needs to be free from bugs. If blockchain technology was being used to make a payroll payment, a bug might allow the receiver of a payroll payment using a smart contract to request that payment multiple times and get away with repeat payments before the blockchain system has a chance to update itself. Now, I know that all software, including professional, enterprise-level software, contains bugs but smart contract payments are irreversible, so if this happened to a payroll payment there would be no chance that the company could get its money back if a bug like this were to exist and get exploited.

In fact, in 2017, nearly $55 million-worth of ETH was stolen because of an exploitable bug in Ethereum’s source code, and it became one of the biggest backdoor hacks in history. It came down to the capital T in line 666 which, if it had been a small t, that would have prevented the hack. Unbelievable huh!?

I am making this point because only a very tiny proportion of code is ever technically “perfect” and again, for commercial adoption, I think risk-averse companies may therefore, avoid it until larger clients are on-board and have proven its safety.

There is no doubt too blockchain technology offers significant advantages that people may feel may outweigh the risks.

 These include speed, the ability to make fast, cross-border payments and the ability to eliminate the need for a 3rd party acting in the middle of the transactions which would effectively reduce transaction costs. I have highlighted how blockchain transparency may be perceived to be a risk, but it could also be a benefit. For example, with blockchain technology, employees and employers will be able to see the exact status of all payments at all times.

Many could argue that blockchain also offers more security than existing enterprise solutions, after all, enterprise solutions currently in use are hackable too! One advantage of blockchain is the fact that because it is encrypted and distributed, it is virtually impossible to falsify its content.

If the speed benefits are appealing to you, then remember that these speed gains also come at a cost. Blockchain transactions use up significant energy consumption and computing power because they are verified using extremely complex algorithms. In addition, as the size of the blockchain grows, the requirements for storage, bandwidth, and computing power also increases.

Of course, we had the same problems with early computers and phones. A computer that took up the size of a small house and consumed the energy of a small town is now available in a form that is 100 times more powerful, fits in the palm of our hands, and uses almost no power at all to operate – such as a smartphone. In fact, I still remember my mum refusing to for many years to swap her typewriter and tippex strips for a computer (although, like everyone else, she did finally relent). The fact of the matter is, almost no employer or employee could operate without either of these technologies now.

So, will we see widespread adoption of blockchain technology within payroll applications?

Ultimately, yes. But, like the computer example above, I cannot see this adoption happening until many of the issues regarding security, speed, power usage, bandwidth requirements and other issues have been improved and streamlined. I am sure we will see a lot of news in this space coming out in 2019 and beyond as payroll providers sell the many potential benefits blockchain technology could offer payroll departments. However, for me, these companies have yet to prove that blockchain is the right medium to solve current payroll problems or convince me that it is ready in its current form to be a cost-effective solution.

It is likely that if blockchain technology does not take off, you will instead begin to hear more and more about DLT-based databases instead! After all, a blockchain is just a chain of blocks and therefore a type of distributed ledger technology (DLT) right? Well, yes, but not all blockchains are the same. DLT is ultimately a decentralised database that is managed by various participants – and therefore, I believe that this is where we will see quicker progress as new DLT-based products are developed by payroll providers.

With this in mind, get ready for an explosion of new DLT options to hit the market…

I truly hope you have enjoyed this series of 10 articles. I would love to hear your thoughts!

So, what do you think?

As always, whether you love payroll or 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 & Credits:

Dom Jolly Image: https://www.radiotimes.com/news/2016-09-12/dom-jolys-trigger-happy-tv-to-return-as-all4-web-series/

Blockchain for Payroll & HR: The Risks & Costs. article 9 of 10

 

This is article 9 of 10 forming the ninth 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 and Cryptocurrency 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?
  7. Article 7: How to build a Blockchain payroll system
  8. Article 8: When should businesses start planning for blockchain?

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

Blockchain for Payroll & HR: The Risks & Costs

Transferring payroll to the blockchain will require you to integrate (relatively) untested software into your own internal systems.

Immutability is both a benefit and a negative. And where decentralised systems interact with the real world is where they are weakest.

Speaking about a 20th June hack of South Korean cryptocurrency exchange Bithumb, worth upwards of $35 million, Mati Greenspan, a senior market analyst at social trading and brokerage platform eToro, said:

“The immutability of a decentralised currency system plays into the hands of fraudsters.

He went on to comment:

“Once a transaction happens, it can never be undone, which is one of the reasons cryptocurrencies can be a target for hackers. However, immutability is also one of Bitcoin’s most attractive qualities. The fact that it operates transparently and independently is a clear advantage for many.”

As discussed above, blockchain or DLT in the business of Software as a Service (SaaS) is still relatively new.

All the hype around blockchain-based systems as ‘The Next Big Thing‘ does tend to cloud the in-built negatives that blockchain technology brings to the table, as well as the technology’s level of immaturity.

In the payroll and HR business, those constraints are around slow payments and insecure databases which can be edited, hacked or stolen.

But is the application of blockchain really the solution we are looking for? 

What do you think?

  • The last article in the series will be my conclusion!

“So, Is blockchain and crypto the future…?

As always, whether you love payroll or 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:

When should businesses start planning for blockchain? article 8 of 10

This is article 8 of 10 forming the eighth 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?
  7. Article 7: How t build a Blockchain payroll system

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

When should businesses start planning for Blockchain?

We will no doubt hear much more about blockchain in the coming months and years.

Institutions and governments appear to be more interested in Distributed Ledger Technology (DLT) than blockchain, although the terms are beginning to be used interchangeably.

In Parliament on 6 June 2018 Prime Minister Theresa May revealed that several government departments were working on proofs of concept for how DLT could be integrated into the civil service (link: https://www.theyworkforyou.com/debates/?id=2018-06-06b.297.5&s=distributed+ledger+technology#g300.2]

Sentiment appears to be shifting towards DLT for banks, too.

For example, in a 21 June speech at Mansion House in London, the head of the Bank of England Mark Carney told attendees that the English central bank would be one of the world’s first institutions to build DLT into their payment systems (https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/new-economy-new-finance-new-bank-speech-by-mark-carney.pdf).

Mark Carney said:

“The Bank of England is in the midst of an ambitious rebuild of the Real Time Gross Settlement (RTGS) system – the backbone of every payment in the UK. There are three ways the Bank’s new RTGS will provide a platform for private innovation. Each will make it easier for people to plug in and pay, even across borders. First, RTGS is being re-built so that new private payment systems, including those using distributed ledger, can simply plug into our system.”

Current research on DLT and blockchain in HR and payroll tends to claim that these new systems are faster than current applications, and transaction fees are much lower.

We should therefore ask:

  1. How much lower?
  2. How much have businesses who have adopted blockchain in their HR and payroll saved, on average?
  3. When will blockchain adoption be reflected in savings on a company’s balance sheet?
  4. When do we move from ‘this is what the technology can do in theory’ to ‘this is what the technology has done in practice’?

Transaction fees tend to increase over time on a blockchain-based system. This is down to the ‘miners fee’, or the amount of time it takes a mining node to verify a correct transaction. Included in this amount is the cost of electricity and bandwidth.

And yet, feedback from business is that DLT is not really suitable for real-time, high frequency payments systems (http://www.longfinance.net/LongFinance/DLTCoursePDF2.pdf).

This is because the cost per DLT transaction is significantly higher than through a centralised database, and the consensus mechanism – requiring all parties to agree on changes to the ledger – slows down the system

As the DLT grows in size – as the audit trail is continuously added to, it creates an ever-increasing ledger which makes computer storage a serious issue, especially for smaller firms who are not ready to splash out on new hard drives every time they want to update their payroll!

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:

  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Thanks 🙂

As always, whether you love payroll or 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://www.theyworkforyou.com/debates/?id=2018-06-06b.297.5&s=distributed+ledger+technology#g300.2]
  2. https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/new-economy-new-finance-new-bank-speech-by-mark-carney.pdf
  3. http://www.longfinance.net/LongFinance/DLTCoursePDF2.pdf

Images:

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:

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

How Blockchain, Cryptocurrency & DLT affect the Future of Payroll & HR ?

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

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