Blockchain payroll systems coming to HR tech

Blockchain potential and caution for payroll

This activity is happening at the extreme early stage of HR blockchain's development, ADP and Kronos acknowledged.

And some observers are determinedly skeptical about the emerging technology. Many see truly viable blockchain payroll systems for commercial use as a long way off.

Tashina Charagi

But for ADP and others, blockchain's prospects in areas like cybersecurity, identity verification and automated, secure transactions make it appear like a good fit for the process of moving money around the world to pay employees.

"As far as blockchain applications and payroll, 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," said Tashina Charagi, vice president of corporate strategy at ADP.

Paying contingent workers with blockchain

Charagi said ADP also sees potential around HR blockchain for same-day payment transactions for the growing ranks of contingent and gig economy workers who want to be paid in real time and avoid payday lenders.

"Workers and their employers are now trying to have more flexible payments," she said. "To do that on blockchain technology is something that should gain traction in the payroll world."

Workers and their employers are now trying to have more flexible payments. To do that on blockchain technology is something that should gain traction in the payroll world.

As for Kronos, Bob DelPonte, vice president and general manager of the Workforce Ready group, said in a statement that Kronos also views blockchain as potentially useful for paying gig economy workers and for other HR functions.

"Blockchain presents an exciting opportunity to help organizations simplify and accelerate vital HR activities," DelPonte said. "This could range from the identity verification process during hiring, where new hires upload personal documents, like their bank account or tax information, to the blockchain, to the blockchain-based distribution of wages to employees without bank accounts."

Can big HR tech vendors do blockchain?

But while the presence of ADP and Kronos in the blockchain payroll arena may appear to lend credibility to the still nascent technology in HR tech, some observers aren't convinced.

Brent Skinner, principal analyst for human capital management (HCM) at Nucleus Research, said he is skeptical of the ability of the big vendors to bring a blockchain payroll system to market quickly, though he sees significant long-range potential for HR blockchain.

Skinner noted that both ADP and Kronos have been late in moving their systems to the cloud, though both have recently released more innovative products. Meanwhile, more agile cloud-only HCM vendors, such as Ceridian and Ultimate Software, have been innovating more successfully, he said.

"ADP and Kronos hit the snooze button on modern HCM technology for a long time, and it remains to be seen if these companies have finally woken up and gotten out of bed," Skinner said.

"If ADP can clearly define and narrowly scope an innovation, then they can deliver on it, but in terms of something as broad-reaching as a blockchain payroll -- payroll being the fundamental expression of what ADP is -- that might be a little different," he said. "Payroll is the epicenter of HCM. And blockchain technology in HCM is in its infancy."

Startup does blockchain payments

Despite the widely held view that blockchain in HR tech is way behind blockchain in the financial services and healthcare industries, a few startups have developed and are marketing blockchain-based payments software.

Jonathan Chester, founder and president of Bitwage, a blockchain-based international wage payment and payment processing company, said the firm, which has about 10 employees, is growing.

As of now, Chester said Bitwage's main line of business on the payments side is processing cross-border wage payment transactions for contingent IT developers, many in Brazil, working for U.S. employers.

Bitwage also uses the blockchain cryptocurrency, bitcoin, to offer benefits to workers, such as retirement or investment accounts.

On the payments side, Bitwage moves money around using bitcoin and then converts the bitcoin into the local currency to pay workers, at what the company says is a lower cost than moving the money conventionally.

At the same time, Bitwage uses blockchain to verify gig economy workers' credentials and work history data.

The company has its own compliance program and a compliance officer, a Brazilian lawyer.

"We take compliance very, very seriously," Chester said.

One advantage blockchain gives employers is the ability to streamline financial pathways so they don't need a subsidiary in every country they're in, Chester said.

"In terms of payments, blockchain is going to create this direct-to-user situation where you don't need to set up a local entity when you're hiring these workers," Chester said.

Workers with digital identities

One of the theories behind Bitwage is the idea that workers will soon be able to control their own digital identities by owning portable, verifiable histories on blockchain.

Jeff Mike

That somewhat futuristic concept is endorsed by Jeff Mike, HR research leader at the eminently mainstream firm Bersin by Deloitte.

Now, a person who has worked for four or five different companies has different records from each employer, all held by the employers.

"Blockchain holds the promise of being more individual-centric" in a world economy that is trending toward contingent workforces, Mike said.

"Blockchain's promise, in its early applications and [in the] longer term, is focused on a secure digital identity, more secure than a database," Mike said.