How Blockchain Simplifies Payroll for Businesses and Gig Workers
Understanding why businesses should use blockchain-based tools for payroll management
The COVID-19 pandemic disrupted labor markets globally during 2020 and the first half of 2021. The consequences of the pandemic were sudden and severe as millions of people were furloughed or lost their jobs, while others rapidly adjusted to working from home as offices closed. One of the long-term effects of the pandemic was the shift to remote work. According to a report from Ladders, “25% of all professional jobs in North America will be remote by the end of 2022, and remote opportunities will continue to increase through 2023.”
As companies increasingly acknowledge the seismic shift in employees’ preferences, they are offering more flexibility regarding where they work in both the long and the short term. However, one of the challenges businesses and remote workers face today is cross-border payroll. Traditional methods of payment, such as wire transfers, are slow and come with exorbitant transaction fees and currency conversion charges.
Blockchain offers a secure, quick, and comparatively cheap way to compensate the global workforce. The blockchain transaction history is also transparent, immutable, and easily trackable. As employee payroll management systems are required to comply with various regulations, blockchain further helps in reducing discrepancies and saves time for the HR department.
In this blog, let’s find out why businesses should choose blockchain-based tools over conventional payroll services:
Quick and cheap cross-border payments
According to a report published by PYMNTS in collaboration with Algorand, more than 37% of businesses use crypto and blockchain for cross-border payments these days. Additionally, 13% of businesses would like to use cryptocurrencies for cross-border transactions. The main reason behind the growing adoption of cryptocurrencies for cross-border transactions is the fact that blockchain transactions are fast and cheap.
Conventional wire transfers may need up to five days for cross-border payment processing — a situation that is not ideal for managing a global workforce. Blockchain payment rails eliminate banks as intermediaries and the time it takes to clear a transaction between the sender’s and the recipient’s bank account. Since blockchain-based transactions are verified algorithmically by validators, they are quick and take less than an hour to process.
Furthermore, current blockchain solutions charge less than 1% of the total transaction as transaction fee, which is significantly cheaper than wire transfer’s exorbitant transaction fees of up to 6% plus additional currency conversion charges.
Secure transactions
Blockchain transactions are immutable, which makes it impossible for any individual or entity to manipulate, falsify, or replace data stored on the network. Blockchains are distributed across peer-to-peer networks that are continuously updated and kept in sync. They don’t have a single point of failure as they don’t use centralized computing servers. It would require at least 51% of the computing power of the network to make any changes to the blockchain ledger, which is practically impossible.
Moreover, blockchain transactions are secured through cryptographic encryption and require a private key for access. Each participant in the network has a unique private key, which they use to sign transactions with their digital signature.
Transparent audit trail for accounting and reporting
Blockchain-based transactions are recorded in chronological order and hosted on-chain, so the record is permanent. Any update to a transaction is recorded as a separate transaction, creating an audit trail for future reference.
Considering the records are hosted on-chain and not on a centralized server, there are no security threats to them. This record creates a connection between the internal records of all the stakeholders involved, so it is less prone to errors and fraud and is verifiable through an audit trail, making compliance and reporting simple and easy.
How Cardstack Can Help?
Cardstack’s Safe Tools allow Web3 businesses to pay their globally dispersed teams, vendors, and freelancers in crypto while keeping track of all their payments from one dashboard for streamlined bookkeeping. Sign up for Safe Tools here: https://events.cardstack.com/en-us/cardstack-safe-tools
Read more about the future of blockchain technology below.
How Blockchain-Enabled Reconciliation Streamlines Accounting
Using Smart Contracts to Optimize Business Processes
