An innovative blockchain-based system for human resources digitalization with traceable relationship management

Abstract

Small and Midsize Enterprises (SMEs) have faced innovative changes in their organizational structure, especially in human resources (HR) and employee management: these digital structural changes have transformed their business practices and strategies. The employees with new technical skills have also been impactful in this digitalization. The HR departments in SMEs have become increasingly pivotal in recruiting new employees and supporting existing employees throughout the organization. ITSvil in Salerno (Italy) has developed the Easywork project based on the “Fenice” microservices architecture. This system supports the HR departments in efficiently managing HR activities through digitalization. The first step in acquiring new resources is formulating the employment contract, which is essential for stipulating agreements on specific job requirements. Blockchain technology and smart contracts are among recent technological innovations impacting this process. Writing contracts in digital codes to simplify and effectively manage the legal relationship involving bureaucratic tasks and cost management is now possible. The new digital system makes employment contract processing transparent, traceable, and reliable. This research presents the design and development of a new microservice compatible and integrable process with the “Fenice” system based on blockchain technology. The proposed digital system aims to make HR management activities more transparent and traceable.

Full text

04004
An innovative blockchain-based system for
human resources digitalization with traceable
relationship management
Claudia Pipino1,*, Gaetano Rocco1, Claudio Pagano1, and Andrea Cipriano2
1University of Salerno, Dipartimento di Scienze Aziendali Management & Innovation Systems, Via
Giovanni Paolo II, 132, 84084 Fisciano, Italy
2University of Salerno, Dipartimento di Informatica, Via Giovanni Paolo II, 132, 84084 Fisciano,
Italy
Abstract. Small and Midsize Enterprises (SMEs) have faced innovative
changes in their organizational structure, especially in human resources
(HR) and employee management: these digital structural changes have
transformed their business practices and strategies. The employees with new
technical skills have also been impactful in this digitalization. The HR
departments in SMEs have become increasingly pivotal in recruiting new
employees and supporting existing employees throughout the organization.
ITSvil in Salerno (Italy) has developed the Easywork project based on the
“Fenice” microservices architecture. This system supports the HR
departments in efficiently managing HR activities through digitalization.
The first step in acquiring new resources is formulating the employment
contract, which is essential for stipulating agreements on specific job
requirements. Blockchain technology and smart contracts are among recent
technological innovations impacting this process. Writing contracts in
digital codes to simplify and effectively manage the legal relationship
involving bureaucratic tasks and cost management is now possible. The new
digital system makes employment contract processing transparent, traceable,
and reliable. This research presents the design and development of a new
microservice compatible and integrable process with the “Fenice” system
based on blockchain technology. The proposed digital system aims to make
HR management activities more transparent and traceable.
1
Introduction
The growing interest of business organizations in human resources (HR) has reached
impressive heights. In today's competitive landscape, the quality and expertise of the HR
department have emerged as pivotal competitive advantages across diverse industry sectors
[1]. Over the past decade, the domain of business companies has navigated through profound
technological revolutions, leading to changes in professional roles’ demand. In particular, the
development of IT skills has become crucial for a company's value. This
* Corresponding author: cpipino@unisa.it
© The Authors, published by EDP Sciences. This is an open access article distributed under the terms of the Creative Commons
Attribution License 4.0 (https://creativecommons.org/licenses/by/4.0/).
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requires changes and improvements in how human resources are managed within the
company [11]. Addressing this evolving landscape, the adoption of blockchain technology
[9] has emerged as a pivotal solution. This is proving instrumental in resolving pertinent
challenges. This includes the validation and certification of candidates' skills and
qualifications, the identification of optimal profiles, and the programmatic management of
contracts [20]. These applications extend to initiatives such as incentivizing exceptional
candidates through Token-based retention plans, Token options, vouchers, or NFTs [15].
Through the secure and transparent recording of data, the blockchain ecosystem ensures
unparalleled security, making the database impervious to hacking attempts [12]. One of the
most important moments in the hiring process is during the formulation of the employment
contract [19]. Here the idea of smart legal contracts emerges, which are executed as
blockchain-based smart contracts [10]. Smart legal contracts facilitate the automatic
execution of predefined actions exclusively when all conditions specified within the
agreement are fulfilled. In doing so, these contracts guarantee clarity of terms, streamline
document signing procedures, authorize the onboarding process for new employees, and
enable seamless and instantaneous remuneration for completed tasks, contingent on specific
predefined criteria. It is crucial to recognize that technological innovations wield a
multifaceted influence on the realm of work. The emergence of new technologies has sparked
debates about their impact on the job market. Some believe that these innovations may
replace human workers with machines, while others argue that they are valuable tools that
simplify tasks that were once tedious and repetitive. In this digitally driven context, the
imperatives of data security and confidentiality, coupled with the demand for swiftness and
transactional certainty, stand as central concerns. As the journey towards work digitization
gathers momentum, the dual challenges of data protection and transactional efficiency
command unwavering attention.
1.1
Problem Statement
The domain of blockchain and smart contracts is often predominantly associated with supply
chain management [14] and emerging digital consumption models [13]. While this
perspective focuses on tracking the production phases of goods, it can be extended to
encompass the entire spectrum of recruitment and employment phases. This novel “lifecycle”
approach could serve as the foundation for recording comprehensive employee information,
from their initial engagement with the company to their potential resignation. The initial step
in onboarding new talented individuals involves formulating the employment contract, a
critical component for establishing sector-specific and occupational agreements.
Subsequently, throughout an employee's career journey, there are performance assessments,
training opportunities, career advancements, and a constant pursuit of new goals. This
intricate process leads to interaction across various segments of the organization, without any
interruption. This is precisely where blockchain technology emerges as a potential solution,
capable of streamlining HR operations.
1.2
Related Works
The pervasive influence of technological advancement manifests in the widespread
integration of blockchain technology and the implementation of smart contracts. The
scholarly community has extensively delved into this phenomenon, proposing a plethora of
innovative solutions within the realm of HR management. These innovations encompass
pioneering mechanisms founded on blockchain technology, aiming to imbue the company's
human resource management system with accuracy, efficiency, openness, and transparency
[21].
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The spectrum of applications for this technology spans systems orchestrating core processes,
facilitating a more strategic approach in a traceable manner [3]. A comprehensive
examination reveals that blockchain for human resource management can revolutionize
systems spanning from the hiring process to employee payment interactions. In doing so, it
enhances and traces every stage of the employment lifecycle [2]. The technology finds
particularly robust usage in systems dedicated to candidate selection for organizations. The
implementation of smart human resource management systems has significantly truncated
the time needed for candidate selection processes, concurrently predicting employee
performance [5]. Furthermore, leveraging smart contracts enables the development of
personalized spaces for employees to showcase their skills and expertise, effectively
constructing an inter-organizational network that catalogues achievements and tracks
performance [6]. This mechanism proves invaluable for enabling precise job allocation,
securely sharing HR management data across organizations, and validating all transactions
and tasks executed. Consequently, the HR department can streamline and expedite the
recruitment strategy, which was previously marred by time-consuming processes [7].
The use of blockchain technology addresses traditional human resource management
challenges related to employee personal information verification, task information
evaluation, task feedback efficiency, and salary incentive fairness. This mechanism promotes
transparency, fairness, and openness in human resource management while ensuring rapid
information updates and feedback without significant third-party interference. Furthermore,
exploring smart contract integration and resolving token issues within the consensus
mechanism represents promising future research directions for human resource management
scenarios [21]. The growth of smart device usage and internet technology has heightened the
importance of the authenticity of human resource information, such as the system of
certification [16]. HR department must be aware of risks caused by information asymmetry
constantly brings economic loss. By instituting a model based on BC, it provides cost-
efficient, third-party independent assistance for decision- making, diminishing risks related
to data authenticity, improving data differentiation, and enhancing the efficiency and
effectiveness of human resource management information [18]. Numerous studies have
tackled HR management's complex decision-making challenges. As this innovative approach
moved from early adopters to early majorities, it gained momentum, and blockchain has
become essential for adapting to the new normal. Recent research will confidently encourage
managers to adopt this innovation in their company's operations [17].
Undoubtedly, the role of smart contracts in contemporary enterprise management systems is
of paramount significance. Their deployment within systems fostering the interaction of
contractual processes across multiple organizations is particularly remarkable. Such an
approach capitalizes on a blockchain-adaptive contract management system that orchestrates
and interconnects intricate contracts, thereby enhancing mechanisms like dispute resolution
among contracting parties [8]. In the ever-evolving landscape of HR management, the fusion
of blockchain technology and smart contracts stands as a hallmark of innovation, heralding a
paradigm shift towards streamlined, transparent, and efficient practices. This symbiotic
relationship has the potential to redefine the trajectory of HR practices, enhancing
collaboration, data security, and strategic decision-making across organizational boundaries.
1.3
Context Analysis
The literature review highlights the pervasive influence of technological advancement,
specifically focusing on the integration of blockchain technology and the implementation of
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smart contracts in the field of human resource management (HRM). It is evident how the
adoption of blockchain technology in HRM achieves accuracy, efficiency, openness, and
transparency. In the context of our analysis, it becomes crucial the need of human resources
to implement strategic internal processes, such as the selection of candidates with specific
hard skills, employee payment transactions, and the overall employment lifecycle
management. As indicated by the spectrum of applications, blockchain technology emerges
as a promising candidate to optimize these processes, covering a broad range of activities
from core processes to strategic approaches. The technology is particularly robust in
candidate selection, reducing time and predicting employee performance. Implementation of
smart HR management systems is highlighted, showcasing the role of smart contracts in
expediting, and streamlining recruitment strategies. The need for personalized spaces for
employees is created, forming an inter-organizational network that catalogues achievements
and tracks performance. Blockchain technology is applied to address challenges related to
employee personal information verification, task information evaluation, task feedback
efficiency, and salary incentive fairness. The mechanism promotes transparency, fairness,
and openness while ensuring rapid information updates and feedback without significant
third-party interference. The literature recognizes the paramount significance of smart
contracts in contemporary enterprise management systems. Smart contracts are deployed to
foster interaction among contractual processes across multiple organizations, with a focus on
enhancing mechanisms like dispute resolution among contracting parties. In this way is
possible to create personalized spaces for employees, forming an inter-organizational
network that catalogs achievements and tracks performance. This work aims to analyze the
design of a novel microservice, named “Mithra”, which is compatible and integrable with the
existing Fenice system. Built upon blockchain technology, the primary objective of Mithra
is twofold: firstly, to simplify the recruitment and management activities; and secondly, to
establish traceability of the entire employment relationship, encompassing all its phases. In
particular, the phases that evolved in Mithra architecture are first the data verification of
identities, qualifications, credentials, and experiences. Also, using Smart Contracts for
employment contract drafting is pivotal in the context analyzed. Finally, a crucial capability
involves the collection of employee information and tracking activities throughout their
employment.
2
Fenice Architecture
The architecture of Fenice is microservices-oriented and developed by ITSvil company
(based in Salerno). The name is derived from the myth of the phoenix rising from its ashes
and this represents a metaphor for technological rebirth. The microservices implemented for
the architecture are defined as follows (see Fig. 1):
-
Prophet represents the API Gateway of the architecture to protect the APIs of the various
microservices and it is the single access point.
-
Ganesha represents the Service Discovery of the architecture. Each microservice
registers with Ganesha by communicating its physical address.
-
Ammit is the Identity Manager and manages the authentication/authorisation of
applications and users that want to use the services of the architecture.
-
Lakshmi manages user profiling for each application through roles, functions and
features.
-
Chirone implements the API Composition Pattern between microservices, which
aggregates responses between responses from Ammit and Lakshmi.
Heimdallr implements the services required to manage the sending of e-mails and PUSH
notifications.
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The technologies used for the development of the architecture are Spring Boot
(https://spring.io/projects/spring-boot), PostgreSQL (https://www.postgresql.org), OAuth2
(https://oauth.net/2 ) with JWT (https://jwt.io ).
Fig. 1. Fenice's microservices-oriented architecture
2.1
Easywork
The Easywork (EW) project was born to support HR management. It uses the functionalities
offered by Fenice. This system allows, firstly, the start of the cycle from the new candidates'
hiring to their employment. Also, it concerns the personal information section creation by
registering the soft and hard skills of each employee to manage its economic categorization.
Through the job posting management, the candidates can submit their applications. The HR
department will be notified via email to process the request. In the end, this system can
perform the management of tasks assigned to specific individuals within the company to
welcome a candidate who has been hired and becomes an employee.
2.2
Mithra Microservice
The new microservice has been called Mithra. It is responsible for managing the interactions
between the users, the smart contract and the blockchain. Additionally, it provides
functionality for contract workflow management, contract creation, digital signature, and
contract status visualization. To integrate Mithra into Fenice’s architecture, a few steps need
to be described. EW, for an employment new hire, requires the services offered by Mithra.
Therefore, it needs to interact with the Prophet, who will query Ammit to authorize access to
the services. Once authorization is granted, the Prophet invokes Ganesha to obtain Mithra's
physical address. With the obtained address, the Prophet proceeds to invoke the requested
service from EW on Mithra. Mithra processes the service request and returns the appropriate
results to Prophet. Finally, Prophet forwards the results to EW, completing the interaction. In
this way, EW can benefit from Mithra's services by following a defined workflow involving
architectural components such as Prophet, Ammit, Ganesha, and Mithra.
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2.3
Colour illustrations
You are free to use colour illustrations for the online version of the proceedings but any print
version will be printed in black and white unless special arrangements have been made with
the conference organiser. Please check whether or not this is the case. If the print version will
be black and white only, you should check your figure captions carefully and remove any
reference to colour in the illustration and text. In addition, some colour figures will degrade
or suffer loss of information when converted to black and white, and this should be taken into
account when preparing them.
3
Solution Proposal
The microservice architecture is based on the Hyperledger Fabric technology
(https://www.hyperledger.org/use/fabric), which provides a framework for developing
permissioned blockchains. The blockchain infrastructure will consist of a network composed
of peers, a Certification Authority organization, an Ordering Service organization and a
shared channel among the involved parties. For the application of employment contracts, a
smart contract will be developed using the Hyperledger Fabric Chaincode programming
language and it will contain the business logic for the creation, management, and execution
of employment contracts (see Fig.2).
Fig. 2. Mithra’s architecture
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One of the functionalities of Mithra will be to ensure a certified signature system on the new
employment contract and record it immutably in the blockchain ledger. When a user wants
to digitally sign a contract, the microservice can provide a user interface that allows the user
to input the necessary signing data, such as the contract ID and their private key. Once the
user provides the information, the microservice can use cryptographic libraries such as
Bouncy Castle (https://www.bouncycastle.org) to generate a digital signature based on the
private key provided by the user. Once the digital signature is generated, the microservice
can prepare a transaction that includes the contract details and the signature itself. Within the
smart contract on the blockchain, the logic for verifying digital signatures will be included.
Using Hyperledger Fabric's Chaincode, the microservice can define a function that takes as
input the contract details, the digital signature, and the public key corresponding to the private
key used for signing. The verification function in the smart contract will utilize cryptographic
algorithms to verify the validity of the signature. After submitting the transaction containing
the digital signature to the smart contract, the microservice waits for a response from the
blockchain. The blockchain executes the signature verification logic within the smart contract
and returns a response to the microservice. The microservice can then interpret the response
to determine whether the digital signature is valid or not. Based on the result of the digital
signature verification, the microservice can take appropriate actions. For example, if the
signature is valid, the microservice can record that the contract has been successfully signed
and update the contract's status on the blockchain. Conversely, if the signature is not valid,
the microservice can log a signature error and take necessary steps, such as requesting a new
signature or issuing a warning.
3.1
Example of Application
The ITSvil organization needs to be defined in the blockchain network: the configuration file
is defined, specifying its name, digital certificates, network service URLs, and other relevant
information. The first peer which we have defined as the CEO peer, is the entity that will
interact as one of the parts. It will generate the cryptographic materials for the CEO peer,
including its certificate and private key. After defining the CEO peer's identity, it will be
associated with the ITSvil organization in the network configuration file. Fig.3 shows the
sequence diagram of the use cases proposed. In detail, suppose a new employee needs to be
hired at ITSvil, and the signing of the contract between the employee and the CEO needs to
take place. The following workflow will occur within the blockchain network (see Fig. 3):
1.
The CEO initiates the contract creation process on the blockchain system. Then the
contract is generated in a digital form and stored on the blockchain, and a unique address is
created for the new employee within the blockchain.
2.
which CEO sends a notification to the new employee, providing the contract address
and signing instructions.
3.
The new employee carefully reads the contract and, if in agreement with the terms,
proceeds with the digital signature, which is encrypted and added to the contract on the
blockchain.
4.
The signed contract is permanently stored on the blockchain, ensuring the integrity and
immutability of the information.
5.
Once the signature is verified, the CEO officially confirms the new employee's hiring.
6.
Then the CEO receives the notification of the new employee's digital signature and
verifies the authenticity of the signature on the blockchain.
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The hiring details, including the signed contract and the new employee's personal
information, are securely recorded on the blockchain and the hiring process is completed: the
new employee becomes an official part of ITSvil.
Fig. 3. Mithra sequence diagram
4
Results and Discussion
In this section, we discuss the results of implementing the proposed blockchain-based system
for human resources digitalization, named Mithra, and discuss its implications for HR
management in Small and Midsize Enterprises (SMEs). The Mithra microservice was
successfully integrated into the existing Fenice architecture. The integration involved
Hyperledger Fabric technology for developing a permissioned blockchain, ensuring security
and permission control in the network. A key success lies in Mithra's ability to proficiently
manage the contract workflow and facilitate digital signatures for employment contracts.
Through cryptographic libraries and smart contracts, Mithra ensures a certified signature
system, recording signed contracts immutably on the blockchain ledger. The entire
employment relationship, from contract creation to digital signature and confirmation, is
recorded on the blockchain. This ensures a transparent and traceable history of each
employee's journey within the organization. The integration of blockchain technology in HR
processes brings several advantages. The use of smart contracts automates and streamlines
tasks, reducing the risk of errors and fraud. The immutability of
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the blockchain ensures data integrity, providing a reliable source of information for HR
activities. The proposed system addresses the challenges faced by SMEs in managing human
resources efficiently. It simplifies the recruitment process, making it more transparent and
traceable. The digitalization of employment contracts through smart contracts minimizes
bureaucratic tasks and enhances cost management. Moreover, the secure and transparent
recording of data on the blockchain mitigates concerns related to data security and
confidentiality. The use of cryptographic techniques ensures the authenticity of digital
signatures, adding an extra layer of security to the employment contract process. The
implemented system enhances traceability and transparency in HR processes.
5
Conclusions
The of blockchain in enterprises for hiring processes through smart contracts offers a
significant improvement. It is clear how they lead to the automation of critical tasks such as
qualification verification and salary management, reducing the risk of errors and fraud.
Furthermore, the immutable record on the blockchain ensures data integrity and transaction
traceability, providing companies with a reliable tool to optimize their recruitment and
personnel management operations. We have presented a novel architecture to assist the HR
Department in new employment activity, using the power of smart contracts to simplify the
recruitment and relationship management activity and to make the performance of the
employment relationship traceable in all its phases. The solution as designed is well-ready to
be applied not only for ITSvil but in different business contexts. In this blockchain network
workflow, the contract is generated, digitally signed, and securely stored on the blockchain,
ensuring transparency, immutability, and information security. In this way, the employment
contract is transparent, traceable and reliable between all parties. Mithra can be used to track
each kind of event transparently by publishing them on the blockchain or to automatize
simple or complex operations based on smart contract conditions. Furthermore, by
technically adopting a micro-service architecture, each service provided as an API could be
used and integrated by third-party platforms or applications to implement new use cases or
more services. As future improvements, the Mithra architecture's flexibility allows the
management of employee payments and optimizing work teams based on skills and
workload. This adaptability positions the system as a scalable solution for evolving HR
management needs.
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