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Will Blockchain Replace Staffing Agencies?


Staffing agencies have been at the centre of multiple forms of disruption over the last few years. Whether it is the latest on-demand work platforms or the original freelancer marketplaces, technology is diluting the dominance of staffing firms, slowly and steadily. The use of these platforms enable businesses to engage workers at much lower rates as they don't have to pay markups to staffing firms. These platforms also offer more flexibility to hourly workers as they can match their working hours to client's requirement. While there are so many benefits offered by these platforms and the gig economy, the question that arises is - why has the adoption not gone mainstream and why are enterprises still leveraging staffing firms. There is a one word answer to this i.e. trust. Staffing firms' differentiation lies in offering trust.

Now, to put it clearly, staffing firms act as intermediaries and offer trusted transactions which are lacking in the gig economy operating system. These characteristics which make staffing firms invincible also make them suitable candidates for blockchain disruption. The core benefit of blockchain seen in other industries such as banking has been disintermediation and minimizing the need for trust. It achieves this by providing a distributed, immutable and traceable ledger for registering transactions.

While this sounds all grand and disruptive, it is important to understand how blockchain can be implemented with on-demand platforms and how it will replace staffing agencies. The initial job of staffing agencies is to offer screened and verified candidates to enterprises. While on-demand platforms already have their screening and verification mechanisms in place, the veracity of these can't be trusted as candidates can provide false data. Blockchain can be used as a platform to store candidates employment credentials, education details, drug and background check information, etc. 
As all this information is on blockchain, it can't be changed by anyone and employment history can be traced back to first employment owing to traceability that blockchain offers.

Other benefit offered by staffing firms is fulfilling the contractual obligations to the tee. This can be replaced by smart contracts on blockchain which contains the contractual terms and conditions, and it gets executed only if the terms of contract are met. On-demand worker or freelancer will only get paid if smart contract is executed. While blockchain offers these direct benefits to replace staffing agencies, it can be combined with other digital technologies such as IoT, automation and AI/ML to further augment the engagement process through on-demand platforms.
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