As an employee, it’s almost a rite of passage to have your employer be late on your paycheck. This inconvenience occurs at least once a year.
In fact, according to a recent payroll survey, 44% of employees had experienced late payments.
The frustration of a late paycheck is a domino effect that affects every area of the employee’s life. And this frustration can be rightly attributed to conventional contracts.
Conventional contracts are maintained and implemented by humans, which makes them liable to error. One miscalculation could cost the employer a lot of money and frustrate the employee to no end.
The survey also revealed that 48% of employees who received their paychecks late were paid an incorrect amount.
The errors that can be caused by conventional contracts are endless. An employer or business partner could forget to send the paycheck or fail to consider the other party’s best interests.
Smart Contracts are an alternative to conventional contracts that businesses should certainly look into. They speed up the payment process and eliminate the error of late payments.
Smart Contracts Vs. Conventional Contracts
Conventional contracts are more vulnerable and susceptible to error and alterations. Human error during data entry can cost a business greatly.
The terms and conditions in conventional contracts can also lead to confusion and misunderstandings between an employer and his employees.
Ensuring that both parties properly understand these terms would require time and energy that they could be used to work, forcing them to work hard on the wrong thing and wasting valuable time.
Smart Contracts are Blockchain-based and therefore aren’t managed by an external third party, thereby removing the risk of third-party manipulation.
The lack of this third-party interference also saves the business money. In addition, the Blockchain stores the information of the contract preventing data loss.
The contracts are stored in the Blockchain, which ensures that the contract is carried out without human involvement. This mitigates the risk of errors.
Instead of human execution, Blockchain’s programming handles the execution of the smart contract. Computer protocols carry out the transactions. And this saves businesses hours of work.
Companies and their employees can focus on more productive tasks rather than wasting crucial hours managing, explaining, or correcting contracts.
These crucial hours can be put into actual work, which would create a more effective workforce. Instead of an employee wasting time trying to force their employers into giving them their paychecks, they can simply relax and do their jobs.
Smart contracts automatically implement the terms of the contract, so late payments will become a thing of the past.
Neither party has to worry about late or improper payment execution because they can trust the unbiased computer protocol to execute the payment.
Will Smart Contracts Completely Replace Conventional Contracts?
As with everything else, proper research is required. Smart contracts may have the potential to revolutionize how businesses handle legal agreements, but it would be wise for companies to take the necessary precautions.
It can be rather difficult to make sure the terms and conditions in a smart contract are carried out according to the initial agreement.
Unfortunately, it’s not uncommon for contracts to contain loopholes, and smart contracts aren’t exempted from this.
Either party or even an external party can take advantage of these loopholes. If these loopholes are exploited, it could lead to major losses in the business.
Companies should use a private Blockchain to implement smart contracts to eliminate the risk of exploitation.
Unlike conventional contracts, smart contracts are difficult to alter. And while this is a benefit, it could also be a disadvantage.
Errors in the code will take a lot of time and money to correct. This is why thoroughness can’t be overemphasized.
Going over each detail and ensuring accuracy reduces the chances of future problems.
The creation of a smart contract typically involves a lawyer and a software engineer. The goal of a smart contract is to remove intermediary involvement.
However, they can’t be completely eliminated. Lawyers are needed to guide the software engineers. They ensure that the terms of the contract are understandable, straightforward, and agreed to by both parties.
The lawyer also ensures that the terms and conditions in the conventional contract are meticulously and appropriately converted into code.
While the software engineer writes the code that will carry out the contract and subjects it to thorough testing to spot even the smallest vulnerabilities.
The lawyer and the software engineer will work hand in hand to ensure that the smart contract is flawless and accurate and that all required legal precautions are implemented.
They must also ensure that there aren’t vague or difficult-to-understand terms because smart contracts struggle to execute terms that are not clear.
Smart contracts can provide a more efficient way for businesses to handle legal agreements, but they have a few downsides that can’t be ignored.
For this reason, they should be used to improve conventional contracts and not outrightly replace them.
Proper research is required before the execution of a smart contract. This ensures that businesses take the right approach to this innovation.
In 2020, the size of the global smart contracts market hit a value of USD 144.95 Million and it’s expected to increase in the years to come.
With the right precautions in place, smart contracts can solve the problem of late or incorrect payments forever.