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Payroll Security: How to Secure Your Data from Breaches & Fraud

Key Takeaways

1. Employee payroll data contains significant amounts of sensitive information that can be exploited if compromised by outside actors or employees.

2. With the increase in cybercrime businesses of all sizes are vulnerable to breaches in their payroll security with large organizations such as Arup, Facebook, and KPMG having been targeted.

3. Payroll security is necessary for safeguarding a business against potential data breaches and security threats as well as ensuring its compliance with the GDPR.

4. By implementing certain best practices such as regular payroll security audits and the updating of software, a business can strengthen its defenses with regard to its payroll security.

From home addresses and bank account numbers to social security and salary details, an organization’s payroll department is responsible for processing large amounts of personal data of its employees. With the continual rise of cybercrime, the threat of a data breach is ever-present and can exploit the vulnerabilities of businesses, both large and small. The consequences of a data breach can lead to loss of employee confidence, identity theft, and fraud and can also have a detrimental effect on an organization’s reputation and financial standing. As an employer, it is crucial to ensure specific processes are in place to safeguard against the risk of such sensitive information falling into the wrong hands. This is particularly relevant as more employees begin to work remotely. This article will discuss some of the best practices your business can employ to improve its payroll security.

Why does payroll security matter?

One of the reasons payroll security has become an important matter in recent times is due to the legal obligations imposed under the General Data Protection Regulation (GDPR). Under these regulations, employee data must be handled and stored securely with potential sanctions or fines being imposed on controllers or processors of payroll for non-compliance with data protection laws.

Businesses everywhere also face the possibility of a data breach occurring due to the rising risk of a cyber-attack. A large number of successful businesses including Arup, Facebook, and KPMG have been the target of cybercriminals over the last few years resulting in breaches in payroll security. The importance of keeping confidential employee data safe has therefore become a priority for all organizations, regardless of size.

Today’s digital landscape makes it increasingly common for such threats to take place by hackers, cybercriminals, and other bad actors who employ methods such as phishing, hacking, and ransomware attacks to exploit businesses. According to the cybercrime news platform Hack Read,

“payroll is one of the most appealing targets for cybercriminals, involving as it does the large transfer of money between institutions whilst being susceptible to hacking due to outdated technology and manual practices.”

The following best practices can help your business to tighten its payroll security system.

5 payroll security best practices

  • Conduct a payroll audit
  • Evaluating your payroll systems and processes can help your business to identify any potential vulnerabilities that could be exploited by cybercriminals. Conducting an audit of the practices and procedures followed by your payroll department will shed light on any gaps that need to be addressed and which expose your organization to a possible breach in security. It may also alert you to other non-criminal sources of payroll error or leakage

  • Gather feedback from those in charge of your company’s payroll asking them to express any concerns they have regarding current practices. Your IT department is another valuable source of information that can draw attention to potential weaknesses in your payroll system as well as any instances where attempts were made to breach payroll security in the past.

  • This exercise can help your business determine the state of your payroll system and the areas that require attention. Whether it’s the need for greater cybersecurity awareness training or better security software, a regular payroll audit will support your business in preventing a possible data breach. Also, exploring DMARC reports can provide valuable insights into email authentication practices and help enhance the security of your communication channels.

  • Separation of Duties
  • The separation of duties within your organization can make it less vulnerable to a potential data breach. Rather than one person being responsible for the entire payroll process, a system where responsibilities are segregated and internal checks and balances are in place will make it more difficult for a cybercriminal to access your sensitive payroll data and compromise your business. This will also reduce any internal risk of fraud or a data leak occurring with regard to your payroll information.

  • For example, the duties of a payroll clerk ought to be separated from measuring payroll performance or employee record-keeping, with such confidential information being accessible by your HR manager only. Assigning supervisory functions with regard to the authorizing of certain payroll processes such as the transfer of funds can also reduce the likelihood of fraud as an employee’s actions are being supervised by a third party.
  • Limit sensitive information
  • Payslips and printed checks can expose your business to a potential data breach due to the amount of sensitive employee information they contain. It is advisable to keep such information to a minimum, limiting it to the employee’s name and any other information that is strictly required.

  • Update your payroll software
  • Outdated payroll software can leave your business vulnerable to security breaches and cyber threats. By keeping your payroll software up-to-date you can help to safeguard your business against such data breaches and threats to your payroll security. Software that allows for various types of permissions can also ensure only certain employees have access to sensitive payroll data.

  • In addition to payroll software, it is advisable to choose security software that automatically updates itself with the latest version to avoid potential oversights which can arise with manual updates. If this is not always possible, ensure your company has a strict update policy with regard to payroll software to ensure you always have the latest software security procedures in place.
  • Restrict payroll access
  • The more people in your organization who have access to payroll information the greater the likelihood of a data breach occurring. As an employer, it is important to limit the number of employees who have access to your payroll system as well as ensure any access is removed once an employee leaves the company. This will reduce the chances of an individual leaking such information deliberately or inadvertently.

Ensure global payroll security — with Horizons

Maintaining payroll security on an ongoing basis requires considerable time and resources. By outsourcing your payroll function to a third-party provider you can reduce this burden while ensuring your employee data is protected.

Horizons gives your business secure access to your employees’ data anywhere in the world with its GDPR-compliant cloud-based Global Employer of Record (EOR) platform. Contact us today for more information.

Frequently asked questions

Payroll can be secured by implementing certain best practices which include the following:

  • Conduct regular payroll audits to identify and address potential vulnerabilities which may expose your business to a data breach.
  • Separate payroll duties within your organization and restrict the number of people who have access to the payroll system.
  • Keep payroll software up-to-date and install security updates as they apply.
  • Limit the amount of sensitive information printed on payslips and checks.
The legal framework which applies to payroll data protection is contained in the General Data Protection Regulation (GDPR). These regulations require employee data to be handled and stored securely with potential sanctions or fines being imposed on controllers or processors of payroll for non-compliance with the data protection laws.

Payroll Security: How to Secure Your Data from Breaches & Fraud