Payroll Data Security: Defending Against Payroll Data Breaches

Data breaches and cyberattacks happen every day. Payroll contains sensitive employee information such as Social Security numbers and bank account details, making it a goldmine for cybercriminals. And because 43% of all data breaches target small businesses, payroll data security should be top of mind.

Kickstart your payroll data security training here. Learn about payroll data security, get payroll data protection best practices, and more. 

What is payroll data security?

Payroll data security is the process of protecting your business’s payroll information from unauthorized access, theft, or alteration. Unauthorized access includes both external and internal breaches. 

Sensitive payroll information may include employees’:

• Social Security numbers
• Bank account numbers
• Addresses and phone numbers
• Pay stubs
• Medical records 

Securing your payroll data is an essential part of payroll management and recordkeeping. You must use a reliable payroll system, establish rigorous standards, and designate who can access payroll. 

Who should have access to payroll data?

You can help maintain payroll confidentially by limiting access to payroll data. There are typically only a select number of employees who should have access to sensitive payroll information. 

So, what roles or positions typically have access to sensitive payroll data? Designated people who may have access to some or all payroll data include:

• Business owners 
• Payroll administrators 
• HR managers

Limit which employees have access to payroll data by establishing access controls, aka who can view or modify payroll data. 

Effective access controls can prevent unauthorized access and reduce data breaches. Controls can also limit internal fraud, such as time theft. 

Can employees have access to their individual payroll information?

Your employees may want a way to access their individual payroll information. Is this possible? Yes! Is this secure? Yes!

You can give employees access to their individual payroll information through a secure employee portal. 

An employee self-service portal lets employees view their pay stubs, access electronic Forms W-2, update personal information, and more. 

Should managers have access to certain payroll information?

Managers may need access to view and/or manage certain direct reports information. 

For example, your managers might be responsible for approving or rejecting employee time cards. Or, you may want managers to be able to view employee pay information.

You can easily give managers limited access to relevant information with some software systems, like time and attendance software. Typically, your managers can access their direct report information in their portal. That way, you do not need to give them an additional login to your business’s main payroll system. 

Why is payroll security important?

The FLSA requires that all businesses keep payroll records for at least three years. It’s up to you to keep this payroll data safe.

Payroll security ensures that external (e.g., cybercriminals) and internal (e.g., disgruntled employees) sources don’t gain access to sensitive information. 

Payroll security is an important part of employee trust—your employees count on you to keep their sensitive information, like SSNs, secure. 

Securing your payroll protects that trust and can save your business from the significant damage control that comes with a payroll breach.

According to the Federal Trade Commission, a data breach requires an extensive business response. In the event of a payroll breach, you must:

1. Secure your operations 
2. Fix vulnerabilities 
3. Notify appropriate parties 

A payroll breach could cause you to spend time and money getting legal counsel, working with forensic experts, interviewing employees, etc. 

How can payroll software help with payroll security?

Using payroll software is one of the ways you can manage your payroll and is an alternative to managing payroll by hand. 

Reputable software systems protect payroll data through measures like: 

• Data encryption: Like banks, payroll software protects data through encryption
• Access controls: Add users and assign user-based permissions
• Secure records: Store all of your payroll records in your secure software account 
• Automatic updates: Get the latest software version with automatic updates 
• Multi-factor authentication (MFA): Users can set up MFA to authenticate their account access with two pieces of evidence (i.e., password and authentication code)

Payroll software also has a clear audit trail, which can make it easy for you (and your employees with access to payroll data) to spot discrepancies. 

4 Payroll data protection tips

Keep your payroll data secure by using reputable software, conducting a payroll audit, establishing access controls, and following security best practices.

1.  Use reputable payroll software 

Reputable payroll software simplifies the process of running payroll and can help keep your data secure through measures like data encryption and MFA.

Payroll software also makes it easy for you to give limited payroll permissions to access payroll reports. That way, accountants or HR employees gain access to needed reports but not sensitive personal information. 

2. Conduct a payroll audit regularly

Conducting a payroll audit can help you prevent payroll fraud and ensure your data is up-to-date and secure. 

A payroll audit is the process of analyzing your business’s payroll processes and information. Consider conducting a payroll audit at least once per year. 

Your payroll audit should look at things like:

• Active employees
• Pay rates 
• Hours worked 
• Paid time off 
• Wages
• Tax withholdings 

Regular payroll audits can help you catch discrepancies, weed out ghost employees (aka someone on the payroll who doesn’t work for you), and more.  

3. Limit access to payroll

Again, not everyone in your business should have access to payroll data. Only a few people should have full access to sensitive payroll information. 

Designate the people who should have payroll access and train them on security best practices (e.g., cybersecurity awareness videos). 

If an employee with payroll access leaves your business, immediately remove their access to payroll. Removing access should be a key step in your employee termination checklist. 

4. Follow security best practices

There are several “best practices” you should follow to protect your payroll data. 

For payroll data security, you and your employees with payroll access should:

• Regularly change passwords
• Understand phishing tactics and other tax scams
• Take advantage of multi-factor authentication
• Keep physical documents in a locked space 

Protect your payroll data with Patriot Software 

Are you looking for a secure payroll system you can depend on? 

With Patriot Software’s online payroll, you can manage your business’s payroll with ease. You can add unlimited users with permissions. That way, you can choose which users can view reports only and which users can run payroll and see sensitive information. 

Not to mention, Patriot Software is committed to the safety and security of your payroll data. We protect your data through layers of security protocols, encryption measures, and stringent access controls. 

Patriot Software has also achieved SOC 2 compliance, which signifies that every facet of our operations has been scrutinized and secured achieving the highest industry standards. 

Learn more about our software when you sign up for a no-obligation demo!

This is not intended as legal advice; for more information, please click here.