What is payroll data security?
For hackers, fraudsters, and other cyber criminals, your data is incredibly valuable.
With just one successful data breach, thieves can steal sensitive information to extort and steal from companies and individuals.
Payroll data security describes the actions you can take as an employer or service provider to secure your payroll – from training staff to spot risks to using payroll software with the latest data security measures.
Why is data security so important?
If you’ve not got payroll data security locked down, getting your pocket picked isn’t the only consequence you could face. There’s also:
- Disruption to immediate payroll operations
- Damage to your organization’s reputation (especially payroll service providers)
- Legal penalties, fines, and costly compensation payouts
Remember – each employee record in your payroll represents a real person. If their data is stolen, they’re vulnerable to identity theft.
Featured Guide
Understanding secure payroll and data security
For thieves and cyber criminals, your payroll data is a gold mine. Find out what it takes to handle payroll security with this free guide.
Payroll data compliance
Part of solid payroll data security involves ensuring compliance with relevant laws, standards, and regulations, including:
- The General Data Protection Regulation (GDPR)
- The Health Insurance Portability and Accountability Act (HIPAA)
- State-specific legislation, e.g. Virginia’s Consumer Data Protection Act
- Sector-specific regulations, e.g. the Financial Services Modernization Act
- International standards like ISO/IEC 27001.
What threats to payroll data security are out there?
Let’s take a look at some of the most common threats to payroll data security – including how they happen.
-
Your system is hacked
One of the most common threats to payroll security is hacking, which is when somebody accesses your system – including your digital devices and networks – without your consent or knowledge.
Hackers exploit vulnerabilities in software systems, especially those that are outdated or poorly designed. Once they gain access, they can steal, alter, or delete sensitive payroll data.
Regularly updating your software and using preventative measures like firewalls and Antivirus programs can mitigate this risk.
-
Your staff falls prey to phishing attacks
Criminals don’t just target your tech to access payroll data – they’ll also try to trick or manipulate people within your organization to do it for them. This is known as phishing.
In a phishing attack, cybercriminals often impersonate trusted individuals, such as managers or IT personnel, to trick employees into revealing sensitive information.
For example, you might receive an urgent email from a colleague urging you to send them your log-in for the payroll software, but their email address doesn’t look quite right. This could be a phishing attack, and someone is attempting to trick you into providing them access to your payroll system.
-
Thieves in your organization
Not all threats come from external sources. Unfortunately, you also need to be vigilant for employees misusing their access to commit fraud or steal data.
This might look like:
- Creating “ghost employees” on the payroll to siphon money
- Altering payroll data (for example, inflating their income)
- Adjusting time-keeping systems to cover up absences.
To mitigate these kinds of risks to payroll security, you may want to limit access controls, perform thorough audits of payroll transactions, or provide staff with the means to report any concerns anonymously.
-
Malware infiltrates your software
As part of a system breach, hackers and cybercriminals may attempt to install malware to compromise data security.
Malware (short for malicious software) is any program or file that’s designed to interact harmfully with a computer, network, or server. Malware can include:
- Viruses
- Worms
- Trojans
- Ransomware
Once malware infiltrates your payroll system, criminals can steal or sabotage sensitive information, disrupt operations, and cause long-term damage such as affecting payroll data processing.
Malware isn’t always deployed as part of a targeted attack. Malware can be mistakenly downloaded by someone in your organization from a website, email attachment, or USB drive.
-
Ransomware takes your data hostage
Ransomware is a type of malware that encrypts data and demands a ransom for its release.
Once on your system, ransomware will encrypt your payroll data; essentially locking you out. Without the encryption key, the data can’t be accessed, retrieved, or even deleted – and thieves are betting on you paying big bucks to regain control.
Even large firms can be at risk; in late 2021, UKG experienced a ransomware attack on its Kronos Public Cloud service. This resulted in a significant data breath and serious legal action as a consequence.
Unfortunately, paying the ransom does not guarantee the return of your data. The impact of ransomware can also paralyze payroll operations, delay payments, and cause significant financial and reputational damage.
Frequently Asked Questions (FAQs)
Learn more about payroll data security and what else you might need to know to keep your company and its payroll data safe.
-
Thieves and cybercriminals can exploit stolen payroll data for various purposes, including:
- Committing identity theft by using personal information to create fake identities or access financial accounts
- Committing tax fraud by filing fraudulent tax returns to claim refunds
- Committing benefit fraud by applying for government benefits under the stolen identity’s name
- Accessing and manipulating financial accounts, leading to unauthorized transactions.
-
The General Data Protection Regulation (GDPR) is a comprehensive data protection law enacted by the European Union.
Although an EU rule, GDPR applies to all organizations processing personal data of EU residents, regardless of the organization’s location.
In the US, GDPR requires strict data protection measures, including legislation that requires companies to:
- Ensure personal data is accurate and up-to-date
- Process data lawfully, fairly, and in a transparent manner
- Ensure data collected for specified, explicit, and legitimate purposes is not processed for other purposes
- Only collect data that is necessary for the intended purpose.
- Retain data only as long as necessary.
- data against unauthorized access and breaches.
Non-compliance with GDPR can result in severe fines and penalties.
-
The Health Insurance Portability and Accountability Act (HIPAA) is a US law designed to protect sensitive health information:
HIPPA establishes national standards for the protection of individuals’ medical records and personal health information. HIPAA’s main objectives are to:
- Ensure health insurance coverage continuity for individuals between jobs
- Combat fraud and financial abuse in health insurance and healthcare delivery
- Simplify administration and manage healthcare transactions electronically.
HIPAA compliance is essential for organizations handling health-related data – both to avoid legal repercussions and to effectively safeguard patient privacy.
-
ISO/IEC 27001 is an international standard for managing information security:
Otherwise known as IEC 27001, this standard provides a systematic framework for organizations to manage sensitive company information and mitigate risk.
The key components of IEC 27001 are:
- The Information Security Management System (ISMS); a framework of policies and procedures to help manage risk to data
- Risk assessment and treatment plans
- Continuous improvement through regular audits and updates.
Adopting ISO/IEC 27001 is voluntary, but it can help you protect your payroll data more effectively.
Plus, it can provide additional reassurance to customers and users that you prioritize security.
-
An incident response plan is a structured approach to addressing and managing the aftermath of a data breach; in this case, a breach of sensitive payroll data.
A typical incident response plan for a payroll data breach might cover:
- Preparing to respond to an incident, e.g. establishing and training up an incident response team
- Detecting and identifying the payroll data breach
- Containing a breach and preventing further unauthorized access
- Identifying and eliminating the root cause, e.g. removing malware
- Recovering from the breach, e.g. by restoring affected systems
- Learning from the incident and improving your approach in the future.
