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Payroll Security: Five Tips To Keep Your Business Data Safe

May 16th, 2022


Payroll security involves taking steps to ensure that sensitive company and employee information isn’t compromised by employees or outside actors, like hackers. Common sources of payroll security issues include time sheet fraud, pay rate alterations, and data breaches—though the exact nature of these varies by the type of business.


If you take important steps to safeguard your business’ data, it’s possible to create a secure payroll system using software.


We detail 5 tips you can use to improve your current process and ensure that your employee and financial information is safe.


1. Train Employees How to Use Your Payroll System

Training all new and current employees on the proper use of your business’ payroll system helps everyone understand built-in security features. It’s also an opportunity to train relevant employees on additional steps that must be taken to protect sensitive company data and employee records such as Social Security numbers and addresses. For that reason, payroll training efforts should clearly describe your company’s procedures and make sure all relevant employees have access to them.


To maintain employee training goals and uphold payroll security standards, schedule additional training sessions whenever the software is updated or a procedure changes. Egress’ 2021 Insider Data Breach Survey found that 74% of organizations have their security breached as a result of employees breaking security rules. Ensuring that your employees are trained and aware of all rules/regulations is the best way to get ahead of this.


2. Include Payroll in the Business’ Security Strategy

Just as your business’ payroll procedures should be published in relevant training materials, payroll security is an important part of the business’ security measures. Including payroll processes in your security strategy makes relevant policies accessible to employees and makes it easier to integrate all of the company’s security measures and avoid gaps or other weaknesses. Helpful internal measures that can combat payroll fraud include:


  • Conducting background checks before hiring new employees
  • Limiting how many employees have access to employee personal information
  • Encouraging employees to use direct deposit instead of printed checks, which are more susceptible to payroll fraud


3. Update Your Payroll Software Consistently

Whether it’s an app on your phone or the system your business uses to manage payroll, outdated software exposes you to a number of security threats, including hackers. For that reason, one of the best ways to tighten your business’ payroll security is to update your payroll software immediately after those updates become available. These updates are especially important when released in response to known data breaches or other security issues.


You can keep software up to date by providing clear update requirements in your company’s payroll and security procedures. Likewise, if employees need to update the software on their individual devices, communicate this in a timely fashion, provide clear instructions, and follow up to confirm the updates are completed.


Business owners who work with a payroll provider should also confirm that the vendor automatically applies all software updates—rather than requiring manual updates at the individual company level. Updating your payroll software also allows you to ensure that you have access to all the latest third-party integrations, which will help you to streamline your process in the most efficient way possible.


If you’re uncomfortable with the extent of security measures offered by your current system or third-party provider, consider switching to another payroll provider.


4. Require Users to Update Their Login Credentials Regularly

In addition to updating your company’s payroll system itself, take steps to require that employees update their passwords on a regular basis. Generally speaking, it’s best to update passwords every 60 to 90 days, though the frequency ultimately depends on the unique needs of your business and the likelihood of a password breach. This requirement should be clearly stated in the company’s security procedures and as part of payroll system training.


Regular password changes don’t protect against every threat to payroll security, but the approach can still be an effective strategy—especially when combined with other security measures.


5. Focus on Separation of Duties

Separation of duties is a human resources and information technology principle that can help tighten payroll security while also reducing errors. In the context of payroll security, businesses are more likely to have security issues if a single person is performing every stage of the payroll process. This is because people are typically less likely to access or steal sensitive information if they think someone else will be reviewing their work and other activity. And in many cases, not having access to multiple systems makes it impossible to commit payroll fraud.


As an example, some businesses opt for one employee to manage time cards, have someone else handle payroll, and have a third employee issue the checks. Not only does this structure discourage employee fraud, but it also reduces the likelihood of errors. The more employees who are required to review elements of your business’ payroll process, the fewer mistakes are likely to impact operations.


Bottom Line

Whether you work with a third-party payroll provider or handle payments in-house with software, payroll security is an integral part of paying employees. Payroll systems typically have security features built in, but there are a number of steps that you can take to protect your business from threats like falsified time sheets and data theft.