Payroll Security: The Basics You Need to Know

Payroll Security: The Basics You Need to Know | The Enterprise World


Payroll security is one of the crucial roles of an HR department. As a business owner, you need to ensure that your staff feels confident that its sensitive data is confidential, including:

  • Bank accounts
  • Social security numbers
  • Home addresses
  • Payslips

Unless you put the right payroll security systems in place, it’s difficult to guarantee complete safety in a world full of data breaches and hackers. With employee data protection regulations becoming increasingly demanding and fines getting steeper, your company risks huge penalties if it doesn’t protect payroll information.

This article takes you through payroll security basics, which include the following:

  • What is payroll security?
  • Why does a payroll solution need security?
  • What are the most common payroll security problems?
  • How can your company protect payroll data?

Let’s dig deeper to unearth answers to all these questions and more.

What is Payroll Security?

Payroll security involves taking precautions to help prevent sensitive employee and company data from being compromised. If you pay employees accurately and on time, it not only boosts their morale but also maintains your company’s reputation and financial stability. It can quickly enhance your company’s productivity if you tick all boxes right.

Payroll security also involves implementing a range of measures to keep confidential employee information relating to worker benefits and compensation, which usually includes the following:

  • Names and addresses
  • Taxes and deductions
  • Social security numbers and medical insurance data
  • Variable data such as sickness, holidays, hours worked, and bonuses
  • Extra fringe benefits

Naturally, this information is obviously highly sensitive. Therefore, it’s crucial that your company includes as many protections in its security measures and strategies as possible to ensure confidentiality and safeguard against potential leaks, data breaches and hacks.

Why Does a Payroll Solution Need Security?

Payroll Security: The Basics You Need to Know | The Enterprise World

Your company manages huge amounts of personally identifiable information of its workers. If you don’t have security systems in place, it means your database is vulnerable to prospective hackers. A single breach in payroll data can result in more than identity theft. For example, a minor data leak can result in the following:

  • Fraud
  • Brand image and company reputation damage
  • Loss of employee loyalty, confidence and trust

Smaller businesses might be lulled into a false security thinking sense, “Potential hackers are after the big fish.” If you own a small business, that sense of thinking can come at a huge cost. In fact, payroll frauds take place almost twice as often in smaller companies than in larger organisations. But why? Smaller businesses tend to have fewer strategies and controls, making them easier targets for potential hackers.

As a company owner, it’s important to understand that payroll frauds are more than quick cash grabs. Payroll fraud schemes are the most lasting, with an average lifespan of approximately 30 months. That means without proper systems and technologies in place, a company could go for several years without noticing the ongoing theft of its money or sensitive data.

What Are the Most Common Payroll Security Problems?

Your business needs to be on the lookout for multiple potential security issues and not just hacking. While hacking is the most common payroll security problem, your company also needs to be alert concerning the following types of payroll frauds.

Payroll Security: The Basics You Need to Know | The Enterprise World
  • Time theft: Also known as timesheet falsification, time theft is a common payroll fraud that takes place when workers report more hours worked than they actually did. They do that to inflate their paychecks in the process. In most cases, time theft occurs in the form of workers clocking in for shifts early, clocking in for co-workers who aren’t actually at work or clocking out late.
  • Falsifying wages: Either working solo or in collaboration with payroll managers, employees can falsify their wages by increasing their sales numbers, upping their wage rates, or tampering with the actual paycheck itself.
  • Ghost employees: Ghost workers are simply non-existent employees at your company who are receiving paychecks. This type of fraud can take several forms, including former employees being paid even after leaving your company or current workers setting up fake accounts in your payroll system.
  • Expense reimbursement: Expense reimbursement frauds take place when workers get paid back for a business expense that didn’t occur, was a personal or cost less than reported, enabling them to benefit from the difference.
  • Advance retention: Advance retention takes place when a worker requests advance pay and fails to repay it.

How Can Your Company Protect Payroll Data?

Several proven, expert tips can help your company protect its payroll data and avoid those common frauds. These tips include the following:

Payroll Security: The Basics You Need to Know | The Enterprise World
  • Educate remote workers about the proper security of data
  • Always review company advances to ensure they are fully paid
  • Use the latest payroll software alongside solutions that are updated regularly
  • Split payroll processing duties and ensure each worker works as a watchdog against others
  • Continually review your payroll department’s paperwork
  • Practise reasonable payroll data security with all your paychecks

Finally, if you are utilising global talent, trusting a reliable and reputable employer of record service provider can help you avoid payroll fraud. An employer of record will ensure the security of your money and workers while also helping you to recruit and onboard workers seamlessly and compliantly. Also, an employer of record ensures your workers are paid accurately and compliantly.

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