Payroll is a lucrative target for bad actors. Not only is money is at stake, but also sensitive data, such as employee names, Social Security numbers and earnings history. Employers must take threats to these assets seriously and prioritize payroll security.

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What is payroll security?

Payroll security is how employers and payroll service providers protect payroll transactions and data from malicious activity. They may implement various support measures, such as multi-factor authentication and adaptive software, to keep payroll secure.

Why do employers need payroll system security?

Employers are responsible for securing the employee data necessary to process payroll, as well as the money transferred from their bank account to their employees. Failure to fulfill either of these duties can result in expensive losses. Though all businesses are at risk, the need for payroll data security increases with large-scale data collection and online accessibility.

Common payroll vulnerabilities

On-demand access to payroll data has created opportunities for hackers and dishonest profiteers. Some of the more common vulnerabilities they take advantage of include the following:

  • Insider threats – Employees may deliberately alter time sheets to increase their pay, or payroll personnel could accidentally enter incorrect wage rates.
  • Phishing – Besides containing link-laden attacks, emails may have messaging designed to instill confidence and convince payroll practitioners to change bank account numbers or redirect payments.
  • “Ghost” employees – An insecure network could allow hackers to create non-existent employees who appear legitimate and receive regular paychecks.

Essential strategies for data security in payroll processing

Payroll attacks are constantly evolving, which means employers must be proactive to keep their information safe. These payroll security measures may help:

  • Policies – Procedural documents should cover how to handle sensitive paycheck information and address potential breaches.
  • Training – Employees must have easy access to the security payroll policies and know exactly what is expected of them.
  • Basic security – Firewalls, software patches and other computer security basics can help protect daily payroll operations.
  • Automation – In addition to minimizing mistake-prone tasks, like data entry, automation gives payroll practitioners more time to identify potential payment vulnerabilities.
  • Multi-factor authentication – Secondary and randomly generated passcodes that must be accessed from an authentication app on an alternate device help ensure that only authorized individuals can securely access network systems.
  • Adaptation – Keeping pace with the latest security threats requires regular software updates and assessments of network performance and protection capabilities.

Who leaks payroll data?

The most significant risk to data security for many employers is their employees. In fact, employees top the list of the six most common causes of data breaches:

  1. Disgruntled employees
  2. Careless or uninformed employees
  3. Mobile devices
  4. Cloud applications
  5. Unmatched or unmatchable devices
  6. Third-party service providers

How payroll service providers can improve data security

Leading payroll service providers, like ADP, are dedicated to protecting the privacy and security of the data they process for clients. As part of this commitment, the following data security services may be available:

  • Frontline cyber and fraud protection
  • Authentication and authorization controls
  • Deep network visibility, segregation and segmentation
  • Advanced intelligent security event and behavior analysis monitoring
  • Extended confidential data leakage and intellectual property protection
  • Multi-level network and end-point intrusion prevention, detection and remediation capabilities
  • Next-generation anti-malware and threat protection
  • Continuous application security testing and vulnerability management services

Frequently asked questions about payroll security

How much do payroll errors cost?

Payroll that is not accurate can cost employers thousands of dollars. If the error is escalated to the Department of Labor (DOL) Wage and Hour Division (WHD), the cost may be compounded in terms of time, legal and accounting fees, and reputation.

How long does it take for payroll to verify direct deposit?

Direct deposit transfers usually are completed by 9:00 a.m. on the scheduled payday. If the financial institution advances its own funds before settlement occurs, employees may have access to their earned wages before payday.

What is considered fraud by an employee?

Employee fraud is one of the major threats to payroll security. For example, workers may attempt to receive pay for hours they didn’t work by deliberately submitting erroneous time cards.

This guide is intended to be used as a starting point in analyzing how to secure your payroll and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax guidance or other professional services. Please consult with your legal counsel.