No matter which type of business you run, if you have employees then payroll is important. Since processing payroll involves a vast amount of personal data, payroll security should be top of mind. By making it a priority to secure your payroll, you can reduce the risk of serious issues that cost you time, money and headaches down the road. To help, we’ve put together a list of payroll security best practices to follow.
Here’s our roundup of the top 12 best practices for payroll security:
1. Perform a Payroll Security Audit
While a payroll security audit will take time and effort, it will reveal any problems you might be facing. To start, evaluate your payroll team by asking each member to explain what they do on a day-to-day basis. This will shed light about daily security practices and weaknesses in the process.
Then, take a close look at your payroll data to determine if there have been security breaches in the past. If you do discover breaches, think about why they occurred and what you can do to prevent them down the road.
2. Train All Employees To Use Your Payroll System
New and current employees need to know how to properly use your payroll system. As you train your team, make sure they understand all of its security features. Also, clearly explain what they can do to protect sensitive information, such as employee addresses and Social Security numbers. Hold additional training sessions any time you update your software or change a procedure.
3. Consistently Update Your Payroll Software
It’s all too easy to forget about updating your payroll software or put this task on the back burner. But doing so can expose your business to various security threats. Once you learn about a new update, implement it immediately. If your employees have individual devices that must be updated, let them know right away, provide clear directions and check in to make sure they completed the updates. Ideally, you’d choose a software that automatically applies all updates so you don’t have to do them manually.
4. Require Users To Regularly Change Their Login Credentials
Require your employees to change their passwords every 60 to 90 days. Even though routine password changes may not protect against every payroll security threat, this strategy can help minimize the risk of breaches and unwanted access. In addition, encourage your employees to use strong passwords, which are made up of a combination of uppercase letters, lowercase letters, numbers and special characters. Asking them to set up multifactor authentication can also be worthwhile.
5. Restrict Payroll Access
Even if you’re a startup or small business, there’s no reason for every employee to have access to your payroll system. The only individuals who might need to get into it are those in the payroll and human resources departments as well as business owners or those on the leadership team. Be sure that any employee who does have access to your payroll software completes a rigorous training program that focuses on security.
6. Limit Check Information
You may find that some employees prefer to receive paper checks instead of direct deposit. While this is no big deal, revealing too much employee information on checks can expose your business to serious threats. If you currently include Social Security numbers and addresses, for example, remove these sensitive details and only include employee names. If you partner with a third-party vendor to print your checks, make sure they’re on board with keeping sensitive check information to a minimum.
7. Be Mindful of Security When Employees Leave
All too often, security breaches arise when an employee gets fired or quits and still has access to sensitive company information. To reduce this risk, reset their passwords and disable their access to your payroll software as well as any hardware that lets them connect to your network. Even if an employee leaves on good terms, taking these steps can give you some much-needed peace of mind.
8. Outsource Your Payroll
There’s no denying that maintaining a secure payroll system takes time and energy. If you have a lot on your plate and don’t have the budget to hire a full-time payroll or human resources team, consider outsourcing. A third-party provider can save you time and ensure your payroll is protected. If you decide to go this route, do your research and shop around to hone in on the right provider. Make sure you choose a company that takes security issues seriously through comprehensive security measures.
9. Separate Bank Accounts
By opening a separate bank account for your payroll, you can easily reduce the number of business assets at risk. In the unfortunate event an employee commits payroll fraud, your losses will be limited to that account. Make sure the account contains just enough funds to complete payroll as keeping too much in it can defeat the purpose. A dedicated payroll account can also simplify the audit process.
10. Strengthen Computer Security
Tightening your computer security can enhance your payroll security. To do so, install a firewall to block unauthorized access, back up your data regularly, implement software updates as they become available and use spam filters to detect unsolicited emails. Don’t forget to encrypt sensitive data on your computers and other devices and encourage employees to log out of the payroll system before they leave their desk or other work area.
11. Protect Physical Payroll Data
Even though we live in a digital world, it’s important to protect physical payroll data as security issues can still happen the old-fashioned way. Keep any paper files with sensitive information locked up. Ask your payroll team to store away any documents with confidential data and lock their cabinets when they leave their work areas. Also, encourage shredding unwanted papers and collect file room keys from employees who are leaving.
12. Separate Payroll Duties
If you have an in-house payroll team, consider dividing their duties. One employee can handle time cards, while another submits payroll, and a third employee issues pay stubs. This will reduce the risk of an employee changing or stealing sensitive information. If your payroll department consists of one person, you can create separate accounts for various parts of the process.
Why Payroll Security Is Important
The payroll process involves a great deal of sensitive information. If one hacker makes their way into your system, they’ll have access to your employees’ addresses, Social Security numbers, bank account information and more. This can lead to cyberattacks that can cost you a significant amount of money to recover while putting your reputation on the line. By being proactive and taking steps to safeguard your sensitive payroll data, you can keep hackers away.
Bottom Line
Unfortunately, even small businesses are at risk for payroll fraud. By pairing a quality payroll software with these best practices, you can ensure your company information is safe. It’s essential if you’d like to avoid fraud that disrupts your day-to-day operations and interferes with your bottom line. One way to help keep payroll safe is by using a payroll service, such as OnPay, Gusto or ADP Run. Learn more about the best payroll services.