Data breaches are part and parcel of our interconnected reality, and the damage they can inflict goes far beyond mere monetary losses. Payroll systems are among the most frequent targets, as the data they store is valuable both on its own and as a means of gaining deeper access or extracting further gains.
What makes payroll data so coveted, and what fallout are companies who don’t take protecting it seriously enough facing? Most importantly, how can you prevent your own company’s payroll data from being exposed and misused? Here’s everything important you should be aware of.
What Types of Data Do Payroll Systems Contain?
Payroll systems ensure that each employee and their work activities are properly documented and compensated. By necessity, this means that they aggregate and store a wealth of sensitive information, which falls into three broad categories.
Personal information – The information needed to establish someone’s identity. On the one hand, it includes core info like names, addresses, SSNs, and contact information. On the other, it also establishes a person’s employment start date and role within the organization, their tax status, and any dependents they might have.
Financial information – The accounts and records needed for payment purposes. This includes employees’ bank account and credit card information (in case of expense reimbursements), salary details, pay histories, tax forms, and variable salary components like overtime.
Ancillary data – Not strictly part of payroll data, but generated when handling it nevertheless. For example, your company might let employees access their pay-related information through an online service portal. Access logs can include IPs and device info. Hackers can use that for recon, so companies can track and check IPs with an IP lookup tool during incidents and audits.
Why Does Payroll Data Need to Be Protected?
Protecting payroll data is crucial, as neglecting to do so can have disastrous consequences beyond mere financial losses.
Identity theft and cyber threats
Payroll systems collect all essential personal and financial data tied to each employee. Exposing it in a breach gives cybercriminals everything they need to commit identity theft and financial fraud. They may open new bank accounts or take out loans. This can ruin a victim’s credit score and take years to recover from, even when identity theft is established.
Payroll data may also help cybercriminals conduct more convincing and sophisticated spear phishing attacks. For example, they may use personal information to pose as someone from the HR or payroll department and ask the victim to confirm some financial details or help clear up a dispute. The links embedded in such messages can then lead to fake websites that capture further payment information, while attachments may contain malware.
Legal liability and reputation damage
Not taking all appropriate measures required to safeguard payroll data may make your company face legal and compliance consequences. Failing to uphold strict standards like HIPAA or the EU’s GDPR may result in lawsuits or compliance inquiries.
Reputational damage can be the most far-reaching and difficult consequence to recover from. Both clients and potential partners may see your company as untrustworthy, even more so considering the nature of the leaked data.
Finally, there’s the cost of getting back on track. Investigating a breach, implementing more effective safeguards, and resuming normal operations can take a long time and cripple productivity until everything is resolved.
How to Protect Your Payroll Data?
Keeping payroll data safe and mitigating the consequences of potential breaches comes down to a combination of robust cybersecurity measures and human awareness.
Implementing proper cybersecurity procedures and tools is foundational. All payroll data needs to be encrypted. That goes for the live data you work with daily as well as the regular backups you should be maintaining.
Access to payroll data needs to be regulated and strictly monitored by using the best password managers and RBAC systems. Password managers like NordPass create and store strong, unique credentials for everyone who needs access.
Moreso, breaches most often happen due to human negligence or a lack of cybersecurity awareness. That’s why not even the most sophisticated precautions are a replacement for regular training. Budget for cybersecurity training that covers everything from the fundamentals for new hires to emerging threats all employees should be able to recognize and report.