Payroll data security: How to protect your business and employees

Payroll teams have a big responsibility. They need to make sure everyone gets paid accurately and on time, and they need to do so while protecting their organisation’s most sensitive data.

Personally identifiable information (PII) held by payroll includes bank details, national insurance numbers, as well as salary, pension, and tax information, and is highly sought after by fraudsters. In fact, an analysis of 141 million leaked files from 1,297 cyber-attacks found that HR data, including payroll information, appeared in 82% of cyber breaches. 

A single breach can be costly, with the average cost of a significant cyber-attack for an individual business in the UK at almost £195,000.

With this in mind, payroll security is essential.

What is payroll security?

Payroll security is about keeping sensitive data safe from cyber criminals, fraudsters, and even internal threats.

It involves a mix of technologies, policies, and procedures that, together, ensure payroll information is secure, access is restricted to authorised personnel only, and compliance with key regulations and tax laws is maintained. 

What is the impact of GDPR laws on payroll processes?

The UK’s stringent General Data Protection Regulation (GDPR) laws, which exist to protect personal data, have a big impact on how you store and provide access to payroll-related data.

According to GDPR rules:

• You can only keep hold of employee data that is relevant to running payroll

• You should securely delete information that is no longer required

• Payroll data must be accurate

• Employees have the right to access, correct, or request information about their personal data

• You must keep a Record of Processing Activities (ROPA)

• You should have a breach strategy in place (find out what an effective strategy looks like later in this blog)

How to educate employees on data security

Employee awareness is crucial to keeping payroll data safe. Even the most secure systems become vulnerable if employees use weak passwords, accidentally share sensitive files, or fall victim to phishing emails.

By educating employees, you can build a culture of security and minimise the chance of costly mistakes. Here are five impactful ways you can do this:

Deliver mandatory security training

• Clear, role-specific training should be non-negotiable for all staff handling payroll data. This should cover key topics like recognising phishing and social engineering attempts, how to create secure passwords, the importance of multi-factor authentication (MFA), and how to handle sensitive files.

Simulate phishing and security drills

• Regularly run controlled phishing attack simulations to help employees spot suspicious emails or messages.

Clear policies and guidance

• Provide easy-to-follow written policies on data security. Don’t forget to include expectations for remote or hybrid working, since employees tend to have a lower security awareness threshold at home.

Define clear reporting protocol

• Create a detailed incident response plan. Quick reporting enables a faster response and reduces potential damage.

Reinforce payroll security measures regularly

• Use newsletters, short video reminders, and team meetings to keep payroll security top of mind.

6 common types of payroll security risks

Payroll security risks are constantly evolving. Here are six of the most common ones:

1. Phishing/social engineering: Attackers can send fake emails pretending to be HR, Payroll, or Finance teams. They ask for login details which they then use to access employee records and payment information.
2. Ransomware: This is malicious software that encrypts files or systems. Attackers then demand payment to restore access.
3. Payroll diversion fraud: This is when cybercriminals redirect employee salaries or payments into accounts they control.
4. Insider misuse: When someone with inside access to an organisation – maybe an employee, contractor, or ex-employee – deliberately misuses access to payroll systems.
5. Misconfigured access: When incorrect permissions mean an employee has access to data they shouldn’t.
6. Third-party vendor weaknesses: When a software provider’s systems, processes, or security controls are inadequate, leaving your payroll data exposed.

What to do if there is a security breach in payroll

Having a well-prepared response in the event of a breach is essential to minimising disruption, ensuring compliance, and protecting employee trust.

An effective approach includes the following three steps:

Contain the breach

• Immediately restrict access to the payroll system. Conduct a full assessment to understand the extent of the breach and what data has been compromised.

Notify relevant parties

• GDPR rules dictate that you must report specific breaches to the Information Commissioner’s Office. You should also notify affected employees immediately.

Learn from the breach

• Conduct a comprehensive review to identify weaknesses and prevent issues from repeating in the future

Your proactive payroll security checklist

Here are some actionable steps you can take right now to enhance your payroll security and prevent a breach from happening in the future:

• Document your payroll processes: Know where sensitive data is stored and who has access. Review permissions regularly.

• Ensure your software meets recognised security standards: Choose providers with ISO 27001 and Cyber Essentials accreditations in place to make sure sensitive data is safe and secure.

• Mandate the use of strong passwords and multi-factor authentication for all payroll system users.

• Keep all software up to date: Ensure your software is running on the latest version so you can rest assured it meets the latest data safety standards.

• Switch to online employee self-service: Reduce your reliance on paper-based payslips and P60s, which can easily fall into the wrong hands.

Benefits of outsourcing payroll processing

Leading teams often choose to protect their business by working with a managed service provider.

Take HSE as an example. Just a few years ago, the organisation – which provides all of Ireland’s public health services in hospitals and communities across the country – faced the worst cyber-attack in history. The cyberattack meant that all systems had to be taken offline while security teams secured the systems. But the pressure was on, because 22,000 people (most of them key workers) were due to be paid just seven days after the attack.

Thankfully, HSE had recently taken out a managed solution with Zellis.

“We were thankful that we had a managed service. It meant Zellis could get everything up and running as soon as we got our first ‘clean laptop.’,” said Brid Harte, HSE’s national payroll manager. “They were nothing but helpful. This resulted in HSE staff being paid correctly and on time despite significant and unprecedented disruption to our IT systems.”

Take control of payroll security with Zellis

For decades, Zellis has supported some of the UK and Ireland’s most complex organisations with payroll that’s more accurate and resilient.

Zellis Managed Pay Services include:

• Specialist expertise: Our team of experienced professionals maintain up-to-date knowledge on security best practices.

• Enterprise-grade technology: Software that integrates seamlessly with HR, Finance and workforce systems.

• Strategic reporting: Delivering insights that improve visibility and governance across the payroll cycle.

• Built-in security and compliance: You’ll always be up to date with local regulations. We are accredited by ISO 27001 and Cyber Essentials.

• Integrated online self-service tools: Employees can view and, where appropriate, update their own records, resulting in more reliable and higher quality data.

Ready to learn more?