Digitized payroll processes have changed how businesses administer their employees’ pay and benefits, as well as how they conduct their HR (i.e., Human Resource) processes. By leveraging automation, organizations can achieve fewer payroll-related errors, faster payments, and real-time reporting. As a result, payroll is more efficient than ever before. Although these benefits are significant, the increased reliance on technology has also exposed businesses to an increased risk of Cyber Security threats.
As demonstrated by the recent Data Breach at The TEAM Companies, LLC, even the most established payroll service providers can experience vulnerabilities in their digital operations (i.e., systems that contain vulnerable points of access to sensitive employee data). The TEAM breach exposed sensitive personal and health information that is held in an organization’s system and demonstrates that all businesses, regardless of their size or established service offerings, remain exposed to Cyber Security threats when dealing with large volumes of employee data.
Most traditional payroll services were based on manual and/or partially automated processes. These processes typically did not allow for external access (e.g., internet) to payroll data, but they stored employee data in “air-gapped” storage systems (e.g., files stored in a locked file cabinet, and only physical access to the file makes it possible to read or change anything in the file). By comparison, most modern-day payroll software applications operate on interconnected networks using a hybrid of Cloud technology (i.e., accounts hosted in the Cloud for easy access) and Remote Access tools and services. Therefore, although these technologies improve efficiency, they also provide multiple points of entry for Cyber Criminals.
The businesses in many industries like Media, Entertainment and technology have large or dispersed work forces and therefore have higher level of Cyber risk than other Businesses. Traditionally payroll systems store the following items; Social Security Numbers, tax documents, Direct deposit account numbers and sometimes Health records about Employees. When any of these Vendors are compromised or if the Computer Networks of the businesses have been compromised the potential for exposing a larger amount of sensitive employee data exists and can potentially result in Identity Theft and/or Financial fraud.
In addition, the delay in detecting Cyber Attacks only compounds this problem. Cyber Attacks can continue undetected for weeks, providing plenty of time for the Cyber Attacker to steal sensitive employee data and exfiltrate it. After detecting a breach, companies face a lengthy, complicated and expensive process to remediate the breach. Companies must find a balance between the convenience and expediency of Modern Payroll Systems, while maintaining robust security requirements.
To help mitigate these risks, Businesses should employ multi-layered Cybersecurity Strategies that include the following: Encrypted data transmission; Strict access controls; Multi-factor authentication; Regular auditing of internal Company systems and Third-Party Providers; and Employee Training so that all users understand how to securely handle sensitive information and are aware of potential Phishing attempts or Suspicious Activity.
The benefits of digital payroll transformation include increased efficiency for businesses and higher levels of employee satisfaction. However, as evidenced by The TEAM Companies, LLC's recent data breach, a careful approach to digital payroll transformation is necessary to ensure the protection of employee data. Protecting employee data in an increasingly digital world necessitates a combination of technology investments along with building a culture of security awareness and proactively managing risks.
