Payroll deals with some of the most confidential information that the organization will deal with. Names of employees, social security number, bank details, wages, tax information, and many more of such personal information may need to be provided for proper handling of payroll. In cases where the organization engages the use of payroll outsourcing services, some of these pieces of information will have to be provided to the payroll outsourcing organization.
This brings in the issue of information security and confidentiality of the employees in deciding on which payroll provider to go for. Payroll outsourcing does not relieve the employer of their duties regarding handling information of their employees. It rather involves the business understanding how the payroll service providers collect, store, access, and protect information.
What Employee Data Payroll Outsourcing Services Access
Some information is necessary for the payroll vendor in order to compute salaries, make payments, record payroll data, and generate the reports that are required.
The information required will depend on the type of payroll system and the services offered by the employer. However, payroll information can comprise very sensitive data about individuals and their finances.
Some information includes:
- Name and address of the employee
- Social security number or any other tax identifying information
- Information regarding wage and salary of the employee
- Bank account details for making direct deposits
- Withholding information
- Identification information of the employee
- Working hours and time data
- Benefits and deductions
- Leave and payroll related information
- Payroll tax information
It would be wise to share only the information that is required for offering the particular service. The payroll vendor does not have to have access to all systems and employee data.
Social Security Numbers, Bank Details, and Wage Information
Specific care must be exercised in relation to Social Security numbers, bank information, and wage information since they pose various dangers upon breach.
Social Security numbers could be needed for payroll tax reporting purposes and to identify employees. Bank information might be required to facilitate direct deposits. Finally, wage information is critical in payroll computation and compensation tracking.
This type of information should be managed using secure and restricted methods.
Payroll data security should go beyond just using a password-secured payroll system. Firms should know how the information is communicated, who accesses it, how the access is monitored, and how the information is protected when stored.
Access to information should be based on work-related duties. For instance, if a firm hires an individual whose role involves payroll management, he/she could have access to wage information but someone else doing a different job would not need it.
Firms should look at how the access is lost by former workers or provider staff.
How Payroll Outsourcing Services Are Expected to Protect This Data
If a firm employs payroll outsourcing, it is imperative for the firm to be aware of the provider's policy concerning confidentiality of data.
There are various means by which a provider can safeguard payroll data. Some of these may include access controls, authentication methods, encryption, monitoring, safekeeping of data, security training for employees, and policies on security.
Since different providers have different policies and controls regarding security, it is advisable to ask the right questions.
Areas that need to be considered include:
- Access controls
- Authentication process
- Data encryption
- Monitoring of security
- Security training of employees
- Backup methods
- Vendor management
- Incident response procedures
- Data retention practices
Strong payroll provider data protection also requires appropriate internal controls.
Not everyone working at a payroll service provider has to have access to all the client data.
It is useful to know how the provider stores and works with data when the transfer of information takes place.
For example, payroll data can be transferred between employer’s own systems, payroll service provider, banks, and other authorized entities.
This process must be performed using proper security measures.
Another aspect that has to be considered is employee training. Technology alone does not eliminate all the risks. The people who work with payroll information must be aware of security procedures and how to spot possible threats. Businesses have to learn how often the provider evaluates the existing security measures and how it deals with security flaws.
The aim is not to choose a provider without any risks. Such a choice is impossible. Any company cannot eliminate all the risks. What companies have to look for is a provider with reasonable measures and procedures for ensuring security.
What to Ask About Data Storage and Breach Protocols
These are just a few important questions that organizations must ask before selecting any payroll service provider.
The processes of storing payroll data will differ from one service provider to another, ranging from cloud-based data storage to various other technology infrastructures depending upon the technology infrastructure of the provider.
Some of the key questions that an organization should ask are as follows:
- Where is the payroll data stored?
- Who has access to the payroll data?
- How is the sensitive data protected?
- How is the access controlled?
- How long is the information stored?
- What happens at the end of the engagement?
- How is the data disposed?
- Are the third-party technology vendors utilized?
- What is the provider's incident response process?
A payroll data breach should have a defined response process.
If there is a case of unauthorized access or security breach, the service provider will have some procedures that will include investigation of the security breach, containing it, assessing the information that could be at risk, and also notifying relevant parties as and when necessary.
It is important for the business to know about the notification process of the service provider before the incident takes place.
It all depends on the nature of the incident, type of information, the laws, and jurisdiction of the particular incident.
The agreement for the payroll services should clearly outline the obligations in relation to data security, confidentiality, reporting of incidents, and data retention in the event of security breach.
Employee Privacy Rights and Employer Obligations
Not all responsibility related to employee information is shifted to the payroll provider when outsourcing payroll services.
It is necessary for the employer to understand what its responsibility towards the protection of employee data privacy is.
It should be noted that there might be different requirements depending on various factors including types of information, business location, nature of the workforce, as well as federal and state requirements.
There are other issues that should be taken into account apart from securing the information from unauthorized access.
They include the purposes of collecting information, parties to whom the information is distributed, how it is used, and duration of time it is kept.
The employer should develop the procedure concerning processing of employee information.
This procedure might include:
- Restriction of access only to certain individuals
- Use of secure information system
- Check of security policies of providers
- Retention of appropriate information
- Data retention policy
- Training of employees
- Access control
- Vendor responsibilities review
Businesses should avoid collecting and distributing unnecessary information.
At the stage of choosing the payroll provider, the employer should understand which information needs to be transmitted.
Responsibilities for privacy may also extend beyond the period during which an employee works for the business. Businesses need to know how the employee data will be kept and when it will be possible to dispose of that data safely.
Given that there are differences and changes in privacy and employment legislation, businesses need to seek out legal or compliance advice where they have any concerns regarding their responsibilities. Expert outsourced payroll services providers like The Fino Partners can help with safe processing, but the responsibility still rests with the employer.
