Digital payroll processes have revolutionised the industry. They have increased accuracy, made documentation accessible and sharable and boosted efficiency. But, as with any solution, there are risks. In 2023, employee data breaches increased by 57% from the previous year’s figure.
There have also been recent high-profile data breaches already in 2024. Notably, there was a payroll data breach at the UK Ministry of Defence (MoD). This incident serves as a stark reminder of the vulnerabilities even the most secure institutions face.
For HR professionals, safeguarding payroll data is paramount. It not only protects sensitive employee information but maintains organisational integrity and trust. This blog explores the lessons that can be learned from a payroll data breach and outlines effective strategies for prevention.
On 6th May, the news broke that the MoD’s payroll system had suffered a data breach, potentially leaking the details of an estimated 270,000 armed forces service members. These included names, bank details and in some circumstances, personal addresses. The incident occurred through the Ministry’s use of a third-party payroll system.
Initial investigations showed that no data had been removed. But, this kind of unauthorised access can lead to a risk of identity theft, fraud or even a national security threat. For smaller organisations not tasked with storing the data of military personnel, the threat of a data breach is less alarming. However, there are valuable lessons HR professionals can learn from this incident.
Companies enlisting the help of specialised vendors for payroll and other HR processes is common. They take pressure off in-house HR teams and can significantly improve efficiency and accuracy. But, it doesn’t alleviate the responsibility placed on organisations to protect their employee’s data. Therefore, before working with any third parties, it is important to thoroughly vet their security measures. These include:
Once you have chosen which vendor to work with, it’s time to draw up your agreement. Your contract must be carefully drafted to define key security expectations and responsibilities. Give special attention to data protection clauses, breach notification procedures and a right to audit. The right to audit is fundamental once work begins. During the contract period, it is also important to regularly check how your company’s data is being handled.
It is also important to establish clear communication with your vendor. Discussions around security shouldn’t end once the ink has dried. Safety is an ongoing priority. Communication around security ensures any vulnerabilities are caught before they cause problems. Regular performance reviews are a great way to check up on how your data is being handled and iron out any inefficiencies.
Data handling is heavily regulated to protect employees and their privacy. This begins at the point of collection and continues until the data is destroyed. Employers are only allowed to obtain relevant data necessary for payroll processes.
Another key part of data handling is how long it is held. UK GDPR regulations state that data must not be kept “longer than necessary”. This can vary depending on the organisation and the type of data. So, employers must be able to justify their retention periods. Then, once data is no longer needed, it must be safely disposed of.
The most common cause of data breaches within UK businesses is weak or stolen credentials, like passwords. This indicates a clear area for improvement – staff education. Most adults know not to tell others their login details, but when employee data is at risk, passwords take on another level of importance.
This goes deeper than creating stronger passwords. It requires businesses to foster a culture of proactive safety. For HR professionals, this can involve organising training programmes and creating information hubs.
Human error is a leading cause of cyber attacks, but it is easily preventable. It all begins with onboarding. When bringing in any new employees, they must understand the standards of security your company operates to. But, for those who will work with employee data regularly, role-specific training is important. For the wider workforce, regular cybersecurity training sessions should be mandatory. Sessions should cover topics like recognising phishing emails, safe internet practices, and the importance of password security.
It is also important to collaborate with teams within your organisation, like the IT and finance departments, to ensure regular drills are scheduled. These initiatives expose any insecurities and inefficiencies within your process. This fosters both proactive security and continuous improvement.
The MoD payroll data breach highlights the importance of robust cybersecurity measures. For HR professionals, the stakes are high. A breach not only compromises personal data but also damages trust and organisational reputation. By learning from this incident and implementing comprehensive security strategies, HR professionals can play a pivotal role in safeguarding payroll data against future threats.
Adam is our Head of Managed Services, managing the successful delivery of our payroll managed services to a range of clients.
