From salaries and bank account details to Social Security numbers and tax identifiers, payroll data contains some of the most sensitive employee information a company handles. And when this information falls into the wrong hands, the consequences can be — and have been — disastrous.
Here, we explore the importance of payroll data security in a global context, highlight common payroll risks, and offer best practices for safeguarding employee data. Discover insights from Hiraash Thawfeek, Chief Technology Officer, and Michael Nierstedt, Payroll Product Director.
What is payroll security?
Payroll security refers to the measures and practices that businesses undertake to protect employee payroll data. These efforts aim to prevent unauthorized access, fraud, data breaches, and cyber threats, and ensure compliance with data protection and security regulations.
Because of varying regional compliance requirements and differing levels of cybersecurity infrastructure, payroll security becomes even more challenging for companies with a distributed workforce. Companies not only have to navigate different data protection laws in order to secure payroll across multiple locations but also ensure they uphold their own internal security standards.
Thawfeek highlights the particular complexities of securing payroll data across borders. He says, ” Payroll processing is supposed to happen within that country to avoid data sharing across borders. Global companies don’t usually have the right setup or know how to manage this well.”
To navigate these challenges, the most effective global companies adopt a comprehensive, multifaceted approach, including:
- Establishing data protection processes that adapt to the specific regulatory requirements of each country.
- Enforcing strict access controls.
- Implementing payroll risk management practices to minimize vulnerabilities and improve overall payroll security.
- Implementing secure, global payroll systems with advanced encryption and fraud detection features.
The importance of payroll security for global teams
For companies that pay international employees and manage multi-state payroll, the stakes for payroll security are incredibly high.
A single data breach doesn’t just affect one office or region — it can expose sensitive employee information from across the globe. This is especially true if your payroll data isn’t centralized in one place, since 40% of data breaches involve data stored across multiple environments.
Let’s take a closer look at why global payroll security is so important.
Compliance with local and international regulations
Global payroll management teams are responsible for ensuring compliance with local regulations, but they’re also tasked with staying up-to-date with unfamiliar international ones. This level of multitasking is challenging — even for the most experienced.
For example, while you might be well aware of the intricacies of the section of the Fair Labor Standards Act (FLSA) that governs payroll record keeping in the United States, you might not be as clued up on regulations elsewhere.
Take Europe, for example. The General Data Protection Regulation (GDPR) outlines strict and specific requirements for collecting, storing, and managing personal data. For payroll teams with employees based in Europe, this means they not only need to achieve overall compliance but also adhere to GDPR payroll standards.
Plus, these regulations — covering everything from labor laws, tax codes, and data protection standards — change more frequently than many businesses can keep up with. And the cost of non-compliance is high – not only do you risk incurring hefty fines, but you could also face serious legal repercussions.
Business continuity issues
Payroll data security is a critical part of keeping your business running smoothly. And when that data is compromised, you risk disruptions while teams scramble to fix the problem.
This unexpected downtime can also have an impact on your global payroll costs. Beyond the immediate expense of fixing payroll errors or recovering from a cyberattack, there are other costs that quickly add up.
Delayed payments can lead to compliance fines, especially in countries with strict labor laws. Meanwhile, payroll and HR teams have to deprioritize tasks to handle the situation which can stall other important projects.
Employee trust concerns
Proper payroll security is not just a technical issue; it also helps you maintain employee trust. Employees expect their personal and financial data to be handled with care, and any breach of your payroll data protection procedures can quickly erode your employees’ trust.
It’s not only a question of dissatisfaction. More than half of employees say they would reconsider staying with a company after a data breach, highlighting just how important strong payroll security is for employee retention.
Common payroll security issues and risks
Here are the most common payroll security issues and risks businesses should be prepared for.
External data breaches and cyber threats
Payroll systems are a prime target for hackers looking to steal personal and financial information. And if they succeed, this can lead to instances of identity theft and fraud. These attacks often exploit weak passwords, outdated software, or unsecured networks.
Recent research shows that breaches involving employee Personally Identifiable Information (PII) are among the most expensive, with an average cost of $189 per compromised employee record.
As cyberattacks become more frequent, prioritizing secure payroll solutions is crucial for organizations of all sizes to protect employee data. Remember, it’s not just small companies at risk — even big organizations are vulnerable. In 2024, the United Kingdom’s Ministry of Defence (MoD) fell victim to a payroll system data breach.
Weak access controls that can result in payroll fraud
Sometimes the biggest threats to payroll security often come from inside the company itself. Employees or third-party vendors with access to payroll data can misuse their privileges for personal or financial gain.
This could involve leaking sensitive information, initiating unauthorized changes to payroll records, inflating salaries, or even creating ghost employees to divert funds.
As Michael Nierstedt, Payroll Product Director at Multiplier pointed out in a recent webinar, fraud detection is crucial for keeping these risks in check. “You don’t want people making fake payroll with a bunch of fake employees on,” he explained. “You need to be able to detect unusual activity like bulk imported employees.”
But without multi-factor authentication (MFA) or role-based access controls, spotting this kind of suspicious activity becomes much harder. Weak passwords, shared accounts, and a lack of user-specific permissions only open the door wider for unauthorized access and payroll fraud.
Regulatory non-compliance
Failing to comply with data protection laws like the GDPR can lead to severe financial and legal consequences. Non-compliance often happens when businesses lack proper systems to handle sensitive payroll data securely e.g. failing to encrypt information, obtain the proper employee consent, or restrict data access.
Under GDPR rules, fines for serious violations can total 4% of a company’s global annual revenue or 20 million Euros— whichever is higher.
Human errors and using multiple vendors
Mistakes in payroll processing — whether due to miscalculations, incorrect employee classifications, or overlooked deductions — can create significant compliance issues. Simple errors, like misclassifying an employee as an independent contractor rather than a full-time employee can lead to violations of tax laws, labor regulations, or benefits eligibility.
But outsourcing to smaller, local payroll vendors managing data security and compliance can also involve risk. As Thawfeek explains, “The payroll processors have to have the right security setup, and this must be vetted. Smaller providers sometimes don’t have the right expertise.”
Without the right protection in place, companies face a range of risks, from phishing attacks to ransomware and insider threats. According to Thawfeek, many vulnerabilities stem from human error: “When sharing payroll data with vendors and vice-versa, this requires humans handling the sensitive data and using channels like email to send them across. Simple mistakes could lead to data breaches that are quite damaging.”
Payroll security best practices
So, how can you keep payroll data secure? As part of wider global payroll best practices is essential, payroll security requires its own set of focused measures.
Here’s what our experts recommend to protect sensitive employee information and keep your payroll processes compliant and efficient.
Use secure global payroll software with advanced security features
Investing in global payroll software with advanced security features — like encryption, role-based permissions, and automated compliance checks — is crucial for protecting sensitive employee data. Real-time monitoring and alerts also help you quickly address issues before they escalate.
Nierstedt emphasizes the importance of security throughout the payroll system. “Look for two-factor authentication (2FA) and proper security across the entire product,” he advises, “and make sure integrations are encrypted and secure with SOC2 audits.” These features help protect sensitive payroll data from unauthorized access and potential breaches.
Automate payroll processes
Manual payroll processing is prone to mistakes, whether due to simple miscalculations, overlooked deductions, or incorrect employee classifications. Payroll automation minimizes human error and reduces fraud risks with features like automated wage calculations and payment distribution. The best automated payroll systems also flag unusual activity, helping detect fraud and errors early.
Perform regular security audits
Regular global payroll security audits are key to keeping your systems and data safe. These give you the chance to spot weaknesses in your processes, ensure security protocols are being followed, prevent payroll fraud, and identify issues with access control and compliance with local laws. You’ll also be able to mitigate these issues before they lead to breaches or penalties.
Choosing a secure global payroll solution
When it comes to payroll security, prevention is always better than cure. And the more widespread your team, the higher the stakes for payroll security.
That’s why having a reliable global payroll solution is so important. The best options make it easy for you to pay employees across different regions while prioritizing security and compliance — and Multiplier offers the security and reliability you need to do both.
Our global payroll platform is SOC 2 Type I and Type II , and SOC 3 certified, which means our systems and processes meet some of the most rigorous standards for keeping payroll data safe. On top of that, we have ISO 27001:2022 certification, showing we manage risks efficiently and properly secure the data we process.
With Multiplier, you no longer have to memorize all of the different data protection laws around the world. The platform ensures full compliance with GDPR and other privacy standards so that you don’t have to worry about legal risks or data breaches.
As well as following industry best practices such as environment segregation, disaster recovery, and stringent authorization and authentication protocols, here are some other platform features that make Multiplier the best choice for maintaining payroll security:
- Token-based authentication to validate users at every step across all systems.
- Multi-factor authentication which adds an extra layer of security for both users and their data.
- Centralized authorization with Role-Based Access Control (RBAC) and Attribute-Based Access Control (ABAC) to restrict user access.
- Daily and real-time backups for continuous data protection.
- Audit trails to help you maintain accurate records.
Ready to see how Multiplier can improve payroll security for your global team? Book a demo today.
