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7 Ways to Know If a Payroll Service is Secure

August 21st, 2023 | 4 min. read

By Kristi Feist

To say that payroll service bureaus handle a lot of sensitive information is an understatement. They manage more than large amounts of money and they hold personal data for everyone in your organization. This data includes addresses, social security numbers, and other sensitive information.

We’ve noted many essential aspects of payroll security over the past +30 years here at PaydayHCM. Payroll security is not leaving it to someone else to take care of and assuming they will. There are certain aspects of payroll services that you must be aware of.


We’ve divided security into two different categories and the seven key factors. First, there is the technology side of security. The tech side includes software, firewalls, data encryption, multifactor authentication, and more.


Second, we have the human side of security. This includes physical facility security, employee training, 3rd party auditing, and compliance measures. Here is what you'll learn: 


  • What To Look For In A Payroll Service Technology
    • Encryption
    • Data Backups and Disaster Recovery
    • Multifactor Authentication
  • What To Look For In A Payroll Service On The Human Side
    • Employee Training
    • Regular Auditing
    • Secure Data Centers
    • Customer Support


What To Look For In A Payroll Service Technology

As we mentioned earlier, the technological aspect of payroll security is often the most thought of. But what do terms like “encryption” and “multifactor authentication” mean?


1: Encryption

A payroll service bureau should have robust encryption systems, this includes SSL and TLS (Secure Sockets Layer and Transport Layer Security). These are systems that ensure the sensitive data transferred from your computer to the payroll service’s server is secure. These systems are encoding your information before sending it so it’s indecipherable to cyber attackers.


2: Data Backups and Disaster Recovery

A secure payroll service will have a well-thought-out data backup procedure. Ask your potential payroll service about redundancy in their systems. Redundancy is usually thought of as a negative thing. When it comes to data and information storage, it’s a positive and vital part of security.


Redundancy means backing up sensitive data in multiple secure locations so that a loss of data due to human error or major disruptions doesn’t result in losing all of the vital information. Instead, it’s stored in multiple other locations for retrieval.


Not only that, those systems should be accessible and able to restore your data and services quickly. Be sure to ask your potential payroll service about turnaround time in the case of data loss or major disruptions.


3: Multifactor Authentication defines multifactor authentication or MFA as “a security technology that requires multiple methods of authentication from independent categories of credentials to verify a user’s identity for a login or other transaction.


Multifactor authentication combines two or more independent credentials: what the user knows, such as a password; what the user has, such as a security token; and what the user is, by using biometric verification methods.”


To break it down further, your normal authentication is a username and password. MFA goes beyond that because someone with your username and password could access your information.


MFA asks for additional information, like a one-time code sent to your mobile device or biometric identification using your voice, face, or other unique physical attributes.


What To Look For In A Payroll Service On The Human Side

As mentioned before, technology alone is not the answer. Your people and the employees of the payroll service you choose to hire all have a responsibility to protect sensitive information and transactions.


Attacks on business are nothing new but they are evolving all the time. Sometimes it takes a human to recognize something malicious that a system might not pick up on.


4: Employee Training

Any payroll service that you are looking at should have a strong culture of security within their organization. What are some signs that they take security seriously?


Regular employee training is the major factor in human-centric cybersecurity. Employees are the human firewall protecting the company from attacks.


They should be receiving regular training at all levels of the organization. Be sure to ask your potential payroll service how often and with what methods they train their employees for security.


5: Regular Auditing

The payroll service that you are vetting should conduct regular security audits via a 3rd party auditing service. These audits come in the form of SOC (System and Organizational Controls) reports.


SOC reports “enable companies to feel confident that service providers, or potential service providers, are operating in an ethical and compliant manner.”  These reports also “establish credibility and trustworthiness for a service provider.


Compliance is a key aspect of the SOC report. You want assurance that your payroll service is complying with regulations, such as HIPAA (Health Insurance Portability and Accountability Act).


6: Secure Data Centers

Physical facilities and their security should also be a line of inquiry for potential payroll service providers. All sensitive data has to be stored on computers somewhere. You want to be sure that location is a physically secure one, with surveillance, and access controls, like biometric readers.


7: Customer Support

Customer support is often overlooked, but what happens if something does go wrong and needs immediate attention? Security or data breaches can still happen, no matter what you do.


When they happen, you want to know that your payroll service is a call away. A single point of contact (with backups) for such situations and a nearby location are both ideal.


Make Sure Your Business Is Protected

When it comes to your employees’ pay there is no room for error. You need to be sure that the company you entrust with your payroll is doing everything it can to stay secure.


Following the outlined items above, you can make sure your prospective payroll service is on top of their security and yours.


It’s no surprise that we feature all these safeguards ourselves at PaydayHCM. After all, we’ve been in the payroll industry for decades years now. We know the importance of payroll security and the threats that are lurking out there. If you want more insights on what it takes to achieve payroll security, feel free to contact us directly.


Want to know more about the nuances of payroll? Read our article 5 Features to Look for In a Payroll Company and learn what else you should be looking for in a payroll service provider.

Kristi Feist

As a seasoned veteran in the industry and with Payday HCM, Kristi maintains a 1000+ client portfolio with a 98% retention rate. As Vice President of the DSO Division, Kristi works with hundreds of DSO-like companies to adopt best practices around the use of payroll technology, implementing processes and empowering employees of DSOs to use the technology.