8 Critical Payroll Security Tips to Avoid Costly Data Breaches

Payroll security is growing ever more important as cybercriminals continue to develop new ways to bypass security measures. Although providers consistently update their software in response to these threats, breaches almost doubled between 2023 and 2024.

By taking a proactive approach to payroll security, you can help your team deflect these attacks.

With a global track record in secure payroll management, Deel leverages industry-leading measures like encryption, real-time monitoring, and tailored access controls to address these vulnerabilities head-on.

This blog post outlines 8 essential payroll security tips for 2025, providing concrete strategies and best practices to ensure your system’s resilience. By adopting these proactive approaches, organizations can expect enhanced data protection, improved compliance, and a renewed sense of trust among employees and stakeholders alike.

What is payroll security?

Payroll security is the implementation of protective measures to safeguard employee data and information throughout the payroll process. This includes procedures and systems designed to keep information secure and minimize the risk of payroll fraud, phishing attempts, and other security breaches.

Here are the main payroll security issues to be aware of:

• Phishing and social engineering: Hackers trick employees into handing over their credentials and use these to access the system. As they appear to be a legitimate user, businesses struggle to detect these breaches until long after the attack
• Ransomware: Instead of stealing data, criminals encrypt your files using a virus and demand payment for their release
• System vulnerabilities: Criminals can exploit outdated or unpatched software to enter your system. They can do this remotely now that most companies host their data in the Cloud
• Inside threats: Workers may misuse their access to your system for malicious reasons. One common risk is payroll fraud where users manipulate wage, hour, or benefits data to steal money from the company
• Human error: Common payroll mistakes can easily lead to data breaches. All it takes is one person sharing their password or leaving their laptop unattended to give criminals access to your system

Faced with these risks, more and more companies are investing in specialized technology. They’re looking to payroll solutions like Deel with robust security measures like encryption and security operation center (SOC) monitoring.

The challenge is that one in five breaches come from within organizations. Software alone can’t protect your company. Only a comprehensive strategy that covers all your policies and processes is effective against a wide range of threats.

Look for payroll software with built-in security features

The quality of your data security is tied to your payroll service. Make sure any companies you’re considering tick all the boxes on this checklist, as well as any country-specific compliance requirements:

Security tools

• Built-in password policies
• Single-sign on
• Device management
• Role-based access controls
• Multi-factor authentication
• Credential storage
• Next-generation firewall

Certification

• SOC1
• SOC2
• SOC3
• ISO 27001
• GDPR
• HIPAA
• CCPA

Security practices

• AES-256 encryption
• AWS-hosted infrastructure
• 24/7 SIEM SOC monitoring
• CSPM and DSPM solutions
• Penetration testing
• Back up policies
• Need-to-know policies
• Employee privacy training

Services and support

• Global coverage
• 24/7 customer support
• Data breach notifications
• A disaster recovery team
• Cybersecurity insurance
• Data Processing Agreement (DPA)

Asking follow-up questions can help you understand how the payroll provider applies these security measures. Here’s what to ask:

• What is your incident response plan? Check the provider has a well-documented and tested plan in place. This plan should outline the steps they’ll take in case your company experiences a security breach
• Are there any differences in the data protection you offer across locations? Prioritize companies that offer a consistent level of protection everywhere they operate. A vulnerability in just one country could expose your entire system
• How regularly do you conduct security audits and risk assessments? Ensure that your provider arranges checks at least once a year through a third party. Ideally, they should also carry out internal reviews
• How do you store data backups? Ask how regularly the provider saves backups and how they secure them. Some cybercriminals may attempt to attack these alongside your main system
• Can you provide us with any tools and resources on payroll data security? A good provider should show you how to use its features effectively and help train your employees too. For example, Deel always partners you with a customer success manager (CSM) who can provide the necessary documentation or connect you with experts

You can also read the Data Protection Agreement (DPA) the provider must offer with the service. This confirms that the company is acting according to GDPR guidelines. It also outlines how they’ll handle sensitive data like social security numbers, bank account numbers, and personal information.

Use the highest standard of data encryption

Encryption is not only an industry standard but also a legal requirement in many places. It guarantees that nobody can use your data, even if they somehow gain access to your system or intercept transfers.

This security method works by turning all your readable text into a cipher using an algorithm. Only trusted members of your team have access to the key. When an authorized user logs into the system, the software automatically decrypts the relevant files for them.

Although there are other encryption methods, AES-256 is widely regarded as the best. Its complexity makes it virtually impossible to crack. Weaker methods have led to serious incidents such as the attack on Adobe that led to 38 million accounts getting breached.

Cybercriminals can still access payroll information if you don’t encrypt your entire system. Your chosen global payroll provider should encrypt every customer’s sensitive data throughout its lifecycle, store the key in a secure place, and make regular updates.

Maintain a secure infrastructure

When selecting a payroll provider, look for evidence they can provide a secure infrastructure.

Leading companies should have SOC 2 Type II and ISO 27001 certificates. These indicate the provider has undergone vigorous checks to ensure their internal policies and processes meet the highest standards. SOC 2 Type II focuses on how they handle security over time whereas ISO 27001 checks how well they manage risks.

Make sure the provider you’re considering has up-to-date certificates. Organizations should renew the SOC 2 Type II annually and the ISO 27001 every three years.

Also, consider how the payroll provider hosts its web applications. Most software companies use either IBM, Microsoft Azure, or Amazon Web Services (AWS) due to their reliability. These cloud computing platforms help your provider detect attacks using a sophisticated network of sensors.

AWS is often considered the industry leader. It has the largest range of tools and sensors on the market and detects millions of potential threats every day.

In case of a significant breach, your payroll provider should include secure data backups. These backups enable you to restore all your files if they get destroyed or corrupted in an attack. Data backups are particularly effective against ransomware as it’s harder for criminals to hold your data as leverage.

Perform ongoing vulnerability management

Continuously monitor your system to look for vulnerabilities. You can identify and patch potential gaps before hackers have a chance to exploit them.

There are five steps to effective vulnerability management:

• Assess: Conduct monthly audits to look for weaknesses. You could have a specialist simulate an attack on your system to evaluate its security and identify issues
• Prioritize: Rank the vulnerabilities based on their potential impact on your organization. Some critical factors include the scope of a possible breach and the number of people affected
• Act: Fix the identified issues, starting with the ones that pose the highest risk. This might involve applying patches, updating software, or adjusting user permissions
• Reassess: Check the system to see whether the vulnerabilities have been addressed
• Improve: See where you can make general improvements to prevent security issues or refine your processes

Consider outsourcing to a third-party service if you lack the required in-house security expertise. You may open your business to more risks by making do with your own tools and resources.

Look for cyber security specialists with experience in your industry. They’re more likely to be familiar with the software you use and the threats you face.

Use MDM solutions

With more employees accessing sensitive systems from a wide array of devices and locations, this introduces significant vulnerabilities.

Cybercriminals may exploit unsecured home networks, public Wi-Fi, and outdated personal devices, making it vital for companies to enforce robust security measures. Start by requiring the use of Virtual Private Networks (VPNs) to encrypt internet traffic and protect data exchanges.

Additionally, implement Mobile Device Management (MDM) solutions to safeguard devices accessing payroll systems. These tools allow businesses to enforce security policies, remotely wipe data in case a device is lost, and ensure regular software updates are applied.

Learn more: Top 10 MDM Solutions for Improving Device Security and Workforce Efficiency

Develop an incident response and recovery plan

No matter how strong your defenses are, some threats may slip through. A comprehensive incident response and recovery plan can minimize the impact. Outlining the steps everyone needs to take when there’s a security issue allows them to work swiftly to contain the problem. Businesses can turn what would’ve been a full-blown breach into a minor disruption.

Here are the key steps in an incident response and recovery plan:

• Preparation: Develop comprehensive documentation detailing the response protocol for each team in the event of a breach. That includes management, the finance department, and IT. Every stakeholder should have clearly defined roles and responsibilities
• Detection and analysis: Implement real-time monitoring and alert systems to continuously check your system for security breaches and weak points. These systems can find anomalies or suspicious activity
• Containment: Limit the damage caused by the incident. Depending on the size and nature of the breach, you may need to isolate systems, disconnect devices, or temporarily block users
• Eradication: Remove the root cause of the issue. This might involve eliminating malware from the system or closing access points. Ask employees to create new, strong passwords after breaches in case their credentials are compromised
• Recovery: Restore normal operations by reopening the system and returning access to everyone. The IT department may need to install clean backups of your payroll data
• Review: Discuss what led to the breach to see if there are opportunities to strengthen your defenses. If there was a degree of human error, consider arranging targeted training to prevent similar issues in the future

Mailchimp is a good example of how effective these plans can be. After the company identified suspicious activity, they immediately suspended several accounts. They limited the breach to just 133 employees out of their workforce of thousands.

The success of your plan hinges on the security software you use. Prioritize tools with the following features:

• Continuous real-time monitoring
• Capability to recognize known and unknown threats
• Alerts and notifications
• Reporting and analytics
• Historical data logs
• Integrations with your existing infrastructure

Meet international data security requirements

Research the applicable data privacy and protection laws in the countries where you hire employees. Most jurisdictions have detailed rules and guidelines about how businesses collect, use, and store information.

Many regulations explicitly cover the protection of sensitive employee information. What’s more, your company doesn’t need to be resident in a country to be subject to its privacy laws. If you hire workers or process their data within its borders, you’re still expected to comply.

Breaking these laws can lead to a severe penalty or even legal action. For example, the General Data Protection Regulation (GDPR) charges up to 20 million euros or 4% of your annual turnover (whichever is highest).

Your payroll provider is responsible for many aspects of data compliance. Deel securely processes and stores information according to the strictest international policies, such as the GDPR and the California Consumer Privacy Policy (CCPA). If we handle cross-border transfers for your overseas teams, we ensure full compliance with all the relevant authorities.

As the employer, you usually have the following responsibilities:

• Informing employees of their rights
• Getting consent to handle their data
• Making information available on request
• Reporting security incidents within the required timeframe
• Allowing workers to amend or delete their payroll records

Incorporating these laws into your company’s data and privacy policies makes it easier for employees and management to follow. You can protect your business and build more trust with your team. For best results, store these documents in an easily accessible location and encourage everyone to read them.

Download Deel’s free privacy policy template to get started.

Keep updated with emerging trends and technology

Stay proactive to protect your payroll system from all possible threats. As criminals become more sophisticated, businesses must anticipate risks and adopt new technologies to remain secure.

The key issue is AI and automation. Criminal groups can launch large-scale attacks by programming software to repeatedly guess passwords, search for vulnerabilities, or send phishing emails. Ransomware is one of the most pressing concerns, with attacks rising by over 27%.

Companies can use the same technology and others to safeguard their systems. Here’s a look at the most promising cybersecurity trends:

• AI-driven threat detection: AI can continuously analyze data and monitor systems to look for suspicious activity. It can flag issues faster than traditional automation-based methods
• Blockchain: This record-keeping system could be used for tamper-proof recordkeeping
• Advanced encryption: As experts develop new encryption methods, criminals find ways to crack them. While quantum computing is still emerging, it may eventually pose a risk to all current encryption methods

One cyber security trend remains the same. Companies are more likely to be able to deflect threats if they have the right IT expertise. Arrange training for employees on how to use your payroll software safely and make the most of security features.

Secure your global payroll data with Deel

Businesses must make payroll data security an ongoing priority. Taking a proactive stance and developing a strong governance strategy can protect you from numerous cyber threats.

Strong data security also builds trust in your company, as it demonstrates a commitment to safeguarding sensitive information and following the necessary steps to protect your people. Your team can rest easy knowing their personal details are safe.

Partnering with Deel means you can focus on training your team and developing your policies. We take care of all the heavy lifting like system monitoring, updates, and certification. What’s more, Deel Global Payroll is available in over 100+ countries so there will be no gaps in your system.

Want to be sure your payroll data is safe? Book a demo to learn more about Deel Global Payroll and our security tools and features.