How Secure is My Payroll?

Bringing home the bacon is the most important part of any job, so it is essential for business owners to ensure that all payroll information is kept secure and confidential – and that the checks keep coming.

Whether payroll duties are outsourced or completed in-house, there are several key elements any business owner or manager should consider to keep payroll safe.

In-House or Outsourcing Payroll

Ask any business owner if there are enough hours in the day and the answer is probably no. Processing payroll in-house is not only time-consuming, but also carries a certain amount of risk.

According to the Internal Revenue Service, 40 percent of small businesses pay an average penalty of $845 per year for late or incorrect filings and payments.

That is why outsourcing payroll is a go-to option for many small (and large) businesses. It frees up time for staff, reduces costs, keeps IRS penalties to a minimum, and bypasses the pain of dealing with payroll service software programs.

However, both payroll service options require business owners or managers to be proactive in terms of payroll security.

The 5 Critical Security Measures: How Does Your Payroll Compare?

There are five key security measures that are necessary in any payroll department, beginning with the payroll department itself:

Payroll Department

The layout of the payroll department should be constructed in such a way that computer screens or anything containing visible and readable private information cannot be read by office personnel or visitors walking by. Documents containing personal information need to be kept in locked filing cabinets when not in use. Payroll employees and other authorized personnel should be the only ones granted access inside the payroll department.

Payroll Account Access

Employees generally have access to their own payroll information, but cannot access coworkers’ files. A good rule of thumb for any payroll department is to grant access to files by having a member of the payroll department bring selected personal information to the employee making the request, rather than having the employee access the information independently. Supervision should always be implemented when anyone accesses payroll files.


Password protection and firewalls are essential for payroll systems handled electronically. Company-wide firewalls should be installed to protect computer systems and databases. Password protection is a no-brainer and should be implemented throughout the electronic security system.

External Requests

Whether a payroll department is operated in-house or outsourced, external requests for information provide a constant threat of a security breach. Verifying the true identity of who is requesting information can be difficult. Each company should implement a system for handling these types of requests; for instance, requests that come in writing are easier to verify. All payroll employees should be thoroughly trained on how to deal with the safety precautions and procedures relating to external information requests.

Destroying Information

Keeping files on hand that are no longer relevant just opens up a payroll department for a breach in security. Sensitive and personal information should be destroyed. However, some information should be kept as it may become necessary in the event of an audit.

Each of these key points is relevant whether payroll is completed in-house or outsourced. If making the switch from in-house to outsourcing, ask the prospective company what safety measures they take.

If payroll is completed in-house, consider each of the key points and make any necessary changes to ensure payroll safety.

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