Protecting employee data – is your head in the cloud?

Having a clear technology strategy is important to adhere to the increased complexity of payroll operations and compliance with UK and international regulations.

Few organisations are operating cloud-based payroll systems and consequently sensitive data is passed regularly via email or other non-secure data exchanges, putting the organisation at risk of a data breach.

Cloud-based payroll systems offer additional security through encrypted technology and support not often found in traditional systems used by SMEs. The risk of falling victim to data exposure or fraud is greatly increased without this encryption.

In recent years the shift to remote working has been embraced across many industries and with this adjustment in working habits expected to continue, protecting sensitive employee information in multiple workspaces (or home offices) can be extremely challenging, unless the system is based on the cloud. Cloud-based systems can offer peace of mind that all data is being held on a system using the latest security technology while adhering to any legislation changes.

However, with an increasing number of payroll systems and payroll bureau available, organisations are faced with the difficult decision of selecting the right fit for their business. Making the right decision based on the organisation’s risk appetite and an understanding of the broader IT and business strategy is vitally important for payroll system selection.

Having good data is increasingly important to ensure governance and control over systems and processes. At the same time, your employees expect you to act responsibly with their personal information and to respect their right to privacy. Failure to comply with the law can lead to serious legal and financial consequences and significant operational challenges, such as business disruption, financial loss and reputational damage.

Questions for businesses

Digital technology trends and higher expectations have led to features such as real-time reporting, payslips being sent to mobile devices, the production of meaningful information from significant volumes of data, and payroll communicating with other systems, transforming the payroll landscape.

Managers and business owners looking to update their technology strategy should begin by asking:

• Is our payroll data secure and have we performed penetration testing or tested compliance with ISO 27001?
• Does our current payroll system or outsourced bureau fit into the overall technology strategy?
• What interface do we have for the payroll process and how do the outputs link to our HR and finance systems?
• Have we analysed the cost of running the global payroll systems and number of vendors?
• Are we confident that our outsource provider can deliver an end-to-end technology led payroll solution?
• How can we take advantage of technology for a more resilient and efficient payroll process?

The expert view

Paying employees accurately and on time has always been the main objective for payroll. Historically, payroll has been seen as a low-risk function, generally automated (or outsourced), however cyber attacks and data breaches are more regularly troubling the higher levels of management.

At a time when employment taxes are now the largest source of government income, it is only logical to review your payroll function to ensure it is both efficient as well as secure. Tax authorities increasingly see the payroll function as their primary tax collection agent, transferring the burden of responsibility on employers in what can feel like continuous regulatory changes.

It is paramount for the payroll function to operate efficiently and to meet all legislative requirements. Embracing cloud-based technology will help employers pay their employees accurately and on time while remaining fully compliant with all HMRC policies.

If you have any questions or would like any further information on issues regarding Payroll, please don’t hesitate to contact Payroll Director, Stuart Law or any member of our Payroll & Employment Taxes team.