Payroll is one of the most sensitive business functions in any company. Payroll fraud and security breaches are distressingly familiar tales in the modern business environment. Interestingly, the adoption of electronic solutions has only changed the way fraud is perpetrated instead of reducing its occurrence.
In 2019, the Federal Bureau of Investigation reported that payroll diversion schemes via email compromise and other sophisticated attacks cost businesses $8.3 million per year..
This data suggests that while electronic solutions offer a handy solution, a lot of payroll security and fraud prevention comes down to employer processes. After all, sophisticated tools are only as good as the people operating them. Here are 5 ways to shore up your payroll processes to ensure maximum security
Move to the Cloud
Traditionally, organizations have favored keeping data and infrastructure in-house due to privacy concerns. However, to support this decision, companies need to invest significant resources into maintaining and securing their assets. These days, leveraging third party expertise is a much better way to ensure you receive best of breed service.
Cloud-based payroll vendors provide a level of security that in-premise solutions can’t match. And by moving to the cloud, you can scale your payroll solution better as well. For instance, if you expand into a different country or rapidly add branches to your organization, a cloud solution will automatically scale with you for low marginal cost. It is these two advantages of security and scalability that the new breed of venture capital backed global payroll vendors such as Papaya Global are offering. Add to this, the greater reliability that cloud solutions provide, and it’s clear to see that leveraging third party expertise to manage your payroll infrastructure is a no-brainer.
Integrate Payroll into Security Measures
Integrating payroll into common security measures is a good way to reduce payroll fraud.
Create strict procedures and controls around who has access to sensitive data and prioritize access based on risk. For instance, most organizations automatically award access based on seniority, but this only increases the number of unused login IDs in your payroll system. After all, the CEO isn’t going to log in every day to check the nitty-gritty of payroll.
The result is an ID that can be used by malicious actors to perpetrate fraud. Aside from electronic measures, encouraging your employees to sign up for direct deposits and engaging an automated clearinghouse (ACH) will prevent check fraud and business bank account misuse.
Integrating cybersecurity as a central tenet of your organization’s culture is also a great way to increase payroll security. Instead of treating it as an appendage, making it a central business function communicates that payroll is every employee’s responsibility.
Install Updates and Patches Regularly
Security is a fast-changing field these days thanks to penetration attack methods becoming ever more sophisticated. A good payroll solutions provider will offer updates constantly and keep you abreast of industry best practices. Make sure you patch your software regularly so that there are no vulnerabilities.
Aside from updating software, it’s wise to adopt common-sense security tactics. Have your payroll employees update their passwords regularly. Note that frequent updating of passwords can be a double-edged sword. Your employees might run out of creativity and end up choosing weaker passwords.
To mitigate this risk, issue password creation guidelines or even consider ditching passwords for new solutions like FIDO protocols. These new solutions offer two-step authentication without the need for a password. The result is less reliance on a potentially outdated password and a more secure payroll system.
A common issue in payroll departments is that one employee executes a significant amount of work. In the name of cost savings, departments might become understaffed, and this increases the risk of compromise. The more duties a single person handles, the greater is your organization’s risk of falling apart if something happens to that employee.
Installing a separation of duties protocol, something that I.T. routinely works with is wise. In this model, all critical tasks are equally divided between employees. People are less likely to steal or manipulate sensitive information if they know that someone else will be reviewing their work through a simple chain of command.
An example of this structure would be to have 3 employees dealing separately with timecards, running payroll, and issuing checks. This way, no single employee has access to the entire system, and you process payroll efficiently. All their work can be verified by one another, thanks to one person’s output providing the input for the next step and the possibility of fraud decreases.
Security is a moving target these days, and you should always stay up to date with the latest best practices. Payroll is an important business function, so never neglect the importance of securing it. Follow these 4 tips, and you’ll not only process payroll efficiently, but you’ll also create a safer environment for your employees.