Payroll Data Security: What Employers Need to Check

Payroll data security underpins trust between an employer and their workforce. Payroll data includes employee names, addresses, bank account details, National Insurance numbers, salary, bonuses, deductions, and pension information. Each item carries personal and financial value. Loss, exposure, or unauthorised alteration can lead to legal, financial, and reputational risks under GDPR and the Data Protection Act 2018.

This guide highlights the key checks employers should undertake to protect payroll data. It focuses on control, access, storage, transfer, and regular review, helping you build routines that reduce risk and ensure compliance.

 Know the Payroll Data You Hold

Start by listing all payroll data your organisation stores. Include:

• Personal details
• Bank account and payment information
• Pay rates, bonuses, and deductions
• Pension and benefits information
• HMRC submission records

Record clearly:

• What data exists
• Where it is stored
• Who has access
• Why each item is required

This baseline enables precise control and accountability. Remember, even if payroll is outsourced, the employer retains ultimate responsibility. Employees expect clear answers if issues arise.

 Check Who Has Access

Access control is one of the most effective ways to safeguard payroll data. Only staff whose roles require it should have access.

Steps to follow:

1. Request a full list of users with payroll system access.
2. Identify and remove access for roles no longer requiring it.
3. Eliminate shared logins.
4. Confirm individual logins for every authorised user.
5. Ensure two-factor authentication is enabled for all users.

Review access each time staff join, change roles, or leave. Make this part of routine payroll security, not an occasional audit.

Confirm Where Payroll Data Is Stored

Payroll data may exist in payroll software, HR systems, shared folders, email inboxes, or physical files. Confirm its location and protection measures.

Effective storage requires:

• Encryption of stored data
• Controlled access using named credentials
• Safe backup routines

If staff access payroll information remotely, ensure devices comply with your security policies: updated operating systems, strong passwords, and device locks. Avoid storing payroll data on personal devices. Where unavoidable, document the controls in place and review them regularly.

Check How Payroll Data Is Sent and Shared

Payroll data moves between HR, finance, and external providers. Each transfer carries risk.

Check:

• Payslip distribution methods
• Movement of payroll reports between departments
• Bank file transfers to payment platforms
• Pension or benefit files sent to third parties

Avoid standard email for payroll transfers. Use secure protocols such as SFTP, encrypted portals, or approved document-sharing platforms with access logs. If using a payroll provider, request written confirmation of encryption in transit and at rest.

 Review Third-Party Provider Responsibilities

Clarify which payroll tasks your provider handles and which remain in-house. Document the division of responsibility.

Key questions to ask:

• Who holds employee bank details?
• How is access controlled and recorded?
• What security testing occurs, and how often?
• Where is data stored?
• How is data deletion and retention managed?
• What is the breach response plan?

Keep written responses and update them whenever the payroll contract or software changes. Align provider processes with your legal obligations.

 Know How to Spot and Respond to a Breach

Early detection reduces damage. Watch for:

• Unexpected login activity
• Unexplained changes to payroll records
• Access outside normal working hours
• New users added without request
• Reports or payslips sent to unknown addresses

If a breach occurs:

1. Restrict further access immediately.
2. Identify affected records.
3. Notify internal leadership and data protection contacts.
4. Determine if the incident must be reported to the Information Commissioner’s Office.
5. Notify affected employees with clear guidance.

Structured response routines protect trust and reduce confusion.

 Run Routine Payroll Data Security Checks

Quarterly checks help maintain security and support audits. Include:

• Review system access lists
• Confirm backups and test restoration
• Review password policies
• Ensure security updates are current
• Request updated provider assurance documents
• Check payroll devices meet data protection standards

Record each review to provide evidence for internal audits and regulatory inquiries.

 Check Data Retention and Secure Disposal

Retain payroll data only as long as legally required. For leavers:

• Remove system access promptly
• Archive records securely under your retention policy
• Schedule secure deletion and document when it occurs

Avoid keeping data “just in case”; unnecessary retention increases risk.

Review Payroll Processes After Organisational Changes

Changes in business structure can introduce risk. Review payroll security after:

• Workforce expansion
• Department restructuring
• System migrations
• Changing payroll provider
• Remote or hybrid working implementation
• Opening new sites

Check access, storage, transfer, and backup procedures after each change.

 When to Seek Support

External guidance is advisable when:

• Inheriting legacy payroll systems
• Migrating to a new payroll platform
• Receiving repeated employee queries on payslips or deductions
• Experiencing recurring payroll errors linked to data handling

Support helps where risks span HR, finance, and IT, or internal capacity is limited. For expert advice and managed payroll services, contact DH Payroll. We can help ensure your payroll processes remain secure, accurate, and fully compliant.

Conclusion

Payroll data security depends on clear controls and regular reviews. Protect data by knowing what you hold, restricting access, securing storage and transfers, and maintaining routine checks.

Regular reviews take less effort than handling breaches. A structured approach safeguards employees and your organisation while supporting compliance with legal and regulatory obligations.