Confidentiality of payroll data is critical but at times it proves to be difficult to maintain it. Many companies take extra care to ensure the payroll information of their employees stays confidential and do not loose quality man-force to competitor.

A leak in payroll records can result in discord among employees and compromise the employer or employee’s financial situation. For example, two employees perform the same job; however, you decided to pay one of them at a slightly higher rate because she has more experience than the other worker. If the lower paid employee discovers that she’s being paid less, it can result in her feeling resentful and under-appreciated. Further, a leak of an employee’s direct deposit information or the employer’s financial data can cause the respective bank account to be compromised by fraudulent activity.

What mechanisms do organizations resort to, in order to maintain confidentiality in payroll?

Payroll System Security

Strengthen payroll confidentiality by assigning the necessary payroll tasks to specific personnel. For example, if the employee processes only time cards and tax-withholding forms, his system access should allow him to complete only those tasks. Specifically, do not give him access to wages and deductions data if his job does not require him to have access to that information. Some employers use payroll software to process their payroll in-house and this software sometimes has accounting or human resources features attached. Hence, giving the required data access becomes important. If your small business does not have an information technology specialist, use an IT consultant to set up the computer system so the necessary access privileges can be provided.

Payroll Staff Security

Even if you have only one payroll person, ensure that he/she works in a confidential location, separate from other employees. Before you hire payroll personnel, emphasize the importance of keeping payroll data private, such as logging off the payroll software before leaving the computer and not disclosing payroll information to non-payroll staff. To protect sensitive information, you may have the payroll staff sign a confidentiality agreement upon hiring them. Some employers make termination of the payroll staff immediate rather than giving advance notice if there is a leak of confidential information.

Engage a capable vendor in payroll outsourcing

Businesses that outsource payroll take an important first step towards creating a culture of confidentiality in the office premises. The trickledown effect goes beyond payroll: companies that outsource payroll maintain the confidentiality of employees’ financial as well as personal information but also help create a professional atmosphere where employees value confidentiality. The salary details access is limited to a small number of senior staff and the payroll service provider and most of the critical information is kept confidential by the provider.

This support results in, businesses having full focus on their core business and offloading non-core but critical activities. Although payroll administration is often an afterthought for businesses, establishing a trusted system helps businesses manage important human resource challenges.

I hope you find this useful. Your feedback and suggestions are welcomed.

In case of any additional information required, please feel free to reach out to me.


Abhishek Shrivastav (Finsmart Solutions)

96899 39368

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