Payroll security: How to keep your payroll data safe

As we’ve said many times on this blog, your payroll system isn't just a backend function. It’s a vault of sensitive data that needs fortress-level protection.

Names. Salaries. Bank accounts. Government IDs. Tax IDs. Personal addresses. Every one of these sits inside your payroll platform, which makes it no surprise that they are such an attractive target for cybercriminals and fraudsters.

Whether you’re running a lean startup or scaling a global workforce, protecting that information is mission-critical. In this article, we’ll walk you through the main risks to be aware of, the best practices for staying safe, and why choosing the right payroll partner is crucial.

Why does payroll security matter?

As mentioned, payroll data is gold to hackers. Yet, many companies treat payroll security as “just another” administrative task. This leaves gaping holes in their defenses which cybercriminals can — and will — exploit, resulting in significant financial damage and serious compliance issues.

"The average cost per breached payroll record in 2024 was $189"

IBM and the Ponemon Institute study

Beyond the financial damage, the fallout of a payroll data breach includes:

• Loss of employee trust

• Regulatory penalties and fines

• Brand damage

• Operational chaos

Modern payroll security is about more than locking down a spreadsheet. It’s about safeguarding the systems, processes, and platforms that hold your company’s most sensitive data.

Payroll security breaches in recent years

There have been numerous breaches of payroll providers in recent years, which has affected numerous organizations including:

• Zellis: Payroll provider Zellis was subject to a mass hack in 2023, affecting employees at several large companies including British Airways, Jaguar, Dyson, the BBC, and Boots. Legal action is currently ongoing.

• UKG: Ultimate Kronos Group (UKG) was subject to a ransomware attack in 2021, impacting employees at Wholefoods, Honda, and Pepsi. In a subsequent lawsuit, UKG agreed to pay up to $6 million to those affected.

• SSCL: UK government payroll contractor SSCL was subject to a large hack in 2024, with an estimated 270,000 Ministry of Defence and British military personnel affected. Legal action involving over 5,000 employees is ongoing.

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What makes payroll systems vulnerable?

To secure something, you have to understand what makes it insecure. Here are some of the biggest threats to payroll systems:

1. Phishing and social engineering attacks

Phishing is one of the most common and dangerous entry points for payroll data breaches. These attacks often come in the form of deceptive emails, texts, or even phone calls pretending to be from a trusted source, such as HR, finance, or a payroll provider.

Once an employee clicks a malicious link or shares their login credentials, attackers can potentially infiltrate your payroll system, change direct deposit info, or export confidential employee data, all without triggering any alarms.

2. Weak access controls

In many companies, too many people have too much access to payroll data. Without granular access controls, junior employees, third-party vendors, or even former staff might retain access long after they should.

The more people who have access to sensitive payroll data, the greater the chance of accidental leaks, unauthorized changes, or internal fraud.

This could be an issue if your business:

• Has shared logins between departments

• Grants administrative rights to multiple people “just in case”

• Has a lack of visibility and/or oversight into who’s accessing what data

3. Outdated or insecure payroll software

Legacy payroll systems often lack modern security protections and are rarely patched against new vulnerabilities.

This is risky, as cyber attackers often exploit known software flaws. If your payroll system isn’t updated regularly, you're giving attackers an easy way in.

This could be an issue if:

• Your vendor no longer supports or maintains its software

• You rely heavily on manual backups or offline exports

4. Insecure data storage or transmission

Storing payroll files locally, emailing spreadsheets, or using consumer-grade tools to manage payroll exposes your data to unnecessary risks.

If your payroll data isn’t encrypted — whether stored on a drive or sent through a network — it can be intercepted, copied, or accessed by unauthorized individuals.

This could be an issue if:

• Your payroll files are stored on shared drives or desktops

• You send spreadsheets via email without encryption

• You use USB drives for payroll backups

5. Third-party vendor risks

Even if your internal systems are secure, your payroll provider might not be. If your vendor doesn’t have proper controls, certifications, or transparency, they could be the weakest link in your security chain.

When a provider gets breached, your employee data goes with it. In many high-profile breaches, the root cause was a compromised third party.

This could be an issue if:

• If your vendor has no compliance certifications (SOC 2, ISO27001, etc.)

• They give vague or absent answers to your security questions

“Remote has complete ownership over its end-to-end operations, as opposed to relying on third-party entities. This approach is particularly beneficial because it allows us to have complete control over the data and mitigates the risk of uncertain data handling practices.”

Marcelo Lebre, Co-Founder and President at Remote

Best practices for payroll data protection

To ensure that you mitigate these — and other — potential risks, there are several best practices you should always adhere to:

Implement RBAC and the principle of least privilege

Role-based access control (RBAC) limits who can view, edit, or manage specific payroll data, while the principle of least privilege ensures users get only the minimum level of access necessary for their job. Implementing both of these practices reduces the risk of accidental data exposure or internal misuse.

As a starting point, try to ensure that:

• Payroll access is limited to payroll and finance leads

• You give view-only permissions for auditing or HR reviews

• You have access logs to track every login and data change

It’s also highly advisable to regularly audit your user permissions, especially after team changes or restructuring.

Encrypt everything — at rest and in transit

When payroll data is encrypted at rest (on servers) and in transit (when it's moving across networks), it becomes unreadable to anyone who doesn't have the proper decryption keys. This protects your data even if it's intercepted or stored in a compromised location.

Aim to use:

• AES-256 encryption for stored data

• TLS 1.2+ for secure network connections

• Encrypted backups and disaster recovery plans

Require MFA

Passwords — even secure ones — can be cracked, but multi-factor authentication (MFA) adds a second layer of protection. Even if an attacker gets access to login credentials, they can’t get into your payroll system without this second factor.

It’s good practice to:

• Implement and require MFA for all payroll users

• Use authenticator apps or hardware keys

• Automate system alerts for any failed MFA attempts

It’s often a good idea to pair MFA with single sign-on (SSO) to balance convenience with security, especially for fast-growing teams.

Train your team to spot threats

Phishing, social engineering, and credential stuffing attacks often succeed because people don’t know what to look for. Training your team on payroll security basics significantly reduces this risk.

Aim to:

• Provide quarterly training sessions on how to recognize payroll scams

• Regularly run internal simulations of phishing attacks

• Provide clear reporting channels for suspicious messages

It’s also a good idea to tailor training for different teams. For instance, payroll admins need to have a broader threat awareness than general employees.

Keep your software updated

As mentioned, cyber criminals actively scan the internet for systems running old versions of software. Many breaches happen because known vulnerabilities weren’t patched — sometimes for months. Updating your software helps close those doors.

Don’t forget any plugins, extensions, or third-party tools connected to your payroll system, either. They need updates too.

Top tip: Use cloud-based payroll solutions — like Remote Payroll — that receive automatic updates and patches, and vet your vendors for ongoing security improvements.

Conduct regular payroll security audits

Security audits help you uncover misconfigurations, inactive accounts, missing patches, and suspicious access patterns. They also give you a baseline to measure improvements and prove compliance.

Aim to conduct:

• Annual third-party audits

• Internal quarterly reviews of user access and system logs

• Incident response drills and penetration testing

Don’t wait for a breach to conduct your first audit, either. Make audits part of your operational routine and build them into your vendor relationships too.

How Remote delivers secure payroll

As a small business, it can be difficult to effectively implement and maintain many of the best practices above, especially if your resources and budget are tight.

This is why it’s advisable to work with a security-first, cloud-based payroll partner like Remote. We invest heavily in our security, enabling you to benefit from our enterprise-grade infrastructure.

Specifically, we:

• Host our payroll infrastructure on isolated networks with strict, auditable access controls.

• Use advanced firewalls, threat detection, and prevention mechanisms. We don’t wait for threats; we proactively identify and stop them.

• Perform ongoing security audits, maintain logs of every change, and routinely run penetration tests to stay ahead of emerging threats.

• Have a dedicated in-house team focused solely on protecting your data. This includes enforcing SSO, least privilege principles, and ongoing internal security training.

• Encrypt all payroll data at rest and in transit using best-in-class protocols. We also purge unnecessary data to reduce exposure.

• Require two-factor authentication (2FA) for every Remote login. SSO is also available company-wide, making it easier for teams to stay secure without remembering dozens of passwords.

• Meet and exceed global privacy and compliance standards, including GDPR, ISO27001, and SOC 2. What does this mean? Our platform is independently audited and verified by leading third-party firms.

“To demonstrate our commitment to information security — and to provide a secure platform for our customers — Remote has sought out the world’s best-known, internationally-recognized information security standards. These certifications provide a standardized and independent confirmation, so employers can be confident that rigorous security measures protect their employee information.”

Marcelo Lebre, Co-Founder and President at Remote

To learn more about how we provide best-in-class security for your payroll data — and how we make your entire payroll experience seamless — speak to one of our friendly experts today.

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