Payroll is without a doubt one of the most confidential things that small and large businesses are responsible for managing. Should this data fall into the wrong hands, the consequences can be both far reaching and detrimental. Therefore, knowing how to secure payroll processing is essential, and below are some tips which will show you how to do it.
Payroll data entails information involving your employees, such as their Social Security Number, birth dates, home address and bank account numbers. Clearly, if this information is acquired by identity thieves or other criminals it leaves both you and your employees vulnerable to payroll fraud and identity theft. There are two ways in which payroll is compromised, and this is either internally or externally.
Your employees are arguably the greatest potential threat, since they have direct access to the information, particularly if they work in the HR department. Even employees who do not have access to payroll may still attempt to steal it from their co-workers. Even if you believe your employees can be trusted, research shows that small businesses are much more susceptible to payroll fraud than larger institutions. External threats involve criminals and groups that attempt to acquire information through phishing, malware or computer hacking.
Payroll should be processed in a secured room that only authorized employees have access to. The room should be locked and also have security cameras present which show who enters the room and when. By restricting payroll to only a handful of employees, if the data becomes compromised you can quickly narrow down the most likely culprits.
The computers which are used for payroll processing should be equipped with the latest firewalls, and should be regularly updated. Any passwords which are used to secure the computers should be robust, and should be changed regularly with employees who have been recently terminated denied further access. Computers responsible for payroll processing must also use a professional, corporate level anti-virus scanner to ensure they do not become infected. Every company computer should use filters for email spam and employees should be kept up to speed on phishing schemes.
You will also want to regularly perform an audit for payroll. An internal audit is one which is conducted by someone within the organization, while an external audited is carried out by someone outside the company. The purpose of an audit is to ensure the process and numbers are accurate. Employees must also be instructed never to share their personal details with others, even their co-workers. Some companies still maintain their payroll data in physical paper documents, and while these are protected from cyber thieves, you still have to worry about traditional theft. Therefore, physical payroll documents should be placed in filing cabinets which are locked and only accessible with certain keys. Only specific people should have keys to these cabinets and a paper shredder should be used when physical documents need to be disposed of.
Eventually even the best employees will find themselves dealing with problems outside of work, which are significant enough to interfere with their duties. This will typically come in the form of illness, a death in the family, or another catastrophic event that will require them to take time off work. The employee may find that the savings they have is not sufficient to cover the emergency they’re dealing with. In this scenario the employee may request a payroll advance from you to help them, but before you grant it to them here are some things to consider.
The advance is a loan which is provided to employees. It is taken out of wages that you intend to pay them in the future. It differs from the typical loans that are given between friends or family members. Whereas a friend or loved one may back you back at some future time once they get the money, there is no specific time in which this is expected.
An advance from an employer, on the other hand, is much more formal. There will be repayment terms which you’ll be expected to meet, with consequences if you do not. The repayments will usually be taken out of your future earnings, and you can use an entire paycheck to pay it off or spread the payments across multiple checks to keep some funds in your pocket. No employer is required by law to give such advances to their employees, but there are a number of best practices that should be followed.
Favoritism should be avoided when it comes to issuing these advances. In other words, if you’re willing to give it to one employee then you should also be willing to grant it to all of them. Generally, it is best to maintain a policy which is established so that everyone can be held to the exact same standards. For example, employees should work for you for a minimum time period before you’re open to granting them a loan, such as 12 months.
You should also set limits on how much an employee can request. It obviously doesn’t make much sense to issue an employee an advance which is substantially higher than their monthly or quarterly earnings, because then they can quit and you will never get the money back. Limits should also be placed on the number of times that an employee may request an advance within a single year.
Also, another critical factor to keep in mind is that when you issue an employee an advance, the deductions that you take out of their check must not result in them earning less than the federal or local minimum wage, otherwise you would be in violation of the law. You should also consider charging interest on the advance for the simple courtesy of providing the service along with the paperwork that you will be required to process.
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