Someone once said that “Security was once considered disturbance and annoying, but now it’s a necessity all the time.” So true. The development of technology is ever-growing and rapid. It’s the need for today’s generation. Technology has given answers and solutions for a large number of questions that pondered in men’s minds for years. We know that the coin has two sides, right. Similarly, the result of technological growth has also given rise to unethical practices to a certain extent. For example, if digital money is a boon offered by technology, hackers can also cause a threat to the same again because of technology. Hence, it’s a necessity to make sure that our data are secured.

When we talk about technological development, how can we overlook the business organizations adapting to the new changes that become a crucial aspect of sustaining in the market? In this blog, let’s try to understand a similar scenario. The payroll process is concerned with the disbursement of the employee’s salary, having made the necessary deductions. As many say, it truly is a time consuming as well as a difficult task to complete. Thanks to technology that this isn’t the concern anymore. With the increased number of software providers and a simplified process, companies have begun to adapt themselves to the improvement of technology. But. Is the data secured?

Payroll deals with many confidential information about the employee and the organization. We cannot give it a chance for this information to be leaked or misused. It’s said, precaution is better than cure. Hence, it’s essential to take the necessary measures to protect the identity of the employee and to safeguard the image of the company. In order to understand what are ways we can secure the data, we should be aware of where and what the sources of these threats are. 

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Possible Unethical Activities in the Payroll Process

The unethical practices and fraud activities need not happen because of external parties always. Our own people in the organization can also be a cause. But, it’s the responsibility of the HR department to make sure that these do not happen in order to safeguard the staff as well as to protect the organization from the theft. The possible unethical practices may include any of the following:

  • Timesheet fraud: 

It’s often called a ‘buddy punch.’ In this case, employees who share a close bond among themselves may punch in an out for each other on a mutual understanding basis. This may lead to non-disciplinary issues and might be taken advantage of by the other workforce. Above all, it leads to incorrect payment to the employees due to the falsified record of working hours.

  •  Ghost employee: 

What a weird category, right? Just as the name denotes, this type of fraud is too risky for any organization. The scam is so well managed that nobody can even imagine that there is something fishy happening. The employee who has access to the payroll indulges himself in this unethical activity out of mere selfishness.  

Let me give you an example- Imagine Mr. A is an employee in charge of payroll and is not content with what he earns. So he might create a fake employee, Mr. Z, and carry on the payroll process for Z, diverting the salary amount to his own account. Similarly, If Mr. F was an employee and resigned from his job, Mr. A might still not remove his name from the payroll process but carry on and transfer his processed amount to himself. These are the two possible ghost employee threats.

  • Misclassification of the workforce: 

Some organizations deliberately classify their workers as 1099 workers to dodge remitting payroll taxes, medical allowance, and other benefits, which is a clear breach of the law and constitutes deception. Other workers misclassify employees by accident. Either way, the penalty for such fraud can be as high, plus back payroll taxes and fines — so it’s better to operate with an equipped payroll company or skilled manager to classify employees rightly.

  • Diversion scam: 

This type is one of the common fraud witnessed lately. Under this, the HR manager may get information or request to transfer or credit the salary to a different account than the usual. But then, it may turn out to be the one who is not an employee of the organization. Hence, it’s important to verify the information before disbursing the amount.

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Ways To Secure the Payroll Process

Having gone through a few payroll scams, it’s natural to wonder what could be the possible solutions. There is a way out of all the fraud activities. The HR department, though a challenging task, has to take necessary steps in to stop these scams. Few measures are listed here:

Educate Your Workforce

Provide an opportunity for your employees to be aware of the possible frauds and how to secure their data. This may help them either stay out of trouble or be mindful of what needs to be done in case of their information theft.

Comprehensive Cybersecurity Plan

Try to adopt a comprehensive plan for cybersecurity. This may aid you in encrypting the sensitive data of the employees. Alongside, make sure you define who and how will the assessment of the risks be conducted.

Implement a Secure and Well- Developed Technology

It is better to use cloud based payroll software than manually performing the payroll process. It assures accuracy as well as provides a platform to store the data securely. But while deciding on the software, take and consider as many as feedback and suggestion as possible. So that the software chosen is authenticated, well-developed, and safe to implement.

Limit The Accessibility

Decide to whom you want to assign the payroll task and give access to. Also, use passwords and try to limit the number of people you grant access. This will help you from unwanted individuals logging into the payroll portal unnecessarily to ensure a threat free process.

Scrutinize The Reports

On a time-to-time basis, make sure you scrutinize and review the reports related to your payroll. It’s an essential step and must be implemented by the HR manager. Examine the final payroll record for accuracy. Look for ghost workers, padded hours, and any unofficial advances or changes. This not only lessens your uncertainty for payroll fraud but also provides you time to catch any mistakes.

Proper Onboarding and Off-boarding Procedures

While recruiting, try to examine the candidate based on his character and activities. Check if he’s suitable and trustworthy. During the onboarding process, educate him and let him be aware of the do’s and don’ts of the organization, especially related to the ethics and practices. 

Mostly theft incidents happen when the worker resigns from the firm. The management must examine all the employee’s belongings and preserve the right to hold him liable even after he leaves the job, in case any scam is traced. All the access to the worker should be checked before relieving him.

Formulate the Response to the Data Breach

Define and formulate a proper plan on how to deal with scams or fraud if any may arise in the future. Thus, letting your workforce be acquainted, and made aware of the consequences if at all, they engage themselves in any such unethical practices.

Electronic Security Establishment:

Since the majority of the companies are shifting to software solutions rather than traditional manual processes, it has become mandatory to have secured passwords and firewalls to assure protection of  the computers and the data stored in them.


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The Assistance of Legal Systems

In spite of the various precautionary methods, if any scam, fraud, or data theft arises, the legal system can assist you in the following ways:

  • Carefully drafted business agreements and policies, with expert lawyers’ help, rather than a copied template.
  • Issuing a legal notice
  • Access to timely legal support

Take Away

Collecting various data of the employee for the payroll process is inevitable. But at the same time, the security of data is also necessary. Therefore, it’s essential to raise awareness among the employees and create an environment where the workforce are cautious. And thus increases employees’ reliability on the organization as well as its goodwill.