As a small business owner, you understand the importance of protecting your employee data. With the implementation of the General Data Protection Regulation (GDPR) in the UK, it is crucial for businesses to ensure compliance with data protection laws. One area that requires careful attention is payroll management, as it involves handling sensitive employee information. In this article, we will explore the benefits of using payroll software for small businesses, which not only simplifies the payroll process but also helps in safeguarding employee data in the age of GDPR.
Understanding the importance of protecting employee data
Employee data is a valuable asset that must be protected by businesses. It includes personal information such as names, addresses, National Insurance numbers, bank account details, and more. As a small business owner, you have a legal and ethical responsibility to ensure the privacy and security of this data. Failure to do so can result in severe consequences, including hefty fines and damage to your reputation.
The GDPR, which came into effect in May 2018, aims to strengthen data protection and privacy for individuals within the European Union (EU). Although the UK has now left the EU, GDPR regulations have been transposed into UK law and are still very much enforced. These regulations are enforced by the Information Commissioner’s Office (ICO), which is the UK's independent body set up to uphold information rights.
Data breach and incident risks involved with payroll management
The GDPR introduces several key principles that businesses must adhere to when processing employee data. These principles include obtaining consent for data processing, ensuring data accuracy, limiting data retention, and implementing appropriate security measures. When it comes to payroll management, these principles become particularly relevant for you as a business owner, but also to whoever will be managing your payroll information. However we also know that 80-90% of data breaches and incidents happen as a consequence of human error.
What aspects of a payroll system can become vulnerable to a data breach or incident?
Most risks happen with the sharing of payroll spreadsheets and emails or other written communications containing employee information, internally or externally. Mistakes can easily happen: the wrong person added to an email thread for example. But given how sensitive payroll information can be in regards to employee data, it is likely that phishing attempts would target people handling this kind of information in a company.
Payroll software vs payroll outsourcing: what is more secure?
This question can only be answered in hypothetical terms, as it’ll depend on multiple factors:
- how is the data shared between companies and outsourced payroll services: is it shared via encrypted means? Or via email?
- what the outsourced payroll providers’ and payroll software companies’ practices are in regards to data security and privacy
- where employee data is held once shared with the outsourced payroll provider or payroll software company: is it collected on servers in countries that do not enforce strict data privacy and security laws? The GDPR is one of the strictest and most advanced data protection laws in the world, and many countries’ laws aren’t on par with it (for eg in the US).
From speaking to many companies who have used outsourced payroll providers as well as our own personal experience, most outsourced payroll providers will collect payroll information every month via email or online spreadsheets (GSheets for eg). This can expose security risks for companies and employees, as those aren’t secure.
In comparison, a payroll software system should reduce the risk of employee data breaches from happening by providing one cloud-based platform that multiple people can access through a secure login process.
If you’re comparing options between outsourcing your payroll to an external provider or moving to a payroll software, it is worth asking what their practices and procedures are in regards to GDPR compliance.
Map out data in your current payroll system to identify data breach risks
The best way for you to have a tight control of how payroll data is collected, stored and shared within your company is to map it out. Once mapped out, you can more easily identify which parts of your system are risky from a data protection perspective. The tighter your process, the more protected your employee data is likely to be.
The first step will be to assess what type of employee data you ask your employees, and if you need it all. As a rule of thumb, you should only request and store data that is necessary for your company. A few examples would be:
- basic employment information, such as their full name, contract details, bank account details, next of kin information, email address.
- employment documents such as contracts, right to work checks, visa information, etc.
Once you’ve assessed what employee data is necessary for your company to collect, look at how the employee data held by your company is processed, stored and protected. The following questions can help you build a holistic picture:
- How are you storing the data? Electronically (on the cloud) in hard copy form?
- Who has access to this data? Is is shared outside the company? Within your company, who has access to this information?
- Have you got a data retention policy in place for your payroll and HR data?
You can now look at how payroll is run in your company:
- Who in your company has access to the payroll process, and has an input in it?
- How is your data shared? The fewer places/tools/platforms this data is shared with, the fewer risks of data breaches your company will face.
- If your data is shared with external providers, what are their policies and procedures when it comes to handling your data?
This exercise should provide you with a holistic view of how your payroll data is collected, stored and protected in your company. It’ll also help you identify areas that can be improved upon in terms of tightening the process. Below are some ideas on how you might be able to
Best payroll data protection practices for small companies
Limit the number of people with access to your payroll data
Access to payroll data should be limited to only a very few in your company: the people who run payroll or need access to it in order to do their job effectively.
Store your employee data electronically, on an encrypted platform
Avoid paper-based payroll data, as those can easily end up in the wrong hands or inadvertently on the wrong desk. If a paper form of a document is needed, make sure it gets destroyed once it is no longer needed.
Limit the number of tools or systems with access to your employee or payroll data
The more tools you use to collect and store employee and payroll data, the more risks of data breaches exist. Enquire about your service providers’ data protection practices, and what their policies and procedures are in place to ensure their compliance with UK GDPR regulations.
We’d recommend opting for a combined HR and payroll software option such as Onfolk.
Avoid exchanging employee data via email or other unencrypted written communication channels
If you do need to share or exchange payroll data externally, make sure it is done in an encrypted way - through a secure platform or with a password protected file.
Integrating HR and payroll software for a seamless experience
To further streamline your business operations, consider integrating HR and payroll software. This integration allows for a seamless flow of data between the two systems, eliminating the need for duplicate data entry and ensuring consistency across employee records. It simplifies employee onboarding, benefits administration, and time-off management, all while ensuring that payroll data remains accurate and up to date. By adopting an integrated HR and payroll software solution, you can streamline your administrative processes and enhance overall efficiency.
About Onfolk
Onfolk is a payroll company software that offers HR software with payroll integrated to it in order to minimise the amount of admin involved with paying your team and managing their data.
Think effective payroll automation, allowing to run payroll in the UK in a matter of minutes. It is also an official HMRC payroll software, meaning all HMRC reporting is done automatically for you every month. If you’re familiar with Gusto in the US, Onfolk is exactly that for the UK.
Our customers’ favourite features include:
- 90% automated payroll every month
- Full GDPR compliance, with all employee and payroll data encrypted and securely stored in the cloud
- HRIS synced with payroll - specialised in small business payroll software
- Time off management and annual leave calculations included
- Automated onboarding and offboarding
- Pensions fully integrated with Nest, Smart Pensions and more
- Integrations with accounting softwares such as Xero and Quickbooks
- People insights, custom reports and org charts come built in
Further reading:
- Efficiency and Accuracy: The Benefits of HR and Payroll Software for Small Businesses
- 10 Best Startup Tools for Small Businesses Starting Out in 2023
- How Much Does Payroll Software Cost vs Outsourcing Payroll?
- Running Payroll in the UK: How Onfolk Compares to Other Payroll Methods
As a small business owner, you understand the importance of protecting your employee data. With the implementation of the General Data Protection Regulation (GDPR) in the UK, it is crucial for businesses to ensure compliance with data protection laws. One area that requires careful attention is payroll management, as it involves handling sensitive employee information. In this article, we will explore the benefits of using payroll software for small businesses, which not only simplifies the payroll process but also helps in safeguarding employee data in the age of GDPR.
Understanding the importance of protecting employee data
Employee data is a valuable asset that must be protected by businesses. It includes personal information such as names, addresses, National Insurance numbers, bank account details, and more. As a small business owner, you have a legal and ethical responsibility to ensure the privacy and security of this data. Failure to do so can result in severe consequences, including hefty fines and damage to your reputation.
The GDPR, which came into effect in May 2018, aims to strengthen data protection and privacy for individuals within the European Union (EU). Although the UK has now left the EU, GDPR regulations have been transposed into UK law and are still very much enforced. These regulations are enforced by the Information Commissioner’s Office (ICO), which is the UK's independent body set up to uphold information rights.
Data breach and incident risks involved with payroll management
The GDPR introduces several key principles that businesses must adhere to when processing employee data. These principles include obtaining consent for data processing, ensuring data accuracy, limiting data retention, and implementing appropriate security measures. When it comes to payroll management, these principles become particularly relevant for you as a business owner, but also to whoever will be managing your payroll information. However we also know that 80-90% of data breaches and incidents happen as a consequence of human error.
What aspects of a payroll system can become vulnerable to a data breach or incident?
Most risks happen with the sharing of payroll spreadsheets and emails or other written communications containing employee information, internally or externally. Mistakes can easily happen: the wrong person added to an email thread for example. But given how sensitive payroll information can be in regards to employee data, it is likely that phishing attempts would target people handling this kind of information in a company.
Payroll software vs payroll outsourcing: what is more secure?
This question can only be answered in hypothetical terms, as it’ll depend on multiple factors:
- how is the data shared between companies and outsourced payroll services: is it shared via encrypted means? Or via email?
- what the outsourced payroll providers’ and payroll software companies’ practices are in regards to data security and privacy
- where employee data is held once shared with the outsourced payroll provider or payroll software company: is it collected on servers in countries that do not enforce strict data privacy and security laws? The GDPR is one of the strictest and most advanced data protection laws in the world, and many countries’ laws aren’t on par with it (for eg in the US).
From speaking to many companies who have used outsourced payroll providers as well as our own personal experience, most outsourced payroll providers will collect payroll information every month via email or online spreadsheets (GSheets for eg). This can expose security risks for companies and employees, as those aren’t secure.
In comparison, a payroll software system should reduce the risk of employee data breaches from happening by providing one cloud-based platform that multiple people can access through a secure login process.
If you’re comparing options between outsourcing your payroll to an external provider or moving to a payroll software, it is worth asking what their practices and procedures are in regards to GDPR compliance.
Map out data in your current payroll system to identify data breach risks
The best way for you to have a tight control of how payroll data is collected, stored and shared within your company is to map it out. Once mapped out, you can more easily identify which parts of your system are risky from a data protection perspective. The tighter your process, the more protected your employee data is likely to be.
The first step will be to assess what type of employee data you ask your employees, and if you need it all. As a rule of thumb, you should only request and store data that is necessary for your company. A few examples would be:
- basic employment information, such as their full name, contract details, bank account details, next of kin information, email address.
- employment documents such as contracts, right to work checks, visa information, etc.
Once you’ve assessed what employee data is necessary for your company to collect, look at how the employee data held by your company is processed, stored and protected. The following questions can help you build a holistic picture:
- How are you storing the data? Electronically (on the cloud) in hard copy form?
- Who has access to this data? Is is shared outside the company? Within your company, who has access to this information?
- Have you got a data retention policy in place for your payroll and HR data?
You can now look at how payroll is run in your company:
- Who in your company has access to the payroll process, and has an input in it?
- How is your data shared? The fewer places/tools/platforms this data is shared with, the fewer risks of data breaches your company will face.
- If your data is shared with external providers, what are their policies and procedures when it comes to handling your data?
This exercise should provide you with a holistic view of how your payroll data is collected, stored and protected in your company. It’ll also help you identify areas that can be improved upon in terms of tightening the process. Below are some ideas on how you might be able to
Best payroll data protection practices for small companies
Limit the number of people with access to your payroll data
Access to payroll data should be limited to only a very few in your company: the people who run payroll or need access to it in order to do their job effectively.
Store your employee data electronically, on an encrypted platform
Avoid paper-based payroll data, as those can easily end up in the wrong hands or inadvertently on the wrong desk. If a paper form of a document is needed, make sure it gets destroyed once it is no longer needed.
Limit the number of tools or systems with access to your employee or payroll data
The more tools you use to collect and store employee and payroll data, the more risks of data breaches exist. Enquire about your service providers’ data protection practices, and what their policies and procedures are in place to ensure their compliance with UK GDPR regulations.
We’d recommend opting for a combined HR and payroll software option such as Onfolk.
Avoid exchanging employee data via email or other unencrypted written communication channels
If you do need to share or exchange payroll data externally, make sure it is done in an encrypted way - through a secure platform or with a password protected file.
Integrating HR and payroll software for a seamless experience
To further streamline your business operations, consider integrating HR and payroll software. This integration allows for a seamless flow of data between the two systems, eliminating the need for duplicate data entry and ensuring consistency across employee records. It simplifies employee onboarding, benefits administration, and time-off management, all while ensuring that payroll data remains accurate and up to date. By adopting an integrated HR and payroll software solution, you can streamline your administrative processes and enhance overall efficiency.
About Onfolk
Onfolk is a payroll company software that offers HR software with payroll integrated to it in order to minimise the amount of admin involved with paying your team and managing their data.
Think effective payroll automation, allowing to run payroll in the UK in a matter of minutes. It is also an official HMRC payroll software, meaning all HMRC reporting is done automatically for you every month. If you’re familiar with Gusto in the US, Onfolk is exactly that for the UK.
Our customers’ favourite features include:
- 90% automated payroll every month
- Full GDPR compliance, with all employee and payroll data encrypted and securely stored in the cloud
- HRIS synced with payroll - specialised in small business payroll software
- Time off management and annual leave calculations included
- Automated onboarding and offboarding
- Pensions fully integrated with Nest, Smart Pensions and more
- Integrations with accounting softwares such as Xero and Quickbooks
- People insights, custom reports and org charts come built in
Further reading:
- Efficiency and Accuracy: The Benefits of HR and Payroll Software for Small Businesses
- 10 Best Startup Tools for Small Businesses Starting Out in 2023
- How Much Does Payroll Software Cost vs Outsourcing Payroll?
- Running Payroll in the UK: How Onfolk Compares to Other Payroll Methods
