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Topics: Outsourcing, payroll, payroll outsourcing, payroll services

Data Security Concerns With Payroll Outsourcing: Standards & Tips to Protect Your Firm’s Sensitive Information

6 MIN READ | Posted on June 24, 2022
Written By Divya Ramaswamy

Payroll outsourcing data security concerns

Whether you are looking to reduce costs, simplify operations or transform your business, payroll outsourcing can do wonders for your accounting firm. Unfortunately, there is also a degree of risk associated with it. Problems with third-party service providers, especially during times of data breach, can take a toll on your organization’s reputation.

Payroll information is a treasure trove of lucrative data for hackers, considering how it includes so many personal details from home addresses to social security numbers, bank account numbers, and more. Even the biggest names in the business have been affected by data breaches. More business leaders are now thinking about cybersecurity and looking for ways to protect their businesses and customers, especially those looking for payroll outsourcing.

There are a lot of data security concerns when it comes to payroll outsourcing. When you outsource your clients’ payroll to a third-party payroll provider, you share sensitive and critical data with them. Your reputation ultimately depends on how your payroll partner handles and manages that information.

But as long as you tie-up with the right provider, you can successfully outsource your firm’s payroll and hold data security to a high level. Most trusted and top-tier payroll outsourcing providers are mindful of their client’s data and security. Some of the best global payroll outsourcing service providers also comply with essential security standards such as AICPA SOC2 and ISO 27701 and are empowered with a robust security structure to ensure the data remains secure and protected.

Also read: Choosing the Right Payroll Outsourcing Provider: 7-Point Checklist For CPA Firms

So, what data security concerns around payroll outsourcing should you be on guard for? Read on, as we discuss all the data security concerns associated with payroll outsourcing.

Data breaches and identity theft are every company’s nightmare when it comes to payroll outsourcing. You are potentially putting your clients’ personal data at risk as hackers know that payroll outsourcers are a rich source of critical data. But with security standards in force and encryption improving constantly, human error remains the common denominator in payroll data security breaches.

Data security has been compromised irrespective of whether it is mishandled, deleted, lost, or copied. Data breaches involving sensitive personal data turn out to be the most expensive, considering how they have the most significant impact on your reputation. In several cases of payroll data breaches reported earlier, it had been employees who mistakenly responded to phishing emails or disgruntled employees leaking payroll information intentionally. Although most of these incidents appear to have been caused by technology, it’s invariably the people who are to be blamed. Data breaches are increasingly being reported as they are likely to occur even with robust data security and have been preventing many business owners while considering payroll outsourcing. Data insecurity refers to unauthorized, negligent, or illegal access to critical information.

Also read: Debunked: 5 Popular Misconceptions Around Payroll Outsourcing

Data breaches lead to numerous long-term consequences and threats such as monetary losses, decline in productivity, and a great deal of impact on your company. Legal actions can paint a wrong picture of your organization and negatively impact your bottom line as penalty amounts increase. Many organizations consider payroll outsourcing services but are worried about data security.


  • Built-in compliance: It is best to keep your international payroll processing in line with local, regional, as well as federal laws if you have employees in multiple nations.
  • ISO Certification: systems built on the ISO 27001 framework have the highest level of security. ISO 27001 (or ISO/IEC 27001:2013)is the international standard for maintaining the security of data assets. This framework offers a management system for implementing a data security system to ensure confidentiality and guarantee integrity.
  • SOC Compliance: the AICPA published a series of reports that verify an audit of security controls for critical attack surfaces. They are the most common certifications for security and data confidentiality.
  • Easy Access Control: the best payroll outsourcing provider lets you set view permissions for your team members. For example, a top security practice ensures that only a few team members have access to sensitive data. Platforms with easy access control make it easier to ensure data security.
  • Data encryption: One of the simplest yet effective methods of ensuring that the data stored in systems aren’t compromised. Payroll outsourcing service providers without data encryption will not pass payroll audits and aren’t worth considering.
  • Cloud Security & Backup Servers: Look for payroll outsourcing providers who store data securely on the cloud and have redundant servers to back up your data during breaches or mishaps. Data centers help protect your data in emergencies, so there is no chance of losing critical files.

Payroll outsourcing firms are now considering data security as their top priority to ensure the long-term retention of their clients. They adhere to best practices to ensure the data security of the clients. Anti-malware is installed on their PCs as the first step to protecting them from threats like viruses and malware. They undertake regular training and audits to maintain rigorous quality control and maintain the best-in-class standard for information security management systems.

Most payroll providers now have a highly secured FTP server to transfer data between the client and server, enabling smooth and secured data transfer. They strive for essential cyber certifications and have vigorous IT defenses to fight cyber-attacks. It includes patch management, secure configuration, malware protection, and boundary firewall & gateways too. And more importantly, they implement privacy information management systems aligned with the core principles of data protection and also follow security guidelines such as the following:

  • Restricting data access to authorized users only,
  • Blocking the use of removable storage devices, access to internet sites,
  • Controlling data transfer methods to external sources, and
  • Protecting all workstations with an enterprise-level antivirus solution


With an increasing number of high-profile data breaches in recent years, selecting a payroll processing provider with excellent data security processes is critical. We recommend that you ask these questions if you are considering payroll outsourcing services for your firm:

  • What security accreditations are your IT infrastructure and processes compliant with?
  • Where will the payroll data be physically hosted, and who has access to it? Will the server be owned or leased, and how will the network be structured?
  • Do you have security reporting that tracks inconsistent access patterns, analytics & alerts to notify potential breaches?
  • Do you maintain an access log, and can that be edited?
  • Can you discover, restrict and monitor privileged identities?
  • What on-premise security does your company have?
  • How do you reference check new staff?
  • What firewall and antivirus protection do you use?

Must Read: The Ultimate Guide for CPAs to Decode Payroll Outsourcing Services


Payroll security involves several steps to guarantee that sensitive data doesn’t get leaked, lost, or mishandled. Global payroll outsourcing service providers are experienced with expertise in managing payroll functions safely and effectively. Your payroll outsourcing partner will use payroll software with top-tier security measures alongside offering you the expertise you need to secure sensitive data. Payroll outsourcing opens the door to affordable, world-class security standards to ensure data security.

Also read: Payroll Outsourcing Trends in 2021

Ensure Data Security with Payroll Outsourcing by Partnering with QXAS.

Ours is a dedicated team of highly experienced payroll processing professionals who

  • Can smoothly manage payroll
  • Takes care of local taxes, laws & compliance,
  • Guarantees data security
  • Has well-equipped with a user-friendly platform &
  • Offers a transparent pricing structure 


  • Fully compliant: ISO 27001 for information security & ISO 9001 for quality
  • Highly experienced (14 + years) in delivering outsourced payroll solutions to firms across geographies & industries.
  • Specialized in catering to high-volume payroll processing requests, our team of experts has processed over 1,000,000 timesheets annually
  • First-ever Indian GDPR compliant payroll outsourcing company affiliated with prestigious accountancy organizations such as ACCA & ICAEW
  • Most trusted and successful Payroll outsourcing service company with highly efficient, resolute, and experienced accountants

Book a Consultation

We hope you enjoyed reading this blog. Payroll outsourcing in the US has never been safer! Reach out today to learn how outsourcing your payroll to QXAS can help you scale.

Originally published Jun 24, 2022 10:06:57, updated Jul 07 2022

Topics: Outsourcing, payroll, payroll outsourcing, payroll services

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