In the modern employment environment, protecting employees’ personally identifiable information (PII) has emerged as a critical responsibility for businesses worldwide. As organizations continue to leverage technology for improved efficiency and productivity, employees’ sensitive data has become increasingly vulnerable to potential breaches and misuse.
Employee data is processed to calculate payroll and compensation, administer benefits such as health insurance and retirement plans, manage various aspects of human resources management, comply with labor laws and regulations, and more.
Failing to protect this data could have far-reaching consequences, which is why organizations have a legal and moral obligation to safeguard employees’ PII and create a secure and trustworthy working environment.
Employee PII is information about a company’s current, former, and prospective employees and independent contractors that directly identifies an individual. This includes a wide range of information, such as a person’s name, contact information, government-issued identifiers, online identifiers, and more.
What types of employees‘ PII should employers protect?
Employers are responsible for protecting a wide range of employees’ PII to ensure privacy and prevent potential misuse. These are the types of PII employers are required to safeguard:
- Full name: the most basic form of PII that employers must protect, as it serves as the foundation for establishing an individual’s identity. This includes the employee’s first, middle, and last name or any other name by which they are known.
- Contact information: contains data that can be used to locate or contact an individual. In the context of employees, contact information typically includes the worker’s home address, email addresses (personal and work), telephone numbers (work and mobile), emergency contact information, and social media handles or usernames.
- Government-issued identifiers: unique to each individual, government-issued identifiers can be used to access sensitive information, verify identity, or commit fraud. Some common types of government-issued identifiers employers have access to include Social Security number, tax identification number, passport number, and driver’s license number.
- Employment information: data related to an individual’s work history, job performance, and compensation. Employment information consists of job title and position, employment dates (start date, end date, and duration), work schedule and attendance records, salary and compensation details (including bonuses and stock options).Also benefits information (such as health insurance and retirement plan), leave records (vacations, sick leave, and parental leave), performance evaluations, and disciplinary actions.
- Medical information: contains private data about an individual’s health, medical history, and treatment. Employee medical information may include a person’s health status, medical history, current and past prescription medications, disabilities, psychological and behavioral health information, vaccination history, genetic information, and more.
- Financial information: employee financial information includes various types of data, such as bank account numbers, payroll information (direct deposit details, payment schedules, commissions, and other forms of compensation), tax information (tax filings, deductions, refunds, etc.).Also pension plans details (account numbers and balances), expense reimbursements, and investment information (including bonds, mutual funds, and other securities).
- Online identifiers: can be used to trace or link back to an individual, either directly or indirectly, and reveal a person’s identity, activities, or preferences. Online identifiers may include IP addresses, cookies data, usernames or aliases, device IDs, login credentials, browsing history, and more.
- Biometric information: often used by organizations to authenticate or identify employees, biometric information may include facial recognition data, Iris or retinal scans, voice patterns, hand geometry, and more.
- Criminal history: sensitive information about an individual’s past interactions with law enforcement and the criminal justice system. Criminal history may contain arrest records, convictions, incarcerations, probation/parole information, and more.
- Demographic information: can reveal personal characteristics, preferences, or habits that may be sensitive, including age or date of birth, gender or sex, race or ethnicity, Nationality or citizenship, religious affiliation, sexual orientation, etc.
Potential risks of personal data breaches
The potential risks of personal data breaches, particularly those involving employees’ personally identifiable information, are numerous and can have severe consequences for the affected individuals and the organizations they work for.
One of the most pressing concerns arising from such breaches is the risk of identity theft. When employees’ PII falls into the wrong hands, criminals can exploit it to impersonate employees, open bank accounts, take out loans, or commit fraud in their name. This not only wreaks havoc on the lives of the affected individuals but also has a ripple effect on the company, as these incidents erode trust and can negatively impact employee morale.
Another detrimental consequence of personal data breaches is financial loss. The costs associated with investigating and addressing the breach, as well as compensating affected employees, can be substantial, making payroll security a necessity measurement. In addition, data breaches typically result in increased cybersecurity costs, such as hiring additional IT staff, upgrading security infrastructure, and providing employee training on security best practices.
Moreover, the company’s reputation is at stake, as clients may lose confidence in its ability to safeguard their data. In some cases, the damage to the company’s reputation may be irreparable, especially in industries where trust is paramount. A tarnished reputation can also impact employee recruitment and retention, making it more difficult to attract talent.
Legal consequences are an additional risk that companies must contend with in the event of a data breach involving employees’ PII. Regulatory bodies often have strict regulatory requirements in place for the protection of personal data, and failure to comply with these regulations can result in significant fines or penalties.
Companies may also be subject to lawsuits from affected employees, further exacerbating the financial and reputational damage sustained.
Protecting employees’ PII: an employer’s legal obligation
Employers have a legal duty to protect employees’ personal data, as they are entrusted with a significant amount of personally identifiable information (PII).
Various laws and regulations govern the handling, storage, and propagation of employee PII; depending on the jurisdiction and industry, employers may be subject to regulations such as the General Data Protection Regulation (GDPR) in the European Union (EU), the Health Insurance Portability and Accountability Act (HIPAA) in the United States, or other country-specific data protection laws.
To fulfil their legal obligation, employers must stay informed about these laws and take the necessary steps to ensure that employees’ sensitive data isn’t compromised. Here are a few examples of these obligations:
In 2016, the EU approved the General Data Protection Regulation (GDPR), a legal framework that establishes guidelines for collecting and processing EU citizens’ personal information. Implemented two years later, the GDPR’s main goal is to increase individuals’ control and rights over their personal data by setting standards for accountability, security, and transparency in using private data.
Part of the GDPR regulations is the data processing agreement (DPA), which its purpose is to ensure that data processing activities are carried out in a compliant and transparent manner, protecting the privacy and rights of individuals whose data is being processed.
Complying with the GDPR requires all companies operating in the EU to apply policies, processes, and practices for managing the personal data of customers, users, and employees. The GDPR outlines this obligation in several articles and principles.
Article 5, for example, states that personal data must be “processed in a manner that ensures appropriate security of the personal data, including protection against unauthorized or unlawful processing and against accidental loss, destruction or damage, using appropriate technical or organizational measures (‘integrity and confidentiality’).”
Failing to comply with GDPR requirements could lead to hefty fines. In 2020, for example, German data protection authorities fined clothing chain H&M €35.3 million ($41.4 million) over illegal surveillance of employees at its customer service center in Nuremberg.
According to German authorities, the surveillance targeted several hundred workers since 2014 and allowed H&M management to acquire “extensive recordings of the private-life circumstances” of employees.
UK’s Data Protection Act 2018
The Data Protection Act 2018 (DPA 2018) is a comprehensive piece of legislation that governs the collection, storage, processing, and sharing of personal data in the United Kingdom. Based on the EU’s GDPR, the Data Protection Act is designed to protect UK citizens’ privacy rights and ensure that organizations handle personal data responsibly and securely.
The obligation to protect employee personal data can be inferred from seven data protection principles outlined in the Data Protection Act 2018. These principles include lawfulness, fairness, and transparency; purpose limitation; data minimization; accuracy; storage limitation; integrity and confidentiality; and accountability.
According to GOV.UK’s, DPA 2018 is the UK’s implementation of the GDPR. As such, it allows the UK’s data protection regulator to fine companies that fall short of their data protection duties. In 2022, for instance, the British construction group Interserve was fined £4.4 million (about $5 million) after a cyber-attack that enabled hackers to steal the personal and financial information of up to 113,000 employees.
An investigation by Britain’s Information Commissioner’s Office (ICO) found that Interserve “failed to follow up on the original alert of a suspicious activity, used outdated software systems and protocols, and had a lack of adequate staff training and insufficient risk assessments, which ultimately left them vulnerable to a cyber-attack.”
In other words: failing to put appropriate technical and organizational measures in place to prevent unauthorized access to employees’ information.
Employee data privacy laws in the US
Employers have a variety of obligations under US data privacy laws, depending on the specific law and the type of personal information they process. Examples of these obligations include:
- The Privacy Act of 1974: a federal law that governs the collection, use, and dissemination of personal information by federal agencies. The act seeks to balance the government’s need to maintain information about individuals with the individual’s right to privacy.In the context of employees’ privacy, the Privacy Act of 1974 gives individuals the right to be protected against unwarranted invasion of their privacy resulting from the collection, maintenance, use, and disclosure of their personal information.
- The California Privacy Rights Act (CPRA): a privacy law enacted in California in 2020 as a ballot initiative, which amends and expands upon the existing California Consumer Privacy Act (CCPA) passed in 2018.The CPRA eliminates the CCPA’s employee exception, granting California-resident employees the same privacy rights consumers have. The CPRA introduces new employee rights and provisions, including
1. The right to know (what personal information is collected,
2. The purposes for which it is used, and any third parties with whom the information may be shared);
3. Data minimization (requiring employers to limit the collection, use, retention, and sharing of personal information for the purpose disclosed by the organization);
4. And data security (requiring employers to implement reasonable security procedures and practices to protect employees’ data).
- The Health Insurance Portability and Accountability Act (HIPAA): established in 1996, this federal law’s primary purpose is to improve the portability of health insurance companies. However, it also includes provisions that address the privacy and security of employees’ health information.
Under HIPAA, healthcare providers are required to protect the privacy of employees’ medical records and other personal health information. This includes implementing administrative, physical, and technical safeguards to prevent unauthorized access, use, or disclosure of this information.
- The Fair Credit Reporting Act (FCRA): a federal law enacted in 1970 that regulates the collection, dissemination, and use of consumer information. Although the FCRA focuses on consumer credit, the law also has implications for employees’ privacy, particularly concerning background checks and the use of consumer reports for employment purposes.
- The Family Educational Rights and Privacy Act (FERPA): a federal law enacted in 1974 to protect the privacy of student education records. Under FERPA, in cases where employees are also students at the educational institution they work for, their education records are protected.Access to these records is limited, and the institution must obtain the employee-student’s written consent before disclosing their education records.
- The Electronic Communications Privacy Act (ECPA): this federal law from 1986 extends legal protections to electronic communications, such as emails, phone calls, and online messages.Concerning employee privacy, the ECPA states that employers are generally prohibited from intercepting employees’ electronic communications without their consent – unless the employer can demonstrate that it has a legitimate business reason for doing so.
How can employers protect employees’ PII?
To protect their employees’ PII from unauthorized access and data breaches, employers must implement a robust combination of security measures and monitoring tools designed to safeguard sensitive information.
A proactive and multi-faceted approach to PII protection can mitigate the risks of data breaches and help maintain trust and confidence in the workplace. Here are some best practices for protecting employees’ PII:
Implementing strict access controls
Strict access controls are necessary to ensure payroll risk management. By making sure employees can only access personal information if it’s required for their job responsibilities, and by utilizing methods such as role-based access control (RBAC), employers can grant permissions based on an individual’s job function, providing the minimum level of access necessary for each employee to perform their duties effectively.
Regularly reviewing and updating access controls, coupled with monitoring user activities and promptly revoking access for terminated employees, further strengthens the protection of sensitive data and minimizes the risk of unauthorized access or data breaches.
Regularly monitoring and reviewing data security
This approach can help identify potential vulnerabilities, maintain compliance with data protection regulations, and detect any unauthorized access or suspicious activities. It involves continuously assessing and updating security measures, policies, and procedures to ensure they remain effective against evolving threats.
Additionally, performing regular security payroll audits and risk assessments can pinpoint areas of weakness and inform necessary improvements.
Conducting employee training on PII protection
Well-informed employees are less likely to fall victim to tactics used by cybercriminals to gain unauthorized access to PII. Comprehensive training programs should cover topics such as data handling procedures, password management, recognizing and reporting suspicious activities, and adhering to privacy regulations. Regularly updating and reinforcing this training ensures employees stay current with emerging risks and best practices.
Utilizing security measures
By implementing multiple security measures, organizations can significantly reduce the risk of PII exposure. This may include data encryption, firewalls, multi-factor authentication, intrusion detection systems, regular software updates, secure password policies, network segmentation, and more.
Creating a structured incident response plan for data breaches
An incident response plan enables organizations to act quickly, efficiently, and effectively when confronted with a data breach.
Key elements of an incident response plan include establishing a dedicated incident response team with clearly defined roles and responsibilities; developing strategies to limit the extent of the breach; detailing steps to eliminate the root cause of the breach; and outlining communication protocols for notifying internal stakeholders, affected employees, regulatory authorities, and law enforcement agencies, as required by applicable data protection regulations.
Managing third-party vendors
Managing third-party vendors effectively is crucial for protecting employees’ PII. Whether it’s choosing vendors with a strong track record of data protection, establishing the vendor’s responsibilities and obligations related to data security, ensuring that vendors only have access to the necessary PII, or requiring vendors to comply with your organization’s security policies and standards.
Organizations can significantly reduce the risk of unauthorized access or misuse of employees’ PII by managing third-party vendors correctly.
Upgrade your employees’ data privacy
The importance of protecting employees’ PII cannot be overstated. By employing best practices and consistently evaluating their data security, businesses can help protect their employees from the potentially devastating consequences of data breaches.
Choosing the right payroll and payments platform plays a big role in protecting your employees’ PII. At Papaya Global, we pride ourselves on having the highest standards for the most sensitive data. Our cloud-based solutions protect personal information by meeting every standard set by GDPR, CPRA, and other data privacy regulations.
In addition, our in-house privacy team provides guidance on all data protection matters. Schedule a demo to learn more.
What are the consequences of a data breach involving employee PII?
A data breach involving employee PII can lead to numerous adverse consequences. First, affected employees may face identity theft, financial loss, and privacy violations, causing emotional distress and eroding trust. Second, the company may experience legal repercussions, fines, and loss of customer trust, which can hurt its financial standing and competitive edge. Lastly, such incidents can tarnish the organization’s reputation, making it challenging to attract and retain top talent in the future.
Who is responsible for protecting PII at a company?
Responsibility for protecting PII at a company is shared among multiple stakeholders. First and foremost, it is the responsibility of the company’s leadership to establish a strong security culture and allocate resources for data protection. The IT and security teams play a crucial role in implementing and maintaining technical safeguards, while the legal and compliance departments ensure adherence to regulations. Finally, every employee shares responsibility for following security best practices and reporting potential risks or incidents.
How can employers ensure compliance with data protection regulations?
Employers can ensure compliance with data protection regulations by familiarizing themselves with the relevant laws and industry standards applicable to their organization, establishing clear data protection policies and procedures, and incorporating best practices for handling and storing PII. Additional measures include regular employee training, security reviews, and implementing an incident response plan for data breaches.
What are the risks of third-party access?
Third-party access poses several risks to the protection of employees’ PII. For one, third-party vendors might have weaker security practices or vulnerabilities in their systems, making them susceptible to cyberattacks and data theft. Furthermore, if a vendor’s employees are not adequately trained in data protection, the risk of human error or insider threats increases. Consequently, organizations must manage and monitor third-party vendors to ensure they adhere to data security standards.
What to do with a PII data breach?
In the event of a PII data breach, a company must first contain the breach and assess the scope of the incident to understand the extent of compromised data. Next, the company should notify affected employees, regulatory authorities, and any other relevant parties as required by applicable laws and regulations. The company should also initiate an investigation to determine the cause of the breach and implement measures to prevent future incidents. Furthermore, providing support to affected employees, whether financial or mental, can help mitigate the consequences of the breach.