Are pen and paper pay stubs safer than online payroll? Not with these security tips!

Paper pay stubs and the paper trail, in general, make it more difficult for fraudsters to steal Social Security payments and tax refunds.

25% of small businesses are still using pen and paper for their payroll just to avoid the upfront cost or security risk associated with electronic record keeping. However, using tried and true payroll methods can actually hurt your business.

pen and paper payroll

What’s the point of upgrading?

Yes, there’s a point of upgrading, even if the upfront cost and potentially high-security risk are present. Let’s take a look at what a small business gains from using electronic payroll.

  • Accuracy: Human error causes businesses to lose thousands of dollars per year from IRS fees. Inaccurate reporting could lead to bankruptcy, jail time, and a bad reputation.
  • Data compliance: Payroll files must be kept for 3-5 years in most states. With an electronic record system, you can quickly look up tax information from previous years.
  • Backups: All electronic systems back up regularly, but paper isn’t so lucky. Although computers can lose records or crash, you can’t restore original copies of paper files.
  • Reporting: How long does it take you to collaborate accurate data about raises or employee performance? With electronic payroll, you’ll have this info in seconds.
  • Accessibility: Best of all, you won’t have to rifle through filing cabinets to find one piece of information; just look it up on your electronic payroll program and hit send!

Once you’re online, you’ll also have access to other electronic payroll options, like a paystub creator, templates, e-transfer, the ability to send tax information via email, and much more.

How to keep electronic payroll secure

It makes sense why many businesses are scared of transitioning from pen and paper to a payroll program. According to the FTC, there were 2.2 million fraud reports from consumers in 2020. Still, it would be a shame to lose out on the benefits payroll software can bring to your company.

To ensure you stay secure while using payroll software, but the following protections in place:

Educate employees on phishing schemes

Phishing email schemes are designed to appear genuine, but they’ll steal employee information once they enter in their tax or payroll details.

It’s essential that your business educates staff on what a phishing email looks like, so they’re less likely to respond to them. At the same time, employees should double-check with their executives if an email has been sent by them.

Paycheck security procedures

Many companies make the mistake of putting too much (or blank) information on their electronic checks. Avoid adding things like an employees’ full SSN or address, if possible. Encrypt all blank checks or terminated checks within your computer server.

Finally, send an electronic positive pay file to your bank daily, so they can help prevent fraud should it occur.

Separate payroll duties

Employee fraud is also a problem for companies because it’s sometimes difficult to determine who defrauded you. To lower the risk of paycheck theft and time card falsification, only allow one trusted individual the authority to sign off on payroll.

Smaller businesses really need to vet their accounting staff to ensure they aren’t likely to hurt their bottom line or cause issues with the IRS.

Strengthen computer security

Employers need to take strong measures to secure their computerized payroll system. The following processes can help you and your business tighten computer payroll security:

  • Install a firewall, establish a proxy server, and audit your network connections.
  • Install patches and updates as soon as they become available.
  • Use spam filters to detect phishing emails and avoid clicking suspicious links.
  • Establish a strong password that’s less likely to be cracked by hackers.
  • Change your passwords and 2-factor authorization questions every 3 months.
  • Back up your computer data regularly and encrypt it to avoid access.

If you have a hybrid or remote workforce, be sure to remind employees to block their computer monitor while out in public and never to use public Wi-Fi to check work files or documents.