How to Protect Employee Data [+ 8 Step Checklist]

This is a field guide for HR and payroll leaders who steward the most sensitive employee data in a rapidly evolving threat landscape. It’ll take you through what’s at stake, and give you an actionable 8-step checklist that’ll help you protect your organization.

Legal and Compliance

Jaime Watkins

September 11, 2025

12 mins

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Jaime Watkins

Content Specialist

Last Updated

September 11, 2025

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Graphic showing colleagues sitting around a table organizing employee data and discussing the best measures to protect it.

Key Takeaways

Breaches trigger GDPR/HIPAA/CCPA penalties and can erode employee trust, damage your employer brand, and disrupt payroll.

AI-powered phishing, ransomware, unsecured remote access, insider misuse, weak vendors, and “shadow AI” now account for most incidents.

For global teams, protecting employee data signals that you respect privacy across different cultures and markets.

From onboarding to offboarding, HR teams touch some of the most sensitive information in the business – payroll records, health data, and Social Security numbers among them. When this data is mishandled or exposed, the fallout can go beyond regulatory fines and lawsuits. It also impacts employee and investor confidence, which is far harder to rebuild. At the same time, you’re navigating increasingly complex data protection laws across borders.

Today’s threat landscape is fueled by AI-driven phishing schemes, deepfake scams, and an explosion of machine identities that vastly outnumber human accounts. In May 2025, LexisNexis Risk Solutions disclosed a breach that exposed the names, Social Security numbers, contact details, and driver’s license numbers of more than 364,000 people. For global teams and HR leaders, the takeaway is sobering: if a world-class data analytics firm can be compromised, no organization is invulnerable.

This guide explores how to protect employee data in 2025 with a practical 8-step checklist, while unpacking the most pressing risks and the compliance challenges that leaders of global teams must navigate.

Understanding Employee Data Protection: What’s at Stake?

When employee personal data is mishandled or exposed, the consequences can be severe. Organizations face steep legal penalties, including fines of up to €20 million or 4% of global revenue under the EU’s General Data protection Regulation (GDPR) and up to $1.9 million per year under the Health Insurance Portability and Accountability Act (HIPPA). Beyond regulatory fines, breaches can be terribly expensive, whether through fraud, lawsuits, or multimillion-dollar ransomware demands.

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Did You Know?

So far, the cumulative total of GDPR fines for data breaches has reached approximately €5.88 billion. Although the focus used to lie primarily on social media and technology companies, data protection authorities are widening their scope every year to include more and more industries.

HR departments act as the stewards of some of the most sensitive workplace information, including:

Social Security numbers and tax IDs
Bank account and payroll details
Health and benefits information
Addresses and contact details
Performance reviews and employment history

When it comes to global teams, the challenge of protecting this information compounds: navigating overlapping employee privacy laws means one misstep in data handling can create ripple effects across multiple jurisdictions. But the hardest cost to quantify is also the most damaging – employee trust. Once shaken, it’s far more difficult to win back than lost revenue, and it directly impacts retention, morale, and your employer brand.

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Key Threats to Employee Data in 2025

9 out of 10 organizations have already experienced an identity-centric breach, with over half falling victim to phishing or vishing attacks multiple times. So when it comes to protecting employee data, you and your team need to be able to anticipate the risks you might face on the daily.

Here are the biggest threats to employee data protection this year:

Phishing & Social Engineering

Phishing remains the leading cause of breaches but in 2025, both attack and defense strategies are being powered by AI. Fraudsters deploy realistic emails, cloned websites, and even deepfake calls to trick employees into handing over credentials. HR staff are prime targets because of their access to sensitive employee data.

Why it Matters:

Breaches triggered by phishing can force breach notifications under laws such as GDPR and the California Consumer Privacy Act (CCPA), putting you at risk of major fines and penalties for payroll non-compliance.
Employee trust erodes rapidly when payroll or health data is compromised – this has almost immediate repercussions on talent attraction and retention rates.

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Pro Tip: Practice, Practice, Practice

Training needs to be your first line of defense, because your team is sitting on the frontlines. Run phishing simulations, create a safe way for staff to report suspicious messages, and communicate that vigilance is part of protecting livelihoods.

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Ransomware Attacks

Ransome attacks grew steadily in 2024 with a year-on-year increase of 15% and the trend is expected to continue in 2025. This type of cyberattack occurs when malicious software (also known as malware) encrypts a victim’s files or locks their device, meaning you can no longer access them. Usually the attackers will unlock or decrypt the device in exchange for a cryptocurrency ransom.

Why it Matters:

GDPR’s Article 32 requires “appropriate security measures”. Failure to patch systems or secure access may result in heavy penalties.
Ransomware disrupts payroll operations, leaving employees unpaid and creating morale and productivity crises that damage long-term retention.

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Pro Tip: Treat payroll continuity as a resilience issue

Back up payroll data in encrypted, segregated systems and rehearse payroll recovery scenarios so employees never miss a paycheck, even during a breach.

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Unsecured Remote Access

The rise of hybrid work has increased the chances of an attack. Employees logging in from home networks, public Wi-Fi, or shared devices create weak entry points. Without VPNs, Multi-Factor Authentication (MFA), and endpoint protection, attackers can intercept logins to HR systems and payroll platforms.

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Hiring globally? Find the right route for your company.

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Why it Matters:

Weak remote access controls violate GDPR’s principle of “data protection by design and default” and APAC laws such as Singapore’s Personal Data Protection Act (PDPA).
Compromised accounts often lead to payroll or benefits errors, which can lead employees to lose trust in your organization’s competence.

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Pro Tip: Adopt a Zero Trust Approach

Enforce MFA Everywhere: Require strong MFA (preferably apps or tokens) for HR, payroll, and vendor logins.
Validate Devices: Only allow logins from trusted, managed devices with up-to-date security.
Restrict by Location: Block logins from unusual countries and flag suspicious IP activity.
Apply Least Privilege: Limit data access strictly to business purpose and review quarterly.
Monitor Activity: Use tools to detect unusual logins, bulk downloads, or odd access times.
Segment Systems: Separate payroll, benefits, and HR platforms so one breach doesn’t expose all data.
Test Regularly: Run simulations and phishing drills to ensure Zero Trust controls actually work.

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Insider Threats

Not all risks come from outsiders. Insider threats can sneak in from careless mistakes, contractors with over-extended privileges, or even disgruntled employees. A single over-privileged account can expose entire databases of your employee’s personal data.

Why it Matters:

Excessive or unnecessary access breaches GDPR’s data minimization principle and increases the risk of non-compliance.
Insider breaches feel more personal and it often causes a deeper erosion of trust, lowering engagement and fueling turnover.

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Pro Tip: Use role-based access controls (RBAC)

Review who has permission to what and when regularly. Combine this with an anomaly detection tool or tools to flag unusual activity, like bulk downloads of HR data outside normal working hours.

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Third-Party and Vendor Risks

Many HR departments rely on vendors like payroll processors, benefits providers, or an Employer of Record. If those providers don’t meet high security standards, your compliance and employee data protection are at risk.

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What is SOC2 compliance and why does it matter?

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Why it Matters:

GDPR makes organizations liable for vendor mismanagement.
CCPA requires contracts that strictly define vendor roles in data collection and processing.
Employees rarely distinguish between a vendor breach and an employer breach. Trust in your company suffers either way.

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Pro Tip: Audit, Audit, Audit

Audit vendors annually, request certifications like SOC 2 or ISO 27001, and build contractual safeguards around employee privacy laws. Playroll’s SOC 2-certified platform is designed to take this burden off HR teams.

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Emerging Risk: Shadow AI

The use of AI tools at work has skyrocketed, 72% of employees now use AI on the job, but 68% of companies lack controls to secure them. This “Shadow AI” risk means sensitive employee information could be accidentally exposed if your team feeds sensitive data into unapproved AI tools.

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Are you completely compliant? Have a look at our checklist to find out.

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Why it Matters:

Feeding HR or payroll data into unmanaged AI platforms creates compliance violations under GDPR, HIPAA, and APAC data privacy laws.
Employees expect discretion with their personal data; discovering it was processed by an unapproved AI app can feel like a breach of trust and confidentiality.

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Pro Tip: Keep Up With the Curve

Create clear policies for AI use in HR workflows. Only approve tools that meet identity security standards, and educate staff about the risks of feeding sensitive data into public AI platforms.

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Data Compliance Without Compromise

Your people trust you with their most sensitive information. At Playroll, we make that trust non-negotiable. Our SOC 2 certified, GDPR-ready platform with built-in compliance automation protects both your workforce and your reputation, so you can scale globally without sleepless nights.

Book a Demo

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8 Actionable Steps on How to Protect Employee Data

If you’re in HR or leading a company, you’re accountable for compliance, trust, and ensuring that payroll, benefits, and performance data don’t become liabilities. Here’s a practical roadmap you can follow to strengthen employee data protection while staying aligned with global data privacy laws:

1. Encrypt Data in HR and Payroll Systems

Encryption ensures that even if attackers gain access to HR systems, the employee information they steal is unreadable. This is especially critical for Social Security numbers, payroll details, and health data.

Apply Strong Standards: Advanced encryption Standard (AES) 256 is a publicly available symmetric algorithm that converts your plain text data into a cipher. It’ll help you contain the spread of a security breach by making your files unreadable to both humans and computers.
Cover All States: Encrypt both “data at rest” (stored in HR databases, payroll records, backups) and “data in transit” (transfers to banks, benefits providers, or cloud platforms).
Don’t Forget Mobile: Extend encryption to devices accessing HR data remotely such as laptops, smartphones, or tablets used by distributed teams.

Did You Know?: GDPR Article 32 explicitly requires encryption as a security measure, and under CCPA, encrypted data may reduce liability in certain breach scenarios.

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2. Implement Multi-Factor Authentication (MFA)

Passwords are easy to steal, especially when many people use ones that are connected to their names, birthdays, or where they live. MFA adds a critical barrier. By combining something employees know (password) with something they have (token, app, device), unauthorized access becomes much harder.

Go Beyond Passwords: MFA drastically reduces risks of credential theft, the most common vector for breaches.
Strengthen the Method: Use authenticator apps or hardware tokens instead of SMS codes, which can be intercepted.
Expand Access Control: Require MFA for employees, contractors, and vendors accessing your HR systems.

Did You Know?: GDPR recognizes MFA as a “reasonable safeguard” under Article 32. HIPAA mandates secure access controls for health-related data.

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3. Train Employees on Phishing and Secure Data Handling

The best and most expensive technology can’t stop a well-written phishing email if one of your team members clicks on it. Training them to recognize the signs of a phishing email is a simple but non-negotiable security measure you should put in place.

Simulate Real Attacks: Use phishing simulations to create real-life learning moments.
Make It Role-Specific: HR staff handling payroll or health data should receive tailored training on handling employees’ personal data.
Encourage Reporting: Create a non-punitive reporting system so employees feel safe escalating suspicious messages.

Compliance Link: GDPR requires organizations to train staff involved in data processing. Many APAC laws, such as Australia’s Privacy Act, mandate staff awareness programs.

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4. Apply Role-Based Access Controls (RBAC) in HR Software

Not every employee needs access to all HR data. Limiting access by business purpose will reduce insider threats and limit damage from compromised accounts.

Restrict Access Smartly: Only give access to sensitive information to the people that need it. For example, payroll clerks see salary data; recruiters don’t need to.
Review Regularly: Audit permissions quarterly to catch excessive or outdated access.
Automate Access Offboarding: Use Identity and Access Management (IAM) tools to revoke access instantly when staff leave or change roles.

Did You Know?: GDPR’s data minimization principle requires limiting access to what’s necessary. CCPA supports restricting access to prevent unauthorized use of employee information.

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5. Audit EOR Vendors For Compliance

Your security is only as strong as your weakest link. Payroll processors, benefits providers, and EORs handle vast amounts of employee personal data. It’s up to you to do your security due diligence when selecting a payroll partner.

Request Certifications: Ask for SOC 2 or ISO 27001 to verify your vendors are using the latest and most robust security practices.
Perform Risk Assessments: Audit your EOR vendor annually to ensure compliance with data protection laws. If they’re not keeping up with the changing regulations, you’ll be liable to penalties when your data is leaked.
Strengthen Contracts: Define vendor responsibilities for data collection, processing, and breach notifications.

Did You Know?: GDPR makes organizations liable for processors’ failures. CCPA requires contracts that detail vendor roles in handling employee information.

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Graphic showing a snapshot of Playroll's Employer of Record dashboard of the global payroll manager — Partner with a platform that will keep your data secure at every level.

6. Automate Compliance Monitoring In HR Tools

With data protection laws evolving in real time across regions, manual compliance tracking is no longer realistic. Automated monitoring ensures your HR team stays ahead of regulatory changes without being buried in spreadsheets.

Monitor in Real Time: Deploy systems that track unusual access, suspicious logins, or abnormal data processing in HR platforms.
Stay Ahead of Legal Shifts: Automated platforms surface new requirements instantly, whether they’re GDPR updates in Europe or evolving privacy mandates in APAC.
Cut Through the Noise: In an age of fake news and AI-generated content, it’s critical to rely on trusted, verified sources. You want to partner with vendors that have dedicated compliance teams who work to separate fact from speculation and feed you the right information exactly when you need it.
Reduce Penalty Risk: By automating Data Protection Impact Assessments (DPIAs) and breach notifications, you ensure nothing slips through the cracks, protecting your business from costly fines and reputational damage.

Did You Know?: GDPR requires organizations to conduct DPIAs for high-risk data processing and notify authorities within 72 hours of a breach. CCPA and HIPAA also mandate rapid reporting, while APAC frameworks (like Singapore’s PDPA) emphasize proactive incident disclosure.

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7. Patch Systems and Retire Legacy Tools

Unpatched HR systems are often the easiest entry point for attackers. A single outdated payroll application can expose thousands of records and leave your company, your employees, and your clients vulnerable to extortion or attack.

Stay Updated: Apply patches as soon as vendors release them.
Test Defenses: Run penetration tests to uncover vulnerabilities.
Phase Out Legacy Systems: Replace outdated platforms that still handle employees’ personal data and upgrade to newer ones that are aligned with the most recent data technology and privacy laws..

Did You Know?: : GDPR requires “state of the art” security measures. HIPAA mandates technical safeguards to protect health records.

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8. Develop and Test a Data Breach Plan For Your Global Team

As we’ve seen, even the best defenses created by the organizations sitting at the forefront of data protection can fail. You’ll need a tried and tested response plan that will keep you compliance and preserve the trust of your team when things go wrong.

Define Roles & Protocols: Decide who investigates, who reports, and who communicates issues when a security breach occurs.
Align with Laws: GDPR requires breach notifications within 72 hours, while CCPA and HIPAA have their own strict timelines.
Practice, Don’t Just Plan: Run simulations or tabletop exercises annually to keep your team ready to act with updated knowledge and practices.

Did You Know?: GDPR, CCPA, HIPAA, and APAC laws all mandate timely breach notifications.

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Navigating Global Employee Privacy Laws

Expanding globally means navigating a maze of overlapping employee privacy laws. Each region has its own compliance standards, notification requirements, and cultural expectations around employee data protection.

Here’s a breakdown of the most relevant global frameworks:

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Region / Law	Key Focus Areas	Breach Notification Requirements	Employee Data Impact	HR Leader Implications
European Union – GDPR	Strict rules on data collection, consent, and purpose limitation. Strong restrictions on cross-border data transfers. Right to access, rectify, and erase data.	Must notify authorities within 72 hours of becoming aware of a breach.	Protects all employee personal data, including payroll, health, and performance records.	Maintain detailed records of processing. Conduct Data Protection Impact Assessments (DPIAs). Ensure vendors comply with GDPR when processing HR data.
United States – CCPA (California)	Focus on consumer and employee data transparency. Right to know what data is collected and request deletion. Opt-out of data sale.	No single federal standard; varies by state. CCPA requires timely employee notification.	Applies to employee personal information, such as Social Security numbers, payroll, and health insurance details.	Update privacy notices for employees. Track data collection purposes. Respond to employee requests about data use.
United States – HIPAA	Regulates health-related data when employers administer health plans. Requires secure storage and transfer of medical records.	Notification required within 60 days of a breach affecting health data.	Covers employee health information held by HR or benefits administrators.	HR teams must: Safeguard medical claims, insurance, and health benefit data. Ensure vendors (e.g., health insurers) comply with HIPAA.
Asia-Pacific – Singapore PDPA	Requires consent for data collection and use. Emphasizes employer responsibility for safeguarding employee data.	Must notify authorities and affected individuals as soon as practicable.	Covers employee identifiers, payroll, and HR data.	HR teams must: Establish clear consent frameworks for data use. Document and monitor cross-border data flows.
Asia-Pacific – Australia Privacy Act	Protects employee records where collected by private sector employers. Requires organizations to handle data “fairly and reasonably.”	Mandatory notification to OAIC and affected individuals if a breach is likely to cause serious harm.	Covers personal data such as banking details, tax file numbers, and contact info.	HR teams must: Assess whether employee records exemptions apply. Put in place clear breach response procedures.
Asia-Pacific – Japan APPI	Requires employee consent for most forms of data use. Regulates cross-border data transfers.	Breach notifications required to regulators and individuals “without delay.”	Covers all personally identifiable employee data.	Provide notice and obtain consent for cross-border transfers. Update privacy policies to reflect employee rights.

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Take Control of Employee Data Security with Playroll

Today’s hybrid and global workforces want the confidence that their most personal information is being handled with the same care as their pay or benefits.

At Playroll, we bring together global payroll expertise and robust compliance safeguards to give HR leaders peace of mind. Our global employment platform is SOC 2 certified, GDPR-ready, and built with compliance automation to help teams stay ahead of complex data protection laws, while simultaneously freeing your team from manual, error-prone processes.

The result? A system that not only keeps you compliant across borders but also sends a powerful cultural signal: that protecting your people’s data is a core part of protecting your people. Book a demo today to start scaling your global team securely.

ABOUT THE AUTHOR

Jaime Watkins

Jaime is a content specialist at Playroll, specializing in global HR trends and compliance. With a strong background in languages and writing, she turns complex employment issues into clear insights to help employers stay ahead of the curve in an ever-changing global workforce.

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