SOC 2 Compliance Explained: 6 Steps to Achieve Compliance

What is SOC 2 Compliance?

SOC 2 compliance is a framework developed by the American Institute of Certified Public Accountants (AICPA) that outlines how organizations should manage data to protect the privacy and interests of their clients and employees. The standard focuses on five key Trust Services Criteria (TSC) – security, availability, processing integrity, confidentiality, and privacy.

To see whether your company’s systems, processes, and policies meet the standard for SOC 2 compliance according to these five key criteria, you’ll have to undergo an SOC 2 audit. The audit evaluates whether your organization's security measures are robust enough to protect sensitive data from breaches, unauthorized access, and other potential risks.

‍

There is no question that we’re no longer waiting for the rise of digitalisation and AI, we're living in it. Playroll is proud of its SOC 2 compliance, it shows our steadfast commitment to not only having solid security controls and practices in place, but also our commitment to a culture of data protection awareness and education globally.

Amy Smith, Legal Counsel, Playroll

‍

Difference Between SOC 2 Type I and SOC 2 Type II

When diving into SOC 2 compliance, you’ll encounter two types of reports: SOC 2 Type I and SOC 2 Type II.

Here’s how they differ:

• SOC 2 Type I: This report looks into the design of your internal controls at a specific point in time. It looks at whether your systems are set up to meet the Trust Services Criteria.
• SOC 2 Type II: This report looks at how well your security systems work over time, usually for 6 to 12 months. It’s a more in-depth check to make sure your company is consistently protecting data and meeting security standards.

Both reports are valuable, but if you're aiming to show your clients and partners your long-term commitment to security, a SOC 2 Type II report is what they’ll expect.

‍

‍

The SOC 2 Certification Principles Explained

While it’s clear that SOC 2 compliance is an important framework when it comes to security, confidentiality, and privacy in any organization, it's not perfect. There are a few gaps in its principles that companies should be aware of.

Let’s take a look at these gaps, and the tools, systems, and programs that can help bridge them:

1. Security

The Security principle is at the core of SOC 2 compliance. It keeps your systems locked down and protected against unauthorized access, cyber-attacks, and other security threats. It primarily focuses on the implementation of security controls such as firewalls, encryption, and access restrictions. Each of these elements is geared towards making sure that only authorized users have access to sensitive systems and data.

That being said, this principle mainly focuses on security controls and can’t necessarily keep up with the constantly changing landscape of security threats that we’re seeing.

As cyber-attacks get more advanced, the Security principle alone might not offer enough protection unless it's backed by proactive, ongoing monitoring and regular updates to your security measures.

‍

Never miss a compliance or regulatory update with Playroll.

‍

Gaps

• Insider Threats: SOC 2’s security requirements don’t completely address potential threats from within an organization (e.g., employees, contractors, or vendors with access to sensitive data).
• Continuous Threat Intelligence: SOC 2 audits don’t include the implementation of real-time threat monitoring programs that would alert the system to new types of attacks.

How To Bridge the Gap

• Multi-factor authentication (MFA) and two-factor authentication (2FA) are two ways that your business can prevent unauthorized access, especially for high-level systems or sensitive information.
• Intrusion detection systems (IDS), endpoint security, and network security monitoring help track and your organization about suspicious activity.
• Behavioral analytics tools are used to monitor unusual behavior patterns and catch insider threats or unauthorized access attempts from within your organization.

‍

‍

2. Availability

SOC 2's Availability principle ensures that your systems are operational and accessible when they’re needed. In other words, your systems need to have the right level of reliability and uptime. In practice, that means having the right infrastructure in place to avoid downtime which can include backup power systems, reliable servers, and cloud-based services that can quickly take over if the primary system goes down.

But it lacks specific guidance on redundancy and backup systems. While it focuses on preventing downtime, it doesn’t address disaster recovery or business continuity in detail, which leaves potential gaps in addressing unexpected disruptions.

‍

‍

Gaps

• Service Downtime From a Targeted Attack: SOC 2 doesn’t require protection against denial-of-service (DoS) or distributed denial-of-service (DDoS) attacks that could bring your services down for hours or even days.
• Resilience Testing: While SOC 2 requires data recovery plan testing, it doesn’t give specifics about how often disaster recovery drills should be practiced. This will create unknown gaps in your recovery plans that will need to be initiated when unexpected service interruptions or attacks happen.

How To Bridge the Gap

• Redundancy Protocols: Set up backup data centers and cloud services, plus load balancing to handle traffic spikes and ensure availability.
• Backup and Failover Strategies: Regularly back up data and conduct failover tests to ensure a fast recovery if disaster strikes.
• DDoS Mitigation Services: Use tools like Cloudflare or AWS Shield to help prevent and mitigate DDoS attacks and keep your client and employee data safe and secure.

‍

‍

3. Processing Integrity

SOC 2 requires data to be processed correctly, completely, and quickly. This is done by setting up systems that validate and verify data at every stage, protecting the quality of the data throughout its lifecycle. A simple but highly effective example of the type of system your company would need to have in place is one that can automatically verify customer information.

This principle, however, doesn’t specify anything about data being accurately captured in the first place. This essentially means that your system can technically meet SOC 2 standards but still be vulnerable to mistakes, fraud, or data being tampered with along the way.

Gaps

• Data Manipulation: SOC 2 doesn’t focus on preventing fraud or changes to data while it’s being processed.
• Mistakes During Data Entry: Your company might not have systems in place to check if the data being input is correct, which can lead to errors or missing information.

How To Bridge the Gap

• Data Checks: Use tools that automatically check if the data being entered is correct (for example, checking if an address has the right format or a phone number is valid).
• Encryption: Encrypt the data so that it’s secure even if someone tries to change it.
• Audit Logs: Keep a record of every change made to the data, or invest in a system that does it automatically, so you can always track who made the change and why.

‍

Learn how to secure your systems and prevent payroll fraud.

‍

4. Confidentiality

The Confidentiality principle ensures that sensitive information is only accessible to people who are supposed to see it. This is achieved by introducing access control systems that limit who can view or modify sensitive information based on their role in your organization

However, SOC 2 doesn’t always cover situations like data leaks, where sensitive information might accidentally be exposed. It mainly focuses on controlling access but doesn’t necessarily require the use of the most stringent access models.

Gaps

• Data Leaks: SOC 2 doesn’t really cover accidental leaks of sensitive data through channels like emails or file-sharing platforms.
• Access Management: SOC 2 emphasizes limiting access to data but doesn't always require organizations to implement the strictest access models, like Zero Trust.

‍

‍

How To Bridge the Gap

• Access Control: Set up strict rules that only let people access data that they absolutely need for their job.
• Data Loss Prevention: Use tools to make sure sensitive data isn’t shared outside the company by mistake.
• Zero Trust Model: Continuously check and verify all users, devices, and systems, even if they’re already inside the network, to make sure they’re allowed to access the data.

‍

‍

5. Privacy

The Privacy principle is focused on handling personal information in line with privacy laws like GDPR and CCPA. It works by setting guidelines for how personal information is collected, stored, and used. For example, it states that data should be anonymized or encrypted to make sure it’s kept private, and requires businesses to have clear policies for who can access the data and under what circumstances.

However, SOC 2 doesn’t specify exactly how to anonymize or pseudonymize data to protect privacy. This means businesses need to take additional steps, such as encrypting personal data and using privacy-enhancing technologies (like differential privacy) that allow data analysis without exposing personally identifiable information.

Gaps

• Data Anonymization: SOC 2 doesn’t explain exactly how to anonymize or pseudonymize personal data to keep it private, which means organizations might not be doing enough to protect individuals' identities.
• Privacy Controls: While SOC 2 requires protection of personal data, it doesn’t specifically guide businesses on the best technologies or methods to achieve that level of privacy, leaving room for companies to overlook more advanced protection techniques.

How To Bridge the Gap

• Encryption: Always encrypt personal data, both while it’s stored and when it’s transferred. This ensures that even if the data is exposed, it can’t be read or misused.
• Anonymization and Pseudonymization: Use techniques to mask personal data so that even if it’s accessed, it’s not directly linked to an individual. This reduces risks of personal data exposure.
• Privacy-Enhancing Technologies (PETs): Implement advanced privacy technologies like differential privacy, which allows you to analyze data trends without revealing sensitive personal details, ensuring data stays protected while still being useful.

‍

‍

Who Needs SOC 2 Compliance?

If your company handles customer data on a global scale, especially in the tech, SaaS, or HR space, SOC 2 compliance is non-negotiable if you’re planning to continue operating in the modern world.

For Founders

SOC 2 compliance is a credibility boost and trust mechanism that every founder should invest in when expanding globally. Why?

• It builds sustainable relationships with clients, investors, and partners, especially in B2B environments.
• As your business scales and secures enterprise contracts, showing you meet regulatory expectations like GDPR or CCPA can be the difference between landing a deal or losing it before your proposal is even considered.
• SOC 2 compliance positions you as a forward-thinking, secure company, giving you a competitive edge.

‍

‍

For HR Managers

Your role is to protect employee data (payroll, personal information) and maintain HR compliance standards. Here’s how SOC 2 compliance helps:

• If your systems aren’t SOC 2 compliant, it’s easy for sensitive data to get exposed, leading to potential data breaches.
• By securing SOC 2 certification, you’re also equipping your systems with the necessary security controls to protect this valuable information – making both employees and regulatory bodies feel safe.

For Hiring Managers

As a hiring manager, you handle sensitive candidate information, including resumes and personal details. Here's why SOC 2 compliance matters:  

• If your hiring processes aren’t SOC 2 compliant, this data could be exposed, which will affect your credibility internally and externally.
• By ensuring your hiring practices meet SOC 2 standards, you protect candidates’ personal information and reduce the risk of data breaches, all while building trust with potential hires and meeting regulatory requirements.

‍

Your Organization Deserves the Best Protection

At Playroll, we protect your data and your team’s trust. With SOC 2 compliance and the steps we’ve taken to close every gap, you can rest easy knowing both your employees and critical information are safe and secure.

Book a Demo

‍

Why Security Compliance Matters for Remote Work

With an increasing number of people working remotely, SOC 2 security compliance is more important than ever. Remote work brings new challenges for keeping your company’s data safe. Your team will be using different devices, connecting from different places, and sometimes accessing sensitive data on WiFi networks that aren't as secure as the office network. If your security measures aren’t strong, it’s easy for data to be leaked accidentally or stolen.

‍

Get into the nitty-gritty of cyber security and working from home.

‍

Simple Security Measures for Remote Work

1. Two-Factor Authentication (2FA):  When someone logs in remotely, they need to enter a second code (sent to their phone or email) in addition to their password. This helps protect against stolen passwords.
2. VPN (Virtual Private Network): A VPN keeps remote employees’ internet connections private and secure. This way, when they access company systems, no one can see or steal their data.
3. Device Security: Employees often use their own laptops or smartphones to work. It’s important to make sure these devices are protected with security software to avoid data breaches.
4. Access Control: Not everyone needs access to all company information. With role-based access, employees can only access the information that’s relevant to their work, making it harder for sensitive data to be exposed.
5. Regular Monitoring: When people work from home, it can be easy to miss security risks. Regular checks and audits help catch any issues before they become bigger problems.

‍

‍

6 Steps to Achieve SOC 2 Compliance

Achieving SOC 2 compliance doesn’t happen overnight. Here’s a step-by-step overview of what the road ahead looks like:

1. Conduct a Risk Assessment: To start, you need to identify potential vulnerabilities within your systems. This involves reviewing your current processes, security posture, and internal controls to spot gaps that could lead to data breaches.
2. Implement Controls Based on the Trust Services Criteria: Once you’ve identified risks, implement security controls tailored to the Trust Services Criteria. Whether it’s firewalls, access controls, or encryption, these measures help mitigate risks and safeguard sensitive data.
3. Document Policies and Procedures for Data Security: Clear, documented policies are crucial. This includes how data is handled, who has access to it, and how it's protected from unauthorized access. These policies need to be consistently followed and updated.
4. Engage a Third-Party Auditor for a SOC 2 Audit: You’ll need to bring in third-party auditors, like Deloitte or PwC for example, to assess your controls and issue a SOC 2 report. These auditors will assess your systems and issue a SOC 2 Type I or Type II report based on your level of compliance.
5. Address Any Gaps Identified During the Audit: No system is perfect. Your auditors will likely identify areas for improvement. Work with your team to fix these gaps and ensure that your systems meet the necessary standards.
6. Maintain Ongoing Compliance Through Regular Reviews and Updates: SOC 2 compliance isn’t a one-and-done deal. Quarterly audits, continuous system checks, and regular policy updates are necessary to ensure your systems remain compliant and secure over time.

‍

‍

What Are The Risks of Not Being SOC 2 Compliant

Failing to meet SOC 2 compliance comes with significant risks. For starters, without it, you open the door to potential data breaches and unauthorized access. Beyond security threats, you may lose the trust of clients, face regulatory penalties, or even lose business opportunities. SOC 2 compliance helps you mitigate these risks.

Let’s take a look at these risks in a little more detail:

1. Data Breaches

Without the security measures SOC 2 provides, sensitive data may be exposed to unauthorized access, leading to potential data breaches. This can result in the theft or misuse of personal, financial, or confidential information.

Real-World Example

The Yahoo data breach in 2013, which exposed over 3 billion accounts, shows how even the largest companies can be compromised. This can result in stolen personal, financial, and confidential information, which can be sold on the dark web and used for identity theft.

2. Unauthorized Access

If your systems are not SOC 2 compliant, unauthorized users or malicious actors could gain access to sensitive systems or data, causing significant security risks.

Real-World Example:

The Equifax breach in 2017 saw cybercriminals gain access to personal data of 147 million people, including social security numbers. This breach led to over $700 million in settlements and a massive hit to the company's credibility.

3. Loss of Client Trust

SOC 2 compliance is a mark of trustworthiness and credibility. Without it, your clients may question the security of their data, leading to a loss of trust and potentially losing business.

Real-World Example:

Imagine losing a client like Target did after their 2013 data breach, where 40 million credit and debit card numbers were compromised. Clients moved to competitors, and the breach cost Target over $200 million.

4. Regulatory Penalties

Non-compliance with SOC 2 could result in penalties, fines, or sanctions from regulatory bodies, especially in industries that handle sensitive personal information, such as healthcare or finance.

Real-World Example:

The British Airways was fined £183 million for a data breach affecting 500,000 customers. Regulatory bodies like the European Union expect companies to meet data compliance standards like the GDPR (The General Data Protection Regulation), and failure to do so can put you in their crosshairs.

5. Business Opportunity Loss

Clients, partners, and investors often require SOC 2 compliance before entering into contracts or partnerships. Without it, you risk losing out on valuable business opportunities and relationships.

Real-World Example:

An SaaS startup specializing in cloud-based project management software, was in discussions with a large multinational corporation to form a strategic partnership. But during the due diligence process, the enterprise client requested a SOC 2 Type II report to assess the company's adherence to security, availability, and confidentiality standards. The client decided to move forward with a competitor that had already achieved SOC 2 compliance.

6. Damage to Reputation

Security breaches or failing to meet compliance standards can severely damage your company’s reputation, making it harder to attract and retain customers.

Real-World Example:

Facebook's Cambridge Analytica scandal, where mishandling of user data led to a public outcry, regulatory investigations, and billions in losses. Once your reputation is damaged, it’s a long and costly road to regain consumer confidence.

7. Legal Liabilities

In the event of a data breach or failure to protect sensitive data, you could be held legally liable. This could lead to costly lawsuits and legal fees.

Real-World Example:

In the case of the Capital One data breach (2019), the company was hit with a $80 million penalty after a hacker exploited a vulnerability in their system. The legal fees and settlements that follow a data breach can put a serious dent in your bottom line.

8. Increased Cybersecurity Risks

Without SOC 2 compliance, you may lack the robust cybersecurity controls needed to detect and prevent cyber-attacks, leaving your systems and data exposed to evolving threats.

Real-World Example:

With hackers becoming more sophisticated, with 67% of organizations reporting at least one cyber attack over the last 12. SOC 2 helps you stay ahead of these threats by ensuring you have the right defenses in place.

‍

Are You at Risk of Non-Compliance?

Check out our compliance checklist to ensure your business is meeting all the necessary security standards. Stay ahead of audits and protect both your data and your team.

Read More

‍

SOC 2 Compliance for HR Systems

HR systems handle sensitive employee data, making SOC 2 compliance critical for protecting personal information and ensuring trust. Here's how HR systems play a role in achieving compliance:

Data Encryption

HR systems should use data encryption to protect sensitive employee information both in transit and when it’s just sitting on your network. This means that even if data is intercepted, it remains unreadable.

Access Management

Implementing role-based access control (RBAC) makes sure that only authorized users can access sensitive data. This limits internal risks and helps comply with SOC 2’s Confidentiality principle.

Audit Trails

HR systems should maintain audit trails that track user activity related to sensitive data. Being able to see who does what when it comes to your data will help keep processes transparent and employees accountable – both important elements of culture building.

Incident Response Plans

HR systems should have incident response protocols in place to quickly address and mitigate security breaches. These protocols should outline steps for identifying, containing, and resolving incidents, making your team considerably more efficient and effective when a data breach happens.

Automated Compliance Checks

Automating compliance checks will help you stay compliant with SOC 2 standards, detecting gaps before they become real issues.

‍

‍

Evaluating Vendors for SOC 2 Compliance

With so many HR vendors out there, it can be tempting to just make a decision just to be done with the whole process. But it’s important to thoroughly vet the contenders, particularly when it comes to security features.

Here’s how to evaluate vendors:

Verify Vendor SOC 2 Reports

Request and review the vendor’s SOC 2 Type II report to see whether they meet SOC 2’s Trust Services Criteria.

Tip: Ensure the vendor provides a Type II report for continuous security controls.

Assess Data Encryption

Check that vendors use strong encryption methods for data in transit and at rest, aligning their compliance standards with SOC 2’s Security principle.

Tip: : Verify encryption standards are in place to protect sensitive data.

Evaluate Access Management

Does the vendor use role-based access controls (RBAC) and multi-factor authentication (MFA) to restrict access to sensitive data?

Tip: Verify the vendor’s access management policies and use of MFA.

Review Incident Response Procedures

Check the vendor’s incident response plans to see whether they’re ready to handle any sort of attack or breach quickly and with minimal loss of data.

Tip: Request documentation of the vendor's incident response protocols and response times.

‍

‍

Software Tools to Assist in Achieving SOC 2 Compliance

Several tools can help streamline SOC 2 compliance:

‍

‍

Meet Global Security Standards With Playroll

At Playroll, we don’t just talk the talk – we walk the walk. As a SOC 2 compliant software provider, we ensure that our platform is fully aligned with the Trust Services Criteria. From encryption to access management, we’ve built Playroll with your data security in mind.

Ready to see how Playroll can help ensure a safer environment for your business? Book a demo today.