Protecting payroll data from fraud

Payroll systems are among the most sensitive data repositories in any organisation. They hold names, addresses, tax file numbers, bank accounts, salaries, phone numbers, in short, everything a fraudster dreams of. A breach can inflict financial loss, regulatory fines and serious damage to morale and reputation.

Recently, the Benedict Industries Group in Sydney was hit by a payroll data breach in October 2025.  While full details are still emerging, this incident underscores a critical truth: no business and no payroll platform is immune. Even well resourced firms must continue strengthening their defences.

This article will examine why payroll is a high risk target and highlight lessons from the Benedict breach.

Payroll systems are attractive to fraudsters for multiple reasons:

• Rich personally identifiable information (PII): Names, addresses, phone numbers, next of kin, tax identifiers, bank account numbers.

• Direct link to finances: Once access is gained, attackers can redirect payments or withdraw funds.

• Trust and leverage for social engineering: Having intimate insight into employees’ details gives attackers ammunition for phishing, impersonation or extortion.

• Regulatory and reputational consequences: Breaches may trigger statutory reporting, fines under privacy laws, legal claims, and employee backlash.

As one analysis puts it, payroll systems are “a vault of sensitive data that needs fortress level protection.” Moreover, payroll providers themselves have increasingly become targets: attacks on large providers have exposed multiple client organisations at once.

While full forensic findings are yet to be disclosed, here are key lessons and red flags based on initial reporting:

1. Scale matters
   The breach reportedly involved 270 GB of data, not just a small file leak but a substantial compromise. This suggests the attackers had broad access, perhaps through long standing credentials or an insider pivot.

2. Third party risk
   Often in such breaches, the weak link is not the main organisation but one of its vendors, contractors, or file transfer systems. Even if Benedict’s core systems were robust, an external partner could have been compromised.

3. Time to detection & containment
   The magnitude of the leak indicates that monitoring, detection and response may not have been fast enough to curtail the breach at an early stage.

4. Reputational impact
   When employee financial information is at risk, trust is shaken. The fallout extends beyond immediate damage to long term employer credibility.

From this, we can derive that basic protections aren’t sufficient. Organizations must adopt a layered, proactive approach combining people, process, and technology.

Here’s a roadmap of safeguards your payroll team should consider. Many of these are already well understood in the cybersecurity world, your job is to apply them robustly in the payroll context.

1. Access controls & least privilege

• Use role based access control (RBAC) so that only those who must see or modify payroll data can do so.

• Regularly review and revoke access when roles change or employees depart.

• Use multi-factor authentication (MFA) or strong two step verification for all users with payroll access.

• Implement just in time access or temporary elevated privileges rather than permanent broad access.

2. Encryption (at rest & in transit)

• Ensure all payroll data is encrypted while stored (“at rest”).

• Use strong encryption (TLS 1.2 or higher) for data transfer, especially when interacting with external systems or vendors.

• Encrypt backups and archives as well.

3. Network, endpoint & system monitoring

• Deploy intrusion detection / prevention systems (IDS/IPS) to monitor anomalous behaviour.

• Monitor system logs and user activity logs: look for unusual access times, large data exports or repeated failed login attempts.

• Use automated anomaly detection (e.g. flagged by AI/ML tools) to detect suspicious patterns.

• Conduct penetration testing and vulnerability scanning periodically.

4. Vendor & third party risk management

• Thoroughly vet vendors before engagement: require security certifications (e.g. ISO 27001), independent audits, and strong contractual obligations for data protection.

• Require vendors to maintain the same or higher security standards than your organisation.

• Monitor vendor access and enforce least privilege even for trusted third parties.

• Where possible, isolate third party systems from the core payroll environment (segmentation, firewalling, limited API access).

5. Strong change & verification processes

• Any change to bank account or direct deposit information should go through multi step verification (e.g. confirmation by phone, secondary approval), this is one of the most common fraud vectors.

• Maintain strict controls over who can request or authorise changes.

• Insert auditing controls so every change is logged, timestamped, and reviewed.

6. Employee training & awareness

• Train payroll, HR, finance, and IT teams to recognise phishing, spear phishing, social engineering and fraudulent requests.

• Conduct periodic simulated phishing campaigns to test vigilance.

• Promote a culture where suspicious behaviour is reported without fear of blame.

7. Data minimisation & retention policies

• Only retain payroll data for as long as legally required; securely archive or delete obsolete data.

• Mask or anonymise data where possible, particularly for analytics or reporting scenarios.

• Ensure backup data also adheres to retention and deletion schedules.

8. Incident response & breach planning

• Prepare and regularly test a Payroll Breach Response Plan: contain, assess, notify, recover.

• Define roles, communication plans (internal, to affected employees, regulators), and forensic protocols.

• Pre arrange with a cybersecurity incident response team.

• Keep backups ready to restore clean systems, so you can recover quickly.

9. Regular audits & assurance

• Conduct internal audits (quarterly) of user accounts, system access, and payroll transactions.

• Engage third party external audits or penetration testers at least annually.

• Use audit logs to trace any questionable payroll changes or access.

10. Governance, policies & oversight

• Embed payroll data protection in your organisation’s information security governance.

• Assign accountability, eg a payroll security steward or project owner.

• Review and update policies annually or whenever threat landscapes change.

• Maintain alignment with applicable privacy legislation (e.g. Australian Privacy Act, Notifiable Data Breaches regime).

What to do now (for your organisation / payroll team)

1. Conduct a risk assessment: Map your payroll data flows, identify weak links (software, third parties, file transfers).

2. Prioritise quick wins: Enable MFA, restrict access, encrypt backups, patch systems.

3. Review vendor contracts & SLAs: Ensure vendors are obligated to maintain strong security controls and notify breaches.

4. Launch or refresh staff training: Focus on phishing, social engineering, and internal controls.

5. Test your incident response plan: Simulate a payroll breach and walk through roles, actions, timelines.

6. Audit & monitor continuously: Don’t treat security as “one and done.” Threats evolve.

The Benedict breach should serve as a sobering reminder: even large, established firms are vulnerable. Payroll isn’t merely a back office task, it’s a strategic data asset that demands the same rigor and vigilance as finance, legal or IT systems.

By combining solid technology defences, robust processes, ongoing training, and governance oversight, your payroll operations can become far more resilient. By doing so, you safeguard not just your organisation, but your employees’ trust, which, once lost, is hard to regain.