In today’s digital economy, payroll isn’t just a backend task—it’s a high-value target. For accounting firms managing payroll services on behalf of clients, the responsibility goes far beyond cutting checks. You're handling sensitive employee data, managing direct deposit information, calculating taxes, and interfacing with banks, state agencies, and federal systems. That makes your payroll systems a goldmine for cybercriminals.
And unfortunately, the threats are only getting worse.
Payroll systems hold exactly the kind of information hackers want:
Social Security Numbers
Bank account details
Salary and employment records
Tax data
Internal credentials and admin rights
A breach doesn’t just disrupt operations—it exposes your firm and your clients to financial theft, identity fraud, wire fraud, and regulatory violations.
In fact, a 2023 report from the Association of Certified Fraud Examiners (ACFE) found that payroll fraud is the second most common type of occupational fraud in the U.S.—and the vast majority of it is tied to weak internal controls and compromised digital systems.
Here in Ohio, the Office of Information Security and Privacy reported a sharp rise in payroll diversion scams last year, with several mid-sized accounting firms in Columbus and Akron reporting losses due to fraudulent direct deposit changes that went undetected for multiple payroll cycles.
If you think this is just an HR problem, think again. This is cybersecurity—and it’s one of the most urgent areas where accounting firms must lead, not lag.
Understanding the threat landscape is step one in building effective defenses. Payroll systems are prime targets for cybercriminals because they aggregate some of the most sensitive, monetizable data in a single platform. Below are the most common and dangerous payroll-related threats, backed by the latest research:
One of the most financially devastating cyber threats today, BEC attacks specifically target payroll teams by impersonating executives or HR staff to request changes to direct deposit details.
According to the FBI’s Internet Crime Complaint Center (IC3), BEC attacks led to over $2.9 billion in adjusted losses in 2023, with payroll diversion listed as one of the most common schemes.
Verizon’s 2024 Data Breach Investigations Report (DBIR) highlights BEC as the top threat vector in financially motivated cybercrime, especially within professional services.
These attacks often evade spam filters and come across as legitimate internal requests, making them particularly dangerous in firms without strong verification protocols.
Phishing remains the most popular tactic for stealing credentials to payroll platforms. Attackers commonly spoof payroll login portals, HR software, or email notifications (e.g., “You’ve been paid!”), tricking employees into handing over access.
82% of breaches in 2023 involved the human element, including phishing, according to the Verizon DBIR.
The ACFE notes that credential theft is a leading precursor to payroll fraud, especially in cloud-based systems with weak login controls.
Phishing tools are now AI-enhanced, making fake emails harder to detect and more convincingly written.
While cloud payroll vendors offer convenience, they also introduce third-party risk. A breach at your provider can expose your firm—and your clients—without any direct attack on your systems.
According to CISA’s 2023 Supply Chain Risk Management Report, 61% of data breaches involved a third-party vendor, and payroll providers are increasingly being targeted for their centralized access to financial and identity data.
The 2023 breach at a major workforce management platform affected hundreds of payroll processors across the country, many of which were small and mid-sized firms.
Firms that fail to vet vendors or understand shared responsibility models are especially vulnerable.
Not every threat comes from outside. Whether it’s a disgruntled employee altering payroll records or a careless staffer mishandling credentials, insiders pose a serious risk—especially in smaller firms with flat hierarchies and less oversight.
The ACFE’s 2022 Report to the Nations found that 22% of fraud cases involve payroll manipulation, with the average scheme lasting 30 months before detection.
Insider threats are particularly hard to detect without automated monitoring and access logging.
Firms without role-based access controls and segregation of duties are especially at risk.
Old software with known vulnerabilities is low-hanging fruit for cybercriminals. If your payroll systems—or even the operating systems they run on—aren’t up to date, attackers can exploit known flaws to gain access.
The Cybersecurity & Infrastructure Security Agency (CISA) maintains a public catalog of known exploited vulnerabilities. In 2023 alone, more than 200 actively exploited CVEs (Common Vulnerabilities and Exposures) were tied to unpatched enterprise software.
According to IBM’s 2023 Cost of a Data Breach Report, breaches in environments with known unpatched vulnerabilities cost $1 million more on average than those in fully updated environments.
Regular patch management is essential, especially for firms using legacy HR or payroll software.
Payroll data is often exported for reporting, tax filing, or client communication. When files are sent over unencrypted channels—email attachments, FTP servers, or unsecured cloud shares—they’re vulnerable to interception.
A 2023 audit by the Ohio Auditor of State found multiple regional firms transmitting payroll and tax data via unencrypted email—placing both client privacy and regulatory compliance at risk.
According to Ponemon Institute, 59% of breaches involving sensitive data in transit were due to weak encryption or outdated file-sharing methods.
Firms that rely on legacy workflows often overlook the risks tied to how data is moved, not just stored.
Payroll systems are under siege from every angle—external hackers, internal missteps, and supply chain vulnerabilities. These six threats represent the most pressing risks accounting firms face today, and the cost of ignoring them is far greater than the cost of securing them.
Taking action means more than just installing antivirus software—it means building a layered defense strategy, implementing real-time monitoring, and treating payroll security as the mission-critical business issue it truly is.
Let’s be crystal clear: a payroll system breach doesn’t just cost money—it damages reputation, triggers legal action, and often results in the loss of long-term clients.
Firms that experience payroll fraud often face:
Financial penalties from state and federal agencies
Class-action lawsuits from affected employees
IRS audits and increased scrutiny
Loss of payroll services clients due to broken trust
Higher insurance premiums or denied claims if not in compliance
And with Ohio increasingly aligning with stricter national data protection standards, even a small breach can turn into a regulatory nightmare.
So what can your accounting firm do—right now—to harden your payroll systems against evolving threats?
Require MFA on all payroll system logins, especially for admins and HR staff. It’s the single most effective defense against credential theft.
Use network segmentation to isolate payroll systems from general office IT infrastructure. This limits the damage if a breach occurs elsewhere in the firm.
Not every staff member needs full access to payroll data. Enforce least-privilege access so employees only see what they need to see.
Implement workflows where any change to banking details must be verified through an out-of-band communication channel. Don’t rely on email alone.
Ensure all devices accessing payroll platforms—internal or remote—are protected by EDR solutions that can detect and contain malicious activity in real time.
Run quarterly phishing simulations that mimic real-world payroll fraud tactics. Employees are your first line of defense—if they know what to look for.
Use secure file transfer protocols (SFTP, TLS) and ensure cloud platforms offer end-to-end encryption. Plain text payroll exports are a liability waiting to happen.
At least once per year, conduct a formal audit of your payroll systems and processes, either internally or through a third-party risk assessment provider.
If you’re outsourcing payroll processing or using cloud-based platforms, make sure you’re working with vendors who:
Are SOC 2 Type II or ISO 27001 certified
Offer audit logs and granular access controls
Provide detailed incident response plans
Have clear language about shared security responsibilities
Don’t assume that just because you’re using a big-name provider, your data is safe. Ask hard questions, get the answers in writing, and make vendor oversight part of your ongoing cybersecurity program.
You see, payroll security isn’t just a technical checklist—it’s a trust mechanism. It tells your clients you take their people, their privacy, and their business seriously. And in today’s cyber threat environment, that level of care is what separates top-tier firms from everyone else.
The accounting firms that win over the next decade won’t just be the fastest or cheapest. They’ll be the most secure, the most resilient, and the most trusted.
Make sure you’re one of them.