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Do You Outsource Payroll? Make Sure Your Provider has a SOC Report

June 18, 2024

How can you be confident with your payroll provider’s controls and operating effectiveness? Ask them for their SOC report as part of your vendor assessment process. Here’s what you should know.

Outsourcing payroll can save your company time and money and reduce errors…but be sure to do your due diligence when selecting a provider. One key consideration is making sure the provider has a SOC report in place. We share our insight here.

What are the benefits of outsourcing payroll?

Outsourcing payroll allows companies to:

  • Save time and money
  • Reduce errors
  • Ensure compliance with tax laws
  • Free up time for HR teams to focus on more strategic tasks
  • Access advanced technology and expertise that may not be available in-house.

What to look for in a payroll provider

When looking for a payroll provider, check these key aspects:

  • Reputation
  • Experience
  • Strong security measures
  • Scalability

Why should my payroll provider have a SOC report?

A big part of security compliance is conducting a SOC audit. A System & Organization Control (SOC) audit is a report on the internal controls at a service organization (a business who provides services to other entities). SOC audits are a great way for customers to ensure that service providers are practicing safe and secure controls and protecting personal data. Check out our blog, What is a SOC Audit? for more.

Payroll providers typically play a significant role in an organization’s payroll process. As such, you need to understand how their processing impacts the internal controls over the payroll and withholding amounts presented in your financial statements. These elements are reported in the SOC report (ideally a SOC 1 examination).

Having a SOC report in place ensures that the payroll provider prioritizes:

  • Reliability and accuracy
  • Data security- Payroll data is highly sensitive as it contains personal and financial information. A payroll provider with a SOC report has implemented appropriate measures to protect payroll data against breaches, unauthorized access and other security threats.
  • Regulatory compliance- More often than not, industries require organizations to ensure that their service providers comply with specific regulatory requirements. Having a SOC report in place highlights a provider’s compliance with relevant laws and regulations, which can be particularly essential for clients in highly regulated industries.
  • Trust and transparency- A SOC report helps ensure that the payroll provider has been independently audited and meets industry standards for security, confidentiality processing integrity, availability and privacy.
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