In today’s increasingly digital workplaces, cloud-based HR systems have become essential tools for employers when it comes to managing employee records, tracking performance, processing payroll, and automating a range of other HR administration tasks. These systems offer convenience, efficiency, and flexibility — but how safe is the sensitive employee data stored within them?
From names and addresses to bank details and medical records, HR systems hold some of the most confidential information a business can process. For employers and employees alike, understanding how this data is protected and where the risks lie is crucial.
What Is a Cloud-Based HR System?
Cloud-based HR systems store and manage employee data using internet-connected software hosted by third-party providers. Unlike traditional on-site systems, cloud solutions allow access from anywhere with an internet connection.
The benefits of these systems are clear. Automatic updates, cost efficiency, and real-time access to records. But with those benefits come concerns about data security, unauthorised access, and legal compliance.
Legal Responsibilities for Employers
In the UK, the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018 set out strict rules on how personal data must be handled.
As a data controller, an employer is legally responsible for:
- Choosing a compliant HR system provider
- Storing and processing employee data securely
- Only collecting data that is necessary and relevant
- Keeping data accurate and up to date
- Ensuring staff are aware of their rights
Even if the system is managed by a third party, employers must ensure that contracts with providers include data protection clauses and that systems meet appropriate security standards. The Information Commissioner’s Officer provide in-depth guidance regarding employer responsibilities, More on employer data protection responsibilities – ICO
How Secure Are HR Systems in Practice?
Due to strict regulations and the need to comply with legal obligations cloud-based HR system providers take data security extremely seriously and offer robust protections, such as:
- Data encryption whilst data is being uploaded and then whilst it is static in the system
- Role-based access control, so only authorised users can view or edit certain information about employees
- Regular security updates and penetration testing so that the system remains as secure as possible
- Backups and disaster recovery protocols
Reputable providers also undergo external audits and may hold certifications like ISO/IEC 27001, which is a global standard for information security.
That said, breaches do happen. A disgruntled employee at the supermarket chain Morrisons leaked details of nearly 100,000 staff online and that breach cost the company over £2 million to rectify. While this wasn’t strictly a cloud HR system breach, it highlights the importance of checking how data is stored, accessed, and secured.
Key Risks Employers Should Be Aware Of
While most cloud-based HR platforms are designed with security in mind, human error and poor data practices can create vulnerabilities. Common risks include:
- Weak or shared passwords giving unauthorised users access
- Lack of employee training on data handling
- Excessive access permissions, allowing too many people to view or change personal data
- Failure to regularly audit system access and data accuracy
- Inadequate vetting of HR software providers
Remember: even with the most advanced system in place, security ultimately depends on how people use it.
Practical Steps for Employers
To boost employee data safety in your HR system, consider the following best practices:
- Choose a Trusted System Provider
Ensure your provider is GDPR-compliant, has a clear privacy policy, and offers transparent security features. Look for certifications such as ISO 27001 and regular penetration testing.
- Set Access Permissions Carefully
Use role-based access controls so that only those who need certain information can access it. For example, a line manager shouldn’t automatically have access to an employee’s medical or financial details.
- Train Your Team
Educate staff on data protection principles, phishing awareness, and how to handle personal data securely. Even a short training module can reduce the risk of human error.
- Regularly Review and Audit
Check who has access to the HR system and what permissions they have. Update user roles when people change jobs or leave the business.
- Have a Data Breach Plan
Under UK GDPR, serious data breaches must be reported to the Information Commissioner’s Office within 72 hours. Make sure you know what steps to take if data security is compromised, How to respond to a personal data breach – ICO
Employee Rights to Their Data
Employees also have legal rights under UK data protection law, including:
- The right to access their personal data
- The right to correct inaccurate information
- The right to request deletion, in some circumstances
- The right to know how their data is being used and who it’s shared with
Employees can make a subject access request (SAR) to view the data a company holds about them. Employers should be ready to respond within one month and provide the information in a clear format.
Cloud-based HR systems offer real benefits to employers and employees alike, streamlining operations and improving access to vital information. However, their use comes with responsibilities. By understanding the risks, staying informed about legal obligations, and taking simple security precautions, employers can ensure that employee data remains safe, secure, and compliant.
Do you have any questions about today’s blog, need help in becoming legally compliant with contracts/policies or can we support you in taking away any people pains to give you peace of mind?
If you answered yes to any of the above, just give us a call at CUBE HR on 01282 678321, or book in a FREE 30 Minute HR Health Check here FREE HR Health Check and we’ll happily give your business a full HR overview with our personal recommendations absolutely FREE!
Why not also check out last weeks blog 4 Benefits Of An Integrated HR System
We also have a YouTube channel with loads of handy videos outlining various HR related scenarios.
