The Risks and Consequences of Poor Management of Employee Data

Protecting your employees is protecting your business. Failure to secure employee data management can result in threatening consequences for your company.

Here’s a case to reinforce the idea:

An [former] employee of a biopharmaceutical company sued them over a data breach that resulted in the employee’s sensitive personal information being published on the dark web.

However, a legal proceeding isn’t always the consequence of data breaches. Enter data privacy laws like GDPR, which can fine you up to millions of euros.

Scary, right? So, how do you plan to safeguard your employee data?

Let contract software help you with that because employment contracts are a critical part of the employee data management process.

So in this article, let us first further demonstrate the importance of securely managing all employee data and detail how you can benefit from using a contract lifecycle management (CLM) like Avokaado.

What is employee data?

Employee data is the information you gather, process, or store about an employee during the course of their employment. These are some of the data (but not limited to) from an individual employee:

  • personal details like the employer’s name, address, date of birth, and contact information
  • financial data such as employee’s bank account information, social security number, or tax records
  • medical records like an employee’s medical history, insurance information, or disability status
  • job-related information such as the job title,  work history, performance reviews, salary, and benefits enrollment
  • Pre-hiring information that includes recruitment and background check data

Usually, managers as you use them for calculating wages and bonuses during payroll administration. It can also guide you in making informed decisions about your managed workforce — like when deciding the best candidate for a promotion or additional responsibility.

Why is it important to keep it secure?

Since the processing of employee data is considered sensitive, it falls under the regulation by data privacy laws. However, for clarity, it’s best to learn the risks involved in not protecting it.

So here are some of the dangers that could occur in insecure employee data management:

  • Data breaches are among the risks most heavily correlated with weak management of employee data. If your company’s system isn’t secure, it gives a simpler way for hackers to get sensitive information.
  • Another risk associated with poor HR employee data management is identity theft. An unauthorized person could use an employee’s personal information to open credit cards or loans in their name without their consent.
  • Yet another potential danger linked with insecure employee data management is non-compliance with various regulatory requirements. Not adhering to these regulations can end in severe penalties, including possible criminal prosecution.
  • Finally, inadequate management of worker data can also lead to lost productivity due to inefficient processes. With manual processes being too slow, employees won’t be able to complete their day-to-day tasks on time.

Implementing the right security measures for employee data management can help:

Avoid a data breach

A data breach can be devastating not only to your company but to employees as well. Cyberattacks that steal employee data can result in identity theft, financial loss, and reputational damage.

Streamline HR operations

HR operations, like payroll, benefits, and performance management, can be streamlined with efficient HR employee data management.

Guarantee the privacy of employees

Employee privacy is important — an HR trend is intensified concern for data privacy. Your job gives you access to sensitive personal data because they trust you can keep this information confidential and secure — and your inability to do so could lead to serious trouble like legal proceedings.

Protect company reputation

It’s simple — lawsuits and criminal charges not only damage your company’s credibility but also lower employee morale because they lose trust in your data security.

Comply with data privacy laws

If your employee data management got hacked, you might run into trouble with law enforcement, like the General Data Protection Regulation (GDPR). There are all kinds of consequences, ranging from big fines to legal charges.

Yes, employee data management is closely related to GDPR. It sets out strict requirements for the collection, storage, and use of personal data — and that includes employee data. So what are the GDPR requirements in the EU?

GDPR requirements for collecting employee data

The General Data Protection Regulation (GDPR) of the European Union (EU) is a privacy law that applies to all companies processing EU citizens’ personal data – no matter where they’re based.

By its definition of personal data, it includes employee data too. So, here are the law’s requirements when processing them:

1. There should be a lawful basis for processing employee data. Basically, you need to prove that their employee’s personal data is legitimately collected, stored, and used. You need a legal reason, like an employment contract, a legal requirement, or a legitimate business interest, to process personal information.

2. There should be an intention for data minimization. Organizations should only collect and use employee data necessary for the purpose for which it is being collected. The data must be relevant and limited to what is needed.

3. There’s explicit consent before processing an employee’s personal data. This is about an employee’s consent to have their data processed. In order to comply, companies must give employees a clear and specific consent statement that lets them know what the purpose of processing will be, what data will be processed, how their data will be used — including the purpose, what categories of data will be processed, and who will get it.

4. There should be a Data Privacy Impact Assessment (DPIA) for high-risk data processing. When processing sensitive employee information such as medical records or financial details (aka high-risk data), companies must conduct a Data Privacy Impact Assessment (DPIA). A DPIA examines a company’s processes and procedures to identify potential risks associated with collecting and using employee data. The report also gives you tips on how to reduce those risks.

4- There must be satisfactory measures to ensure the security and confidentiality of employee data. Managers like you must take the proper steps to protect employee privacy and security. In other words, you have to implement security measures so your data won’t get accessed by people who shouldn’t, be lost by error, or be deleted accidentally. This can include having employee data management software and ensuring you use data processing agreements (DPA) whenever you have third-party data processors.

For GDPR compliance and secure employee data management, it pays to have a tool for efficiently managing HR-related agreements — employment contracts and NDAs to termination letters.

A solution like Avokaado simplifies the management of employment-related documents and ensures legal compliance for businesses. Let us show how you can benefit from this platform.

Benefits of using Avokaado for managing employment documents

In terms of compliance, Avokaado gives a description of how it processes its users to website visitor’s personal data.

More than that, here are some of the benefits of using Avokaado for document management for employees —- and, thus, efficient employee data management.

1. It centralises collecting and storing employment-related documents. With Avokaado, you can store employee-related documents in one place — which makes it simpler to manage and track employee data inside these contracts as well. Since the central repository contains access control features, only authorized personnel can access employee data. You can use this to keep data safe from unauthorized access, one cause of data breaches.

2. It streamlines employment document creation. Avokaado can automate the creation of employment documents, such as employment agreements, recruitment letters, and confidentiality agreements, through the app store’s templates. Since these are pre-made by legal engineers, you can rest assured that they contain the necessary clauses — but still, you further customize by adding other provisions.

3. It improves the visibility of accessing documents. Avokaado can provide real-time visibility into employment contract status and other employee data management agreements. The platform’s dashboard can display all employment contracts and their current status, such as when approval or signature is needed.

4. It speeds up your document processing workflows. Avokaado, being a contract software, automates many of the tasks associated with contract management. This includes the approval and signing workflows and tracking contract milestones such as renewal and termination. So in processing employment contracts, you can simply add the relevant stakeholders (without leaving your desk) and let the automated contract routes happen.

5. It improves accountability and compliance. Avokaado can help ensure employment documents are created and managed in compliance with data protection regulations, such as GDPR. If employment contracts in global hiring need necessary clauses and disclosures, the platform can help ensure those required terms are included. Also, the tool’s audit trail lets you see what was done on employee contracts, so companies can track who accessed, modified, or deleted employee data. Demonstrating transparency and accountability can help with GDPR compliance.

Efficient employee data management

Prioritizing secure employee data management is crucial for businesses. It’s the key to keeping your team organized and productive.

Here are other benefits of protecting it:

  • Avoid a data breach
  • Streamline HR operations
  • Guarantee the privacy of employees
  • Protect company reputation
  • Comply with data privacy laws like GDPR

However, managing employee data can be complicated if you won’t capitalize on technologies meant to lighten the load — like contract lifecycle management software that you can use to enhance the security of employees’ sensitive information through their contracts.

Try the Avokaado CLM system to minimize the risk of poor employee data management. Make your HR processes faster with Avokaado. Book a demo!

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