Identity theft is a hot topic these days and something that affects countless individuals. In fact, risk management consultant, Jim Crump reports that “There are over 40,000 new cases being reported every single day. There were 50 million cases in the last five years and 14.4 million in 2014 alone.”
While many businesses go to great lengths to keep customer information secure, what about employee information? Let’s discuss some ways that employee identity theft can adversely affect your business and the steps you can take to prevent it.
Laws Regarding Confidential Employee Information
Due to the large volume of cases that are reported each year, there has been a push from congress and many state legislatures to create laws to protect both consumers and employees from becoming victims of identity theft. Two specific laws that deal with identity theft are the Fair and Accurate Credit Transactions Act (FACTA) and the Fair Credit Reporting Act (FCRA).
Both of these laws require employers to properly dispose of information and ensure that no unauthorized parties are able to gain access to it. In addition, there appears to be an overarching pattern of courts holding employers to a higher level of accountability in terms of protecting employee information.
What Happens When an Employee is a Victim of Identity Theft?
There are three main issues that typically arise when an employee is a victim of identity theft. First, it can lead to out-of-pocket expenses and hurt individuals financially. In fact, the Federal Trade Commission found that “Half of victims experience out-of-pocket expenses, and 10 percent end up paying $1,500 or more.” Second, sorting everything out is often a time-consuming process with 10 percent of victims spending at least 55 hours to do so. Third, it creates a lot of headaches and stress, which can take a mental and physical toll.
Not only does this negatively impact your employees, but it can hurt your business in the following ways:
- You can get hit with costly fines of up to $2,500 per infraction if identity theft is due to your negligence.
- Employees will usually have to take time off to resolve the situation, which translates into lost time and diminished productivity.
- Because of the added stress, it can hurt your employees’ effectiveness at work.
- It may create a rift between you and your employees if they know the issue stemmed from your negligence.
Ways to Prevent Identity Theft
While there’s no way to completely eliminate employee identity theft from happening, there are several measures you can take to prevent it. For starters, you can perform background checks on any individuals who will be handling sensitive employee data, which can reduce the threat of a situation arising internally. Next, you can create a data removal policy so that information will be properly discarded once it becomes obsolete.
When it comes to managing electronic information, you should use highly secure software that has features like data encryption, user privilege parameters and network intrusion detection. In terms of physical paper containing employee information, you should ensure that it’s kept in a highly secure location and under lock and key at all times.
Employee identity theft is no laughing matter and can wreak havoc on your employees’ lives and business operations. That’s why it’s so important to take a proactive approach and implement preventative techniques rather than waiting until disaster strikes to respond. For further information on this topic and links to other helpful resources, check out this guide from the IRS.