HR's Role in Protecting Employee Data

One of HR’s many stewardship responsibilities is safeguarding employee data and ensuring that it is managed responsibly. This has become even more important as organizations increase their use of people analytics.

HR must balance transparency and confidentiality, making sure that employee information is handled ethically, securely, and in compliance with data protection laws. Mishandling personal records, payroll information, and sensitive organizational data can result in legal consequences, reputational damage, and workplace discord.

“HR departments, traditionally seen as the custodians of sensitive employee information, have been rapidly transformed by the adoption of advanced technologies,” said Ramesh Nyathani, HR digital transformation architect at US Foods in Rosemont, Ill. “These technologies encompass a vast spectrum of data, from recruitment and employee management to performance evaluation and workforce planning. HR technologies are also becoming repositories of vast amounts of personal and professional data, ranging from basic contact details to biometric information.”

With more organizations taking advantage of platforms that provide comprehensive data analytics, concerns surrounding data misuse, unauthorized access, and breaches have grown.

“Employee data is critical to secure because it includes employees’ personally identifiable information [PII] and payroll information,” said Keith Bigelow, chief product officer at Visier, a people analytics platform company in Vancouver, British Columbia. “For people analytics leaders, it is a top concern that employee data be secured in such a way that there is no leakage of the data either internally or externally.”

There were more than 3,200 data breaches in the U.S. in 2023, the last year with final reporting, according to the Identity Theft Resource Center. And nearly half of those breaches involved compromised employee information. “Employees suffer tremendously in these cases, but employers suffer too, and the financial and reputational harm of a data breach is very high,” Bigelow said.

Another concern is misuse of data. “If you don’t first have a data analysis framework with a clear purpose that your workforce is aware of, you run the risk of inadvertently causing a downstream cascade of issues,” said Tim Pasto, director, HR advisory, at Gartner. The popular risk-of-attrition data model is a prime example, said Pasto, who partners with clients in their talent analytics efforts.

“If a manager finds out that a certain employee is at high risk for leaving, what is that manager supposed to do?” he asked. “What levers should he pull? What are the drivers to understand?”   

Erin Schachter, a Montreal-based attorney with Ogletree Deakins specializing in data privacy and cybersecurity, added that HR and people analytics teams must be aware of data privacy laws in the U.S. and internationally, in addition to laws that address data collection and use more broadly.

“Protecting employee data goes beyond compliance and operational necessities, however—it plays a critical role in fostering trust within an organization,” she said. “Employees expect their personal information to be handled securely, and visible efforts to protect this data strengthen the employer-employee relationship.”

Balancing Transparency and Privacy

People analytics data assists employers with making informed decisions. And HR plays a vital role in balancing organizational needs with employee rights, particularly when it comes to managing information transparency and data privacy, Schachter said.

“Achieving this balance involves implementing clear processes and fostering organizational awareness. Establishing protocols that outline what data is collected [and] how it is used, stored, and safeguarded can support transparency while protecting privacy,” she said. “A written policy detailing how employee data is managed may help set expectations and reduce potential misunderstandings.”

Nyathani said HR should provide employees with accessible and understandable privacy policies, consent forms, and notifications about data processing activities. Employees should be aware of the purposes for which their data is collected and processed, as well as their rights to access, correct, or delete their information.

“Establishing what level of data will be used and what will not be allowed is important to know when creating metrics or analysis,” Pasto added. “Much data is not legally PII but is still sensitive. That means you need to be thoughtful about your ethical data framework. Do you need to have certain information that is connected to each employee, or are you using anonymized data? What is your drill-down capability? What limiting structure is in place to make sure that data does not leak out?”

Many organizations want HR to be out front advocating for and explaining why the company is capturing employee data, Bigelow said. “For the people analytics function, it is all about driving employee performance and productivity. Transparency—being exposed to their performance metrics—drives employee growth,” he explained. “But on the other hand, data privacy is important to counter conflict.”

For example, Bigelow said that employee engagement survey results should not be individually identifiable. “What is needed is a blended security model where certain things are left opaque and other elements are transparent,” he said.

Experts said organizations should practice data minimization, a fundamental HR technology privacy principle.

“This includes regularly reviewing data collection practices, identifying and eliminating unnecessary data points, and establishing clear data retention and deletion policies,” Nyathani said. “It means collecting and processing only the data that is directly relevant to HR functions and legitimate business purposes. Collecting excessive data not essential for HR processes can raise privacy concerns, increase the risk of data breaches, and lead to potential misuse of personal information.”

Staying Compliant with Privacy Laws

Schachter pointed out that in the U.S., employee data collection and usage are regulated by a patchwork of laws, including:

• The Americans with Disabilities Act (ADA), which limits the collection and use of medical information about employees and applicants. “It requires that any medical information collected be stored separately from general personnel files and used only for permissible purposes,” she said.
• The Fair Credit Reporting Act, which regulates background checks for employment purposes.
• The Genetic Information Nondiscrimination Act (GINA), which prohibits employers from making job-related decisions based on genetic information.
• The Health Insurance Portability and Accountability Act (HIPAA), which governs the use and disclosure of employees’ protected health information by employer-sponsored health plans and service providers.

“At least in the U.S., there is truly no singular or hallmark law of workplace privacy,” said Müge Fazlioglu, principal researcher, privacy law and policy, at the International Association of Privacy Professionals, headquartered in Portsmouth, N.H. “Instead, much of the privacy protections that applicants, employees, and independent contractors enjoy within their relationships with employers are benefits of the long shadows cast by laws such as HIPAA, the ADA, and GINA.”

In addition, the 50 state-level data breach notification laws impose obligations for businesses to keep the personal information they collect and process secure, which naturally extends to employers and the data they collect about job applicants and employees, she said.

Fazlioglu noted that state-level privacy laws aimed at consumer data generally exclude employee data, except for the California Consumer Privacy Act (CCPA).

“The CCPA and the California Privacy Rights Act provide California employees with rights to access, delete, and restrict the use of their personal data,” Schachter said. “Employers operating in California must provide notices, implement processes for exercising these rights, and ensure compliance with the laws’ broader requirements.”

She added that additional legal frameworks come into play for multinational employers, including the General Data Protection Regulation, which applies to organizations processing the personal data of individuals in the European Union (EU), even if the organization is based outside the EU.

“HR professionals should understand these frameworks and their implications to ensure compliance and protect employee privacy across jurisdictions,” Schachter said. “Conducting a data mapping exercise can be a crucial first step. This process identifies where employee data originates and flows, helping HR teams determine the applicable laws and implement measures to safeguard data.”

Schachter added that in many jurisdictions, employees may have the right to access their data. “Managing access rights involves ensuring that employees can view and update their data while protecting against unauthorized requests,” she said. “Balancing these rights may also involve protecting confidential business information or the privacy rights of other individuals.”

Best Practices for Employee Data Management

As opportunities for employee data collection grow, HR analytics leaders must balance the organization’s need for data with employees’ increasing expectations of privacy and transparency. An ethical data framework or “employee data bill of rights” can help make employees feel like beneficiaries, not targets, of talent analytics, Pasto said.

A code of ethics for employee data privacy outlines a set of ethical principles that a company should follow when collecting, storing, and using employee personal information, emphasizing transparency, consent, data minimization, and accountability to protect employees’ privacy rights and build trust within the workplace.

“The foundation of all of this is trust,” Pasto said. “Do your employees trust you with their data? One of the key issues is making sure you don’t undermine employee trust in the ethical use of their data. There needs to be open communication from HR around what employers are doing with people data. Stay out of the creepy side of data analytics.”

Pasto recommended following four foundational principles:

• The right to purpose, meaning that organizations have clearly defined the reason they’re asking for employee data before it’s collected. For example, if an organization is monitoring an efficient use of office space, it would be a violation of purpose if that data was shared with managers to assess performance based on how much time employees spend away from their desks.
• The right to minimization, meaning the organization will not collect more data than it needs to effectively fulfill its legitimate business purpose. For example, when measuring remote workers’ productivity, an employer could track data from core work applications rather than monitoring employee webcams.
• The right to fairness, meaning the organization will use data in ways that reinforce equity in the workforce. An effective data partnership between employers and employees is ensuring that both sides benefit from the data that’s being collected, Pasto said.
• The right to awareness, meaning the organization will make it clear to employees what data is being used for what purposes. “Transparency is sometimes a missing opportunity for HR,” Pasto said. “If you don’t tell your employees what you are doing with their data, there is no point in having a purpose in the first place.”

In addition, there are several essential best practices HR departments should consider to manage and protect employee data effectively:

• Obtain consent. Always get explicit consent from employees before collecting and using their data. “Consent is built into an ethical data framework,” Pasto said. “Note that there is implicit consent—for example, when using company devices—and explicit consent needed when collecting survey data or conducting network organizational analysis, for example.”
• Implement strong data security. This includes complying with governance standards such as ISO 27001 and U.S. National Institute of Standards and Technology frameworks, using data encryption and secure storage systems, implementing access controls and user permissions, regularly updating software and systems, and conducting security audits to identify vulnerabilities, Bigelow said. Procedures should also be established for safely disposing of data.
• Conduct regular training. “Regular training is vital for building awareness and equipping employees to identify and respond to potential threats,” Schachter said. “Train HR professionals on proper data handling, confidentiality, and compliance with privacy regulations. Raise awareness among employees about their rights regarding their personal data and the importance of maintaining data privacy.”
• Maintain a data breach response plan. Develop a well-defined plan to respond to potential data breaches swiftly and efficiently, including steps for notification, containment, and recovery.

“A comprehensive data breach response plan is essential to minimize the impact of a breach and maintain trust among employees and stakeholders,” Schachter said. “HR plays a vital role in addressing the human aspects of the crisis, including preparing for and addressing employee questions and concerns; advocating for employee interests such as credit monitoring, cybersecurity support, and other resources; and reinforcing a compassionate approach that helps build trust, prevent stigma, and reinforce accountability while supporting employees through challenging circumstances.”