GDPR in HR and Payroll – Managing Sensitive Employee Data the Right Way

Since GDPR (the General Data Protection Regulation) came into effect in 2018, the regulation has almost taken on a mythical status. Within HR we warn about it, we follow it, we create detailed policies around it, and sometimes we even blame it when it feels like a roadblock. But what does it actually require? How much do we really need to know, for example, in HR and payroll management? Read our article for practical guidance!

Employee Data Requires Extra Protection

HR and payroll information is among the most sensitive data a company handles. It’s not just about personal identification numbers or bank details — it also includes information that can reveal an employee’s health, performance, or family circumstances. Poor handling can lead to fines and loss of trust, but most importantly, it can create concern among employees.

For HR and finance departments, it is therefore essential to have clear processes and reliable system support in daily operations. You don’t need to stop storing all information, but you do need to carefully consider when and how it is stored and processed.

1. HR Data = High-Risk Data

Almost all data handled by HR — including salaries, employment contracts, and recruitment information — involves the processing of personal data under GDPR. Some data is considered sensitive personal data (e.g., health information, religion, or union membership), which means even stricter rules apply. As a general rule, processing this type of data is prohibited unless it can be justified based on approved exceptions and, often, legal grounds.

Common mistakes include sharing payslips through insecure channels, such as unencrypted email, using Excel for employee lists, or storing personnel files in open network folders like OneDrive, Google Drive, or SharePoint. Such practices may be considered personal data incidents unless folder access is properly restricted.

2. Data Minimisation – Collect Only What You Need

A core principle of GDPR is data minimisation: you should only collect and process the information necessary to achieve the intended purpose.

Many HR systems, for example, contain fields that are never used, or retain historical data “just in case.” This creates unnecessary risks.

A good way to avoid excessive data collection is through regular reviews — or even better, by using a system that automatically flags data after a certain period to determine whether it is still necessary. A particularly good opportunity to review data is when an employment ends. Some information must be retained for several years, but much can be deleted. Creating a checklist for the offboarding process can be extremely helpful.

3. Consent is Rarely the Right Basis in HR

In the workplace, consent is rarely a valid legal basis for processing personal data, because the relationship between employer and employee involves dependency. This means consent is not considered “freely given” and cannot be relied upon as an approved exception for storing sensitive personal data, such as ethnic origin or sexual orientation. It is therefore a myth that an employer must, or even can, ask for consent to process this type of data.

However, certain legal grounds can justify the processing of employee data, such as:

• Contractual necessity – for example, handling information required for employment.

• Legal obligation – for example, payroll processing, tax reporting, and regulatory requirements.

4. GDPR as Part of Your Employer Brand

Demonstrating that you protect employees’ privacy strengthens your company’s brand. Secure handling of personal data signals professionalism, respect, and care. Companies that actively integrate GDPR into their HR processes not only reduce the risk of errors — they also build greater internal trust.

Sustainable HR work goes beyond legal compliance. It is about creating structures that are efficient, secure, and long-lasting.

Greenstep helps companies map their personal data processing, establish clear HR and payroll routines, and train their organization in data protection making GDPR a natural part of everyday operations.

Do you want to know how your company can strengthen data protection in HR and payroll? Contact Greenstep’s specialists in HR, payroll, and legal matters — we help you build sustainable, compliant processes.