The Email That Blocked Your Biggest Deal
Your HR Tech startup is growing. Enterprise HR teams love your platform. You're about to close a 500-person company when their procurement team sends a request: "Please provide your SOC 2 Type II report."
You don't have one. The deal stalls. Three months later, you're still working on it while competitors with SOC 2 are closing deals you should have won.
HR Tech companies handle some of the most sensitive employee data: SSNs, compensation, performance reviews, health benefits. Enterprise buyers know this—and they're not willing to trust that data to vendors without verified security controls.
Why HR Tech Gets Extra Scrutiny
The Data You Hold
HR Tech platforms typically handle multiple categories of sensitive information—often more than companies in other verticals:
- Personal Identifiable Information (PII) — Names, addresses, phone numbers, emails
- Government IDs — Social Security numbers, passport numbers, work authorization
- Financial Data — Bank accounts, compensation, equity grants, tax information
- Health Information — Benefits selections, medical leave, disability accommodations
- Performance Data — Reviews, disciplinary records, promotion decisions
- Sensitive Demographics — Age, race, gender, veteran status (for compliance reporting)
A breach of HR data isn't just embarrassing—it can expose employees to identity theft, discrimination, and financial harm. Enterprise buyers know this. They're not just checking a box; they're protecting their employees.
The SOC 2 Checklist for HR Tech
1. Trust Services Criteria Selection
Why it matters: SOC 2 has five Trust Services Criteria. HR Tech companies typically need more than the minimum.
Most HR Tech companies should include Security, Confidentiality, and Availability at minimum. If you handle payroll or benefits calculations, add Processing Integrity. Privacy is increasingly requested by sophisticated buyers.
2. Access Controls (Critical for HR Data)
Why it matters: Who can see employee salaries? Performance reviews? SSNs? Access control is the #1 concern for HR buyers.
- Role-Based Access Control (RBAC) — Define clear roles with minimum necessary permissions.
- Segregation of Duties — Separate who can view vs. modify sensitive data.
- Manager-Only Data — Ensure salary, performance data is only visible to appropriate managers.
- Audit Logging — Log every access to sensitive employee data (who, what, when).
- Access Reviews — Quarterly reviews of who has access to what.
"Can your employees see our employee data?" Enterprise buyers will ask this. Your answer should be: "Only authorized support personnel, with logged access, and only when necessary to resolve issues."
3. Data Encryption
Why it matters: SSNs, bank accounts, and health data require strong encryption—both in transit and at rest.
- Encryption at Rest — AES-256 for all databases containing employee data.
- Encryption in Transit — TLS 1.2+ for all data transmission, no exceptions.
- Field-Level Encryption — Extra protection for SSNs, bank accounts, and health data.
- Key Management — Secure key storage, rotation policies, access controls on keys.
4. Data Retention and Deletion
Why it matters: Employment laws require retaining some data; privacy requires not keeping it forever.
- Retention Policy — Define how long you keep different data types (consider legal requirements).
- Deletion Capability — Ability to delete employee data when requested or required.
- Offboarding Process — Clear process when a customer leaves or an employee departs.
- Backup Retention — Ensure deleted data is also removed from backups within defined period.
5. Availability and Business Continuity
Why it matters: Payroll can't be late. Benefits enrollment has deadlines. HR Tech must be reliable.
- Uptime SLA — Define and meet availability commitments (99.9% is typical).
- Disaster Recovery — Documented recovery procedures with tested RTO/RPO.
- Redundancy — No single points of failure for critical systems.
- Incident Communication — Clear process for notifying customers of outages.
6. Vendor Management
Why it matters: Your customers' employee data flows through your vendors too.
- Subprocessor List — Maintain list of all vendors who access customer data.
- Vendor Security Assessment — Review vendors' security before onboarding.
- Contractual Protections — DPAs and security requirements in vendor contracts.
- Ongoing Monitoring — Annual review of critical vendors' security posture.
Enterprise buyers will ask for your subprocessor list. They need to know who else will have access to their employee data. Keep this list current and be prepared to share it.
HR Tech-Specific Compliance Considerations
International Data Transfers
If you serve companies with employees in multiple countries, you'll face data residency and transfer requirements:
- GDPR — EU employee data requires specific protections and transfer mechanisms.
- Data Localization — Some countries require employee data to stay within borders.
- Standard Contractual Clauses — Required for many international transfers.
Integration Security
HR Tech platforms integrate with many systems—each integration is a potential vulnerability:
- Payroll Systems — ADP, Gusto, Paychex connections must be secured.
- Benefits Providers — Health insurance, 401k, FSA integrations.
- Background Check Services — Sensitive data flows to verification providers.
- SSO/Identity Providers — Okta, Azure AD, Google Workspace.
Every integration should use OAuth 2.0 or API keys (never passwords), encrypted connections, and minimum necessary permissions. Document each integration's security controls—auditors will ask.
Common SOC 2 Mistakes HR Tech Founders Make
Mistake 1: Underestimating Scope
HR Tech touches employee data in many ways—payroll, benefits, performance, recruiting. Each area has different security requirements. Map all data flows before scoping your SOC 2 engagement.
Mistake 2: Ignoring Data Classification
Not all HR data is equally sensitive. SSNs need stronger protection than office locations. Classify your data and apply controls proportionally—auditors and customers expect this.
Mistake 3: Weak Audit Logging
"Who accessed John's salary information?" If you can't answer this question with logs, you have a problem. Enterprise buyers expect full audit trails for sensitive data access.
Mistake 4: Forgetting About Support Access
Your customer success team troubleshoots issues. They need some data access. But can they see SSNs? Salaries? Performance reviews? Define and enforce support access policies.
Timeline: HR Tech to SOC 2 Type II
Month 1: Readiness Assessment
Map data flows, identify gaps, select Trust Services Criteria, choose auditor. Document what you have and what you need.
Month 2-3: Control Implementation
Close gaps: access controls, encryption, logging, policies. Focus on HR-specific requirements like data classification.
Month 4: Type I Audit (Optional)
Point-in-time assessment of control design. Useful for learning the process and satisfying immediate customer requests.
Month 5-10: Observation Period
Operate your controls consistently for 6+ months. Collect evidence. Fix issues as they arise.
Month 11-12: Type II Audit
Auditor reviews controls AND their operating effectiveness over the observation period. You receive your report.
What Enterprise HR Buyers Ask
Security Questions
- Where is our employee data stored?
- Who at your company can access our data?
- How is SSN/bank data encrypted?
- What happens if there's a breach?
- Do you have cyber insurance?
Compliance Questions
- Do you have SOC 2 Type II?
- What Trust Services Criteria?
- Who are your subprocessors?
- Can you sign our DPA?
- How do you handle data deletion?
Next Steps
SOC 2 for HR Tech isn't just a sales enabler—it's a commitment to protecting the sensitive employee data your customers trust you with. Enterprise buyers know what's at stake; your SOC 2 report shows you do too.
Start with the data. Map every type of employee information you handle, how it flows through your systems, and who can access it. That map becomes the foundation for your SOC 2 scope and your security program.
Building HR Tech? vCISO Lite helps you achieve SOC 2 compliance with HR-specific control templates, evidence collection, and audit preparation tools designed for startups handling sensitive employee data.