Recommendations for Encryption Software

I am planning on going paperless with employee documents.  For me to keep this on my computer I need a program which can safely protect this data and keep it private.  I want to setup a standard hierarchy with a "Employee Folder" folder, and a folder inside that folder for each employee.  I want this stuff password protected and encrypted so no one can easily get into it.  Any suggestions on software that can allow me to create encrypted folders easily, put folders inside folders, and easily put documents inside those folders?
Quite a mouthful huh?

I don't know about third-party software (which you must hope continues to be supported), but you can create encrypted disk images in the OS:
http://support.apple.com/kb/HT1578
When chooseing the image format, I would suggest Sparse Bundle Disk Image as that can be efficiently backed up by Time Machine.
Take note of step 10. You probably do not want to store the password in the keychain.
A disk Image mounts just like a hard drive. When you eject it, the file is encrypted again.

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