diff --git a/src/META-INF/classes/AppserverIo/Apps/Example/Services/SchemaProcessor.php b/src/META-INF/classes/AppserverIo/Apps/Example/Services/SchemaProcessor.php
index 9d6fe38..8edd88d 100755
--- a/src/META-INF/classes/AppserverIo/Apps/Example/Services/SchemaProcessor.php
+++ b/src/META-INF/classes/AppserverIo/Apps/Example/Services/SchemaProcessor.php
@@ -72,19 +72,26 @@ class SchemaProcessor extends AbstractPersistenceProcessor implements SchemaProc
      * @var array
      */
     protected $users = array(
-        array('appserver', 'appserver.i0', array('Customer')),
-        array('appserver_01', 'appserver.i0', array('Customer')),
-        array('appserver_02', 'appserver.i0', array('Customer')),
-        array('appserver_03', 'appserver.i0', array('Customer')),
-        array('appserver_04', 'appserver.i0', array('Customer')),
-        array('appserver_05', 'appserver.i0', array('Customer')),
-        array('appserver_06', 'appserver.i0', array('Customer')),
-        array('appserver_07', 'appserver.i0', array('Customer')),
-        array('appserver_08', 'appserver.i0', array('Customer')),
-        array('appserver_09', 'appserver.i0', array('Customer')),
+        array('appserver', 'appserver.i0', 'salt', array('Customer')),
+        array('appserver_01', 'appserver.i0', 'salt01', array('Customer')),
+        array('appserver_02', 'appserver.i0', 'salt02', array('Customer')),
+        array('appserver_03', 'appserver.i0', 'salt03', array('Customer')),
+        array('appserver_04', 'appserver.i0', 'salt04', array('Customer')),
+        array('appserver_05', 'appserver.i0', 'salt05', array('Customer')),
+        array('appserver_06', 'appserver.i0', 'salt06', array('Customer')),
+        array('appserver_07', 'appserver.i0', 'salt07', array('Customer')),
+        array('appserver_08', 'appserver.i0', 'salt08', array('Customer')),
+        array('appserver_09', 'appserver.i0', 'salt09', array('Customer')),
         array('guest', 'appserver.i0', array('Guest'))
     );
 
+    /**
+     * The hash algorithm to hash the passwords with
+     *
+     * @var string
+     */
+    protected $hashAlgorithm;
+
     /**
      * Example method that should be invoked after constructor.
      *
@@ -96,6 +103,7 @@ public function initialize()
         $this->getSystemLogger()->info(
             sprintf('%s has successfully been invoked by @PostConstruct annotation', __METHOD__)
         );
+        $this->hashAlgorithm = 'sha512';
     }
 
     /**
@@ -232,7 +240,7 @@ public function createDefaultCredentials()
         // create the default credentials
         foreach ($this->users as $userData) {
             // extract the user data
-            list ($username, $password, $roleNames) = $userData;
+            list ($username, $password, $salt, $roleNames) = $userData;
 
             // query whether or not, the user has already been created
             if ($repository->findOneByUsername($username)) {
@@ -244,7 +252,8 @@ public function createDefaultCredentials()
             $user->setEmail(sprintf('%s@appserver.io', $username));
             $user->setUsername($username);
             $user->setUserLocale('en_US');
-            $user->setPassword(md5($password));
+            $user->setPassword(hash($this->hashAlgorithm, $salt . $password));
+            $user->setSalt($salt);
             $user->setEnabled(true);
             $user->setRate(1000);
             $user->setContractedHours(160);
diff --git a/src/META-INF/context.xml b/src/META-INF/context.xml
index a9d5120..64669ff 100644
--- a/src/META-INF/context.xml
+++ b/src/META-INF/context.xml
@@ -28,7 +28,8 @@
                                     <param name="lookupName" type="string">php:env/${container.name}/ds/appserver.io-example-application</param>
                                     <param name="principalsQuery" type="string">select password from user where username = ?</param>
                                     <param name="rolesQuery" type="string">select r.name, 'Roles' from role r inner join user p on r.userIdFk = p.userId where p.username = ?</param>
-                                    <param name="hashAlgorithm" type="string">SHA-512</param>
+                                    <param name="saltQuery" type="string">select salt from user where username = ?</param>
+                                    <param name="hashAlgorithm" type="string">sha512</param>
                                     <param name="hashEncoding" type="string">hex</param>
                                     <param name="password-stacking" type="string">useFirstPass</param>
                                 </params>
@@ -40,4 +41,4 @@
         </manager>
     </managers>
 
-</context>
\ No newline at end of file
+</context>
diff --git a/src/common/classes/AppserverIo/Apps/Example/Entities/Impl/User.php b/src/common/classes/AppserverIo/Apps/Example/Entities/Impl/User.php
old mode 100755
new mode 100644
index e448e36..3dbd018
--- a/src/common/classes/AppserverIo/Apps/Example/Entities/Impl/User.php
+++ b/src/common/classes/AppserverIo/Apps/Example/Entities/Impl/User.php
@@ -75,6 +75,13 @@ class User
      */
     protected $password;
 
+    /**
+     * @var string
+     *
+     * @ORM\Column(type="string")
+     */
+    protected $salt;
+
     /**
      * @var boolean
      *
@@ -397,4 +404,26 @@ public function getRoles()
     {
         return $this->roles;
     }
+
+    /**
+     * Returns the value of the class member salt.
+     *
+     * @return string Holds the value of the class member salt
+     */
+    public function getSalt()
+    {
+        return $this->salt;
+    }
+
+    /**
+     * Sets the value for the class member salt.
+     *
+     * @param string $salt Holds the value for the class member salt
+     *
+     * @return void
+     */
+    public function setSalt($salt)
+    {
+        $this->salt = $salt;
+    }
 }