October 2022 Newsletter

Retaining Employee Records

Employers are required to retain important employee documents including government forms, sensitive employee information, financial documents and company policies. The HR department is expected to keep these and other employee records safe and confidential. Employers should take steps and avoid mistakes as a part of these record-keeping requirements.

Why should records be kept?

Records should be kept for both legal and practical reasons. Many documents are required by law to be kept. Companies must also retain employee documents in the event of litigation or an IRS audit. Employee financial and payroll records for potential IRS issues should be kept for at least four years.

How should documents be stored?

Documents must be kept in a secure place that is inaccessible to unauthorized staff and nonemployees in general. They should also be protected from dangers such as fire, water, etc.

Digital Security

Digital employees’ records should be stored in a secure way with backups kept on-site and off-site if possible. Employers should minimize the number of employees with access to this information.

What to keep

There are five types of records and each type of record must be kept for a specified period of time. These include:

1. Personnel files
   
2. Payroll/Benefits documents
   
3. Medical files
   
4. Tax Documents
   
5. Staffing files

Personnel Files

Basic information, hiring documents, promotions, salary agreements, performance reviews, special awards, disciplinary forms and termination notices. By law, you’re required to keep this type of information for at least a year, although requirements may vary by state.

Payroll/Benefits

All payroll-related documents be kept on hand for four years. Benefit related records including health insurance, life insurance, COBRA, retirement plans and any short- or long-term disability plans must be kept for six years.

Medical Files 

Medical-related documents should usually be kept in a separate folder as they may include private information like doctor’s notes, drug test results, Family and Medical Leave Act paperwork. These should be kept for at least three years.

Tax Documents

This will include forms like the W-2, W-4, 1099, Form 1-9, Forms 940 and 941, plus other federal and state payroll tax deposit forms, and FICA and FUTA forms. Per the IRS, these documents should be maintained for at least four years.

Staffing Files

All new job listings should be kept in a special file. Any notes related to the hiring and selection of employees should also go in this folder in case your company gets accused of discrimination or wrongful termination. The details of your documents may support your case in court.

Things to avoid

Do not mix one employee’s records with another.

Do not get rid of employee records too early.

Do not allow access to an employee’s confidential information. Ensure confidential documents are separately kept to avoid unintended access.

Common Questions

May an employee access their records?

Yes. If an employee requests access to their file, it should be granted.

Should I keep paper copies if I have digital copies?

If the records are available digitally, they do not have to kept in paper form.

How long should the I-9 form be kept?

This form should be kept for at least three years from the date of hire or one year after the employee’s termination date.