Employee Record Retention and Destruction: Make Sure Your Business Is in Compliance

Business owners accumulate substantial volumes of employee records like employment applications, performance reviews, payroll records and disciplinary actions. At the beginning of the year, when many employers can’t stuff another piece of paper into crowded filing cabinets, they often decide it’s time to purge old files. But, before you start throwing out any documents, you need to make sure you’re in compliance with federal, state and local laws that require you to retain employee records for a specified time period.

Employee Record Retention and Destruction Policy

file storageTo ensure your company is in compliance with regulations, your small business should have a clear employee record retention and destruction policy. This policy should cover:

  • Who is in charge of handling of the management, compliance and access of employee
  • What records will be kept. The following employee records must be maintained in separate personnel files: Pre-employment information; I-9 forms; benefits plan and employee medical records; health and safety records; and general employee personnel records.
  • Who can access employee records. What files are public and available to the community, shareholders, the media and others. What records are private or confidential and available to particular staff and/or
  • The federal, state and local requirements for maintaining paper and electronic documents, especially as it pertains to legal requirements in discovery or litigation cases.
  • Where employee files will be stored.
  • How long specific records will be kept and when they can be destroyed based on federal, state and local laws. Note: Retention policies are the same when it comes to paper or electronic records.
  • The methods in which files will be destroyed. For paper files, use an outside vendor with an approved record destruction program. For digital records, it’s recommended that you use Department of Defense protocol for erasing and formatting hard drive software programs.

Employee Record Retention Guidelines

Since some federal guidelines may differ with state guidelines, a good practice is to follow the most conservative guidelines. Also, you should follow the guidelines for your industry.

Here are some employee record retention rules pertaining to payroll documents per the specific federal law:

  • Equal Pay Act – Retain payroll records, timecards, wage rates, etc. for 3 years
  • Fair Labor Standards Act (FLSA) – Retain payroll and other records containing employee and payroll information for at least 3 years.
  • FICA, FUTA, Federal Withholding – Retain records with employee name, compensation and tax information for 4 years after the date the tax is due to be paid.

As a small business owner, you have a variety of forms that you must retain for each worker. By outsourcing your payroll services to The Payroll Department, we can help you stay compliant with federal and state regulations. We will process your payroll and report and file any necessary documents with the IRS, so you don’t have to worry about it. Contact us to learn how The Payroll Department can help you with your payroll, so you can concentrate on running your business.

-Ariane of The Payroll Department Blog Team


Posted in: IRS and Tax forms, Operating a Small Business, Payroll, Payroll Processing, Rules, Regulations and Laws

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