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Keeping track of employee records is a core part of running a well-organized business. From hiring to offboarding, the documents you retain tell the story of your working relationship with each employee. They support everything from payroll and benefits to performance and policy adherence.
Most importantly, record retention protects your business during audits, disputes, or legal reviews. Here’s a quick look at what you’re required to keep, why it matters, and how the right systems eliminate the guesswork from the process.
What Employers Must Keep and For How Long
Employers are legally required to retain certain employee records for specific timeframes. These timelines vary based on the type of document and the agency that governs it. Failing to maintain these records could lead to audits, penalties, or lawsuits; therefore, it’s essential to get it right.
Federal Requirements
Several laws guide what must be kept and for how long.
- I-9 Forms must be stored for three years after the hire date or one year after termination, whichever is later.
- Payroll Records fall under the Fair Labor Standards Act (FLSA) and should be retained for at least three years. This includes wages, hours worked, and other pay-related data.
- Medical Records linked to the Americans with Disabilities Act (ADA) or Family and Medical Leave Act (FMLA) can carry longer retention timelines. In some OSHA-related cases, these must be kept for up to 30 years.
- EEO and Discrimination Claims fall under Title VII. Applications, hiring records, and termination documents must be retained for a minimum of one year or longer if a claim is filed.
- Tax Documents required by the IRS, like W-4s and related payroll tax filings, should be held for at least four years.
New York Requirements
In New York, employers are required to maintain wage and hour records for six years. This includes timecards, schedules, and pay stubs. Employers in the state must also retain notices given under the Wage Theft Prevention Act for the same period.
What Happens If You Don’t Keep Records?
Not keeping records puts you at risk. Auditors may assume the worst if documentation is missing. Penalties can range from steep fines to back-pay awards or court judgments. Even a simple complaint can spark a broader investigation if records aren’t available for review.
What Should You Include in Employee Files?
When organizing employee records, it helps to separate documents into a few key categories. Each type of file serves a different purpose and should be kept distinct for privacy and compliance reasons.
Personnel File
This is the main file that documents the employee’s work history with your company. It typically includes the offer letter, job description, performance reviews, and any signed acknowledgments for company policies. You might also keep promotion records or disciplinary notes here.
Medical/Confidential File
This file should be stored separately from the personnel file. It includes health-related documents, such as doctor’s notes, workers’ compensation claims, and any records related to the Americans with Disabilities Act (ADA). Only those with a need to know should have access.
Payroll/Tax File
This one covers all pay-related paperwork. It includes tax forms like the W-4, direct deposit details, and timekeeping records. If you track hours or paid time off, that information should be included here as well.
Separation FIle
Once someone leaves the company, a separate file should be created to store their exit documents. That might include the resignation letter, final paycheck breakdown, COBRA notices, and any exit interview notes.
Maintaining these categories in order facilitates day-to-day management and ensures long-term compliance.
Best Practices for Recordkeeping
Good recordkeeping starts with structure. Sorting employee files by category makes it easier to find what you need when you need it. Limit access to sensitive records to only those who genuinely need it. This reduces risk and keeps private information from falling into the wrong hands.
Go digital where you can. Use a secure platform with regular backups to prevent loss. Cloud-based tools with permission controls are a smart move for small and mid-sized teams.
Don’t let outdated files pile up. Create a clear retention schedule based on legal requirements and internal policies and stick to it. When records hit their expiration date, discard them properly and document the process.
Finally, train your HR team. Ensure they understand what to retain, how long to keep it, and how to handle records with care. Strong habits make compliance less of a scramble and more of a routine.
Why Employee Records Matter
Maintaining employee records builds a solid foundation for your business. When records are organized and up to date, you’re better equipped to handle audits, respond to employee inquiries, and make informed decisions.
At Pinnacle Employee Services, we understand that managing these details can be overwhelming. That’s why we offer HR support services to help you stay on top of recordkeeping requirements so you can focus on running your business.
Ready to streamline your HR processes? We’re here to help! Contact us for your HR Review and Needs Analysis today! Contact us today!