Running a business means dealing with a ton of paperwork. Contracts, invoices, employee records, tax documents… the list goes on. Some records need to be kept for years, whether for tax purposes, compliance reasons, or other business needs, while others don’t. To keep things simple, many businesses just store everything indefinitely, keeping every record that passes through their doors.
But holding onto records longer than you need to can be just as problematic as getting rid of them too early. Over time, your system becomes cluttered with outdated information, making it harder to find what you actually need. It also puts sensitive information at risk, as you are storing this information longer than you should.
That’s why your business needs a retention policy. A retention policy sets clear guidelines about what needs to be kept, how long it needs to be kept, and when to dispose of it. Without one, you’re far more likely to run into issues with compliance, security, and day-to-day efficiency.
In this guide, we’ll explain what goes into creating a retention policy, and show you how to create one that works for your business.
What Is a Records Retention Policy?
A records retention policy is a set of guidelines that determines how long to keep certain records, where to store them, and when to securely dispose of them. It helps businesses stay organized, meet legal requirements, and avoid holding onto sensitive documents longer than they should.
Every record has a lifespan. Some only need to be kept for a few months, while others must be kept for many years, depending on legal regulations and a business needs. A retention policy ensures that every record is kept for the proper amount of time, reducing clutter and minimizing compliance risks.
What Types of Records Are Typically Included in a Retention Policy?
A retention policy applies to many types of records, each with its own legal, regulatory, and operational requirements. Here are some of the most common categories:
Financial Records
Invoices, receipts, tax documents, financial statements, and accounting records all have specific retention requirements that need to be met. Exactly how long they need to be kept depends on tax laws and financial regulations in your state.
Human Resources Records
Employee files, payroll records, benefits information, performance evaluations, and employment contracts are examples of human resources records. The retention requirements for human resources records differ based on state labor laws, tax regulations, and federal privacy regulations.
Legal Records
Contracts, litigation files, intellectual property documents, and corporate records like articles of incorporation and bylaws are subject to retention requirements to ensure compliance with various legal regulations.
Operational Records
Records related to the day-to-day operations of an organization, such as policies, procedures, meeting minutes, project files, and correspondence, may have retention requirements based on industry-specific regulations or operational needs.
Electronic Records
Emails, databases, digital files, and other electronic documents are in some cases subject to retention requirements. These requirements may be determined by data protection laws, industry-specific regulations, or organizational policies.
Health and Safety Records
Records related to workplace health and safety, such as incident reports, training records, and equipment maintenance logs, may have retention requirements based on occupational health and safety regulations.
Medical Records
Patient charts, treatment records, and prescription information are subject to retention requirements under healthcare regulations, such as the Health Insurance Portability and Accountability Act (HIPAA) in the United States.
Keep in mind that medical record retention periods and requirements for each type of record can vary based on the jurisdiction, industry, and applicable laws and regulations. Organizations should consult with legal counsel to ensure they are complying with all relevant retention requirements.
How to Create a Retention Policy
Developing a records retention schedule doesn’t have to be complicated. By following a few clear steps, businesses can create a structured plan for managing their documents effectively. A well-thought-out schedule ensures records are kept for the right amount of time, long enough to meet legal and operational needs, but not so long that they become a burden.
The first step in developing a retention schedule is taking stock of all existing records. Conducting a thorough inventory helps identify what types of documents your business generates and stores. Once the records are accounted for, they should be categorized based on their function or subject matter. Grouping similar records together makes it easier to apply consistent retention rules.
After categorizing records, the next step is researching legal and regulatory requirements. Retention periods often depend on state and federal laws, industry regulations, and business needs. Assigning a specific retention period to each category ensures compliance while preventing unnecessary document storage.
Once the retention schedule is drafted, it should be reviewed and approved by key stakeholders, such as management and legal counsel. Their input helps confirm that the policy aligns with compliance requirements and practical business operations. With a well-defined schedule in place, businesses can maintain organized records, reduce risks, and streamline document management.
What Should Be Included in a Retention Policy?
A well-structured records retention policy should include these six essential elements:
- Purpose – Clearly outline why the policy exists and what it applies to. This sets the foundation for consistent record management.
- Definitions – Define key terms to ensure everyone understands the language used in the policy. This helps prevent confusion and misinterpretation.
- Roles and Responsibilities – Assign responsibility for records management to specific individuals or departments. A clear chain of accountability ensures the policy is followed correctly and consistently.
- Retention Schedule – Specify how long different types of records must be kept. These timelines should align with federal and state retention laws to ensure compliance.
- Legal and Regulatory Requirements – Identify the specific laws and regulations that impact record retention for your business. Staying informed about legal obligations helps minimize compliance risks.
- Secure Disposal Methods – Detail how records should be destroyed once they are no longer needed. Proper disposal methods protect sensitive information and prevent unauthorized access.
How to Implement a Retention Policy
Creating a records retention policy is only the first step. To be effective, it needs to be properly implemented and followed across the business. This requires clear communication, training, and ongoing enforcement to ensure compliance.
Communicate the Policy Clearly
Employees need to understand the retention policy and how it applies to their job roles. Clear communication helps ensure that everyone knows what records need to be kept, for how long, and when they should be securely disposed of. Sharing the policy in writing and discussing it during meetings can help reinforce its importance.
Provide Employee Training
Training is essential, especially for those directly responsible for records management. Employees should know how to follow the retention schedule, store documents properly, and handle secure disposal when necessary. Regular training sessions keep everyone up to date on policy changes and compliance requirements.
Establish Detailed Procedures
A retention policy should include step-by-step procedures for managing records throughout their lifecycle. This means defining how records are created, stored, accessed, and disposed of when they’re no longer needed. Consistent procedures help maintain organization and prevent compliance issues.
Monitor Compliance Regularly
Retention policies should be reviewed and monitored to ensure they’re being followed. Regular audits can help identify any gaps in compliance and address potential issues before they become bigger problems. Businesses should also adjust their policies when legal requirements change.
Enforce the Policy Effectively
A retention policy is only useful if it’s consistently enforced. Employees should be held accountable for following guidelines, and there should be clear consequences for non-compliance. Setting expectations early and reinforcing them over time ensures the policy is taken seriously.
When to Update Your Retention Policy
Creating and implementing a records retention policy is a big step, but it’s not a one-and-done task. Business needs change, regulations get updated, and new challenges emerge, making it essential to review and adjust your policy over time. Regular audits help ensure the policy stays relevant, effective, and legally compliant.
Check for Compliance Gaps
Retention policies only work if they’re being followed. Regular reviews help identify areas where employees may be falling short or where processes aren’t being executed properly. If records aren’t being stored or disposed of according to the schedule, it may be time to reinforce training or refine procedures.
Stay Up to Date on Legal Requirements
Laws and regulations related to records retention can change, and failing to keep up with them can put your business at risk. Periodically reviewing your legal requirements ensures that your policy keeps you compliant and prevents unnecessary liability.
Adjust Retention Periods as Needed
Retention schedules should be flexible enough to accommodate changes in regulations, business operations, and industry standards. If certain records no longer need to be kept as long, or if new record types require longer retention, updating the schedule keeps everything aligned with current needs.
Look for Ways to Improve Efficiency
In addition to helping you stay compliant with changing laws, regular policy updates also provide an opportunity to streamline records management. If outdated processes are slowing things down or resulting in unnecessary storage costs for example, adjustments to your policy can make records retention more efficient and practical.
Legal and Regulatory Considerations
A retention policy isn’t just about staying organized, it also needs to align with legal and regulatory requirements. Failing to meet these standards can lead to compliance issues, fines, or legal complications. When developing a retention policy, businesses should consider the following:
Data Protection and Privacy Laws
Many records contain sensitive information, including customer data, employee records, and financial documents. Federal and state data privacy laws require businesses to protect personal information and ensure it is securely stored and disposed of when no longer needed. Understanding these laws helps prevent data breaches and regulatory violations.
Industry-Specific Regulations
Certain industries face strict rules around record retention due to regulatory oversight. For example, healthcare providers need to follow HIPAA regulations to protect patient records, while publicly traded companies are subject to Sarbanes-Oxley Act (SOX) requirements for financial documentation. Businesses should spend time to research any industry-specific regulations that may apply to them.
Government and Institutional Retention Requirements
Some businesses, particularly universities, government agencies, and non-profits, must follow state-mandated retention schedules. These schedules dictate how long specific types of records need to be kept before they can be disposed of. Ensuring compliance with these laws is critical to avoiding penalties and legal risks.
By factoring legal and regulatory requirements from the start, you can create a retention policy that not only improves overall organization but also protects you from compliance issues.
The Role of Technology in Records Retention
Technology makes it easier for businesses to manage retention policies by automating many of the manual processes involved in recordkeeping.
Most records management systems allow businesses to categorize and organize records, then apply retention rules to each category. Once these rules are in place, the system automatically follows them, storing records for the required time and securely deleting them when they’re no longer needed. This eliminates much of the manual effort involved in tracking retention periods and reduces the risk of non-compliance.
However, this level of automation is only possible with digital recordkeeping. Paper records still require hands-on management, making it more difficult to maintain a consistent retention schedule. By implementing an electronic record keeping system, businesses can set up retention policies once and let the software handle the rest, making compliance easier and more efficient.
Final Thoughts
A records retention policy keeps your business organized, compliant, and secure, but managing retention effectively is much easier when your records are digital. Paper documents require manual tracking and hands-on disposal, making it difficult to implement and enforce retention policies consistently.
By digitizing your records, you can integrate them into an electronic records management system where its possible to automate retention schedules, ensuring records are stored, accessed, and disposed of according to policy.
If you’re ready to make the switch, we can help. Our professional scanning services help you securely convert paper records into digital files, complete with full indexing to ensure searchability. Once digitized, your records can be integrated into the document management system of your choice, allowing you to automate retention and eliminate the hassle of managing paper files.
If you’re ready to take control of your records and simplify retention management, we’re here to help. Contact us to learn more about our document scanning and indexing services or get a free quote for your next scanning project from one of our technicians.
