Keeping tabs on the ever-changing personnel file retention periods is no easy task.
Along with laws that protect employee rights, labor rules, and safety protections, all of which have their own detailed requirements, employers must adhere to strict personnel file retention requirements to keep the business compliant and in good standing.
In addition to individual state and local statutes, various federal agencies including the IRS, ERISA, and the EEOC also impose their own rules that must be followed.
The result is overly complicated retention policies which are difficult to manage and nearly impossible to keep track of.
HR administrators who are responsible for maintaining company compliance end up spending a majority of their time managing and organizing this seemingly never-ending avalanche of employment records.
Often with limited resources to dedicate to HR administration, few employers are able to align to so many specific retention requirements. This forces HR administrators to adopt a simple, pared-down approach to document storage.
It is common for businesses to elect to store the entire personnel file for 7 years after employee termination, regardless of what the various regulations require, as this would typically cover the maximum state and federal statutes of limitations.
Unfortunately, this leads to a large volume of documents stored unnecessarily. Excess documents create inefficiency, add unnecessary clutter, and added frustration for HR departments forced to manage mountains of employee records.
It also exposes your current and past employee’s personal data to an increased risk of data theft or breach of confidentiality by increasing the time it remains in your organization’s possession.
For these reasons and more, a strong business case can be made for implementing a comprehensive employee records retention program.
Some of the benefits of improving your retention workflow include:
- Preventing the out-of-control, exponential growth of your employee records storage requirements
- Protecting sensitive employee information by storing it only for the minimum required amount of time
- Improving the efficiency and productivity of your HR department
- Reducing or eliminating the need for onsite paper storage, including filing cabinets and boxes hogging up precious office space.
- Making regulatory compliance less of an annoyance while reducing legal risks
- Improve the organization of your records, ensuring documents are easy to locate when needed.
While employers are generally allowed to store employee records in paper format, most industry leaders recommend the use of an HRMS (Human Resources Management System).
An HRMS makes adherence to key HR regulations and record-keeping practices a breeze by enabling the automation of document retention and destruction, reducing manual labor and its associated costs.
Sure, paper is tangible, familiar, and easy to use, but it is also easily lost, expensive to manage, and a waste of office space.
On top of that, leveraging your HR data for analysis and data insights is difficult if not impossible when all you have to work with are paper piles.
With the help of our FACTA compliant HR document scanning service, your organization can convert any existing paper documents into HRMS compatible digital files, making the transition to an electronic system easy and affordable.
We can help you implement a document conversion workflow, whereby newly generated paper records are digitized, categorized, and uploaded as text-searchable PDF files into your HRMS.
2023 HR Retention Requirements
Outlined below are the general rules for the retention of employee records. The below information is meant to serve as a guide only and may differ based on industry, the number of employees, and more.
Employee I-9 Forms and supporting documents are used to confirm the identity and employment authorization for individuals hired in the U.S. Employers are required to store all employee I-9 forms for three years after the employee was hired, and up to one full year after employment has ended, whichever date is later.
Recruitment and Hiring Records
The U.S. Equal Employment Opportunity Commission requires that employers keep all personnel/employment hiring records for one year. If the employee is terminated for any reason, his or her personal records must be kept for a full year from the date when the employee was officially terminated. For educational institutions and government employees, the requirement is doubled to two years.
These records include on-boarding documents such as job application forms, interview notes, compensation and pay rate documents, promotion or demotion records, as well as any documents related to employee termination.
According to the Age Discrimination In Employment Act, employers must keep all payroll records for a minimum of three years. Employers must also keep any records that explain reasons for wage disparity between employees of the opposite sex, including job evaluations, bargaining agreements, and wage rates for two years.
The Department of Labor also requires that employers maintain time cards, wage rate tables, job evaluations, and work schedules for at least two years.
According to the Internal Revenue Service, employers must maintain employee-related tax records for four fiscal years ( until the end of the 4th quarter of the 4th year.) The records mentioned include:
- Employer identification number.
- Amounts and dates of all wage, annuity, and pension payments.
- Amounts of tips reported to you by your employees.
- Record of all allocated tips.
- The fair market value of in-kind wages paid.
- Names, addresses, social security numbers, and occupations of employees and recipients.
- Any employee copies of Form W-2 and W-2c returned to you as undeliverable.
- Dates of employment for each employee.
- Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them.
- Copies of employees’ and recipients’ income tax withholding certificates (Forms W-4, W-4P, W-4S, and W-4V).
- Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS.
- Copies of returns filed and confirmation numbers.
- Records of fringe benefits and expenses reimbursements provided to your employees, including substantiation.
- Documentation to substantiate any credits claimed. Records related to qualified sick leave wages and qualified family leave wages for leave taken after March 31, 2021, and records related to qualified wages for the employee retention credit paid after June 30, 2021, should be kept for at least 6 years.
- Documentation to substantiate the amount of any employer or employee share of social security tax that you deferred and paid for 2020.
All employers must keep any documents related to an employee’s benefits including 401K plan details, insurance election forms & plan termination records, COBRA documentation, and any other benefits documentation for six years after employment has ended.
The Americans with Disabilities Act requires that all employee medical records be securely stored for 3 years after termination. This includes any FMLA (Family and Medical Leave Act) leave requests, workers’ compensation claims and documents, results of drug and alcohol tests, ADA accommodations, and more. Any health insurance enrollment forms and COBRA notices must also be stored.
Time and Attendance Records
While no law specifically applies to time and attendance records, it is advisable to maintain these records for the full period of employment plus 5 years. This ensures the business is in possession of all necessary records in the case of litigation or other labor related incidents.
Workers Compensation Records
Federally, OSHA (the Occupational Health and Safety Administration) requires that businesses retain all records related to workplace injuries for 5 years. At the state level, the laws for retaining these records can vary widely, so it is important to check directly with the state agency responsible for specific guidance.
The rules regarding the retention of discrimination related documents also vary from state to state, as well as the type of discrimination documented (age, gender, race, disability).
Federally, the EEOC (U.S. Equal Employment Opportunity Commission) requires that all records related to the charge or action must be retained until the final disposition of the charge or action, meaning the expiration of the statutory period within which the aggrieved person may bring an action in the U.S. District Court.
Why do employers need to store employee data?
While it is true that employee data retention requirements are a nuisance, they generally exist to protect employee rights and the confidentiality of their personal data. The importance of these rules becomes clearer when you consider the following:
Employee Access to Personnel Files
While the laws surrounding access to personnel files vary from state to state, employees generally have the right to request and access the information contained in their own personnel file, including job applications, compensation records, performance evaluations, and disciplinary records for as much as a full year after termination.
Equal opportunity employment
The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcing laws that prevent businesses from discriminating against employees and job applicants on the basis of race, color, religion, sex, nationality, disability, or age. The additional recordkeeping requirements imposed by these laws allow for the preservation of employment data including compensation and pay wages, promotions/demotions, seniority merit systems, and any other data that may demonstrate a clear bias against of in favor of an employee based on the above criteria.
When a business is involved in employment-related litigation, all documents related to the matter must be stored by the employer until the end of litigation in order to preserve evidence. Failing to meet this requirement or an inability to recall a stored document could be seen as an attempt to obfuscate case evidence.
Federal agencies such as the Internal Revenue Service or U.S. Citizenship and Immigration Services (USCIS) may request documents in your personnel files. While the practice is relatively uncommon, failing to provide the information requested could lead to dire consequences.
How and when to destroy employee records
After you have fulfilled the requirement to store your employment records for the specified amount of time, it is important to create an effective disposal plan for your data. All paper employee and applicant records, as well as confidential employee data maintained by an organization’s HR department must be destroyed once the retention dates have passed.
Securely disposing of employment records that fall outside your retention policy is as important to maintaining compliance as meeting the required storage timelines.
Since employment records contain personally identifiable information like Social Security numbers, home addresses, etc., it’s important that attention and care are given to how the disposal of this information is carried out. This applies to all employee records, not just those governed by Fair and Accurate Credit Transactions Act (FACTA)
The Federal Trade Commission provides the following recommendations regarding the disposal of employee data:
- All electronic employee files should be deleted from all storage locations, preventing the data from being reconstructed in the future.
- Paper documentation should be securely shredded or burnt, to prevent data theft and permanently destroy the data.
- It is recommended to hire a third-party provider who specializes in secure document shredding, which provides your organization with a certificate of destruction that serves as proof of proper document disposal.
HR departments should work with the IT department regularly, at least two times a year, to review and purge relevant electronic records. In the case of paper documentation, HR departments should destroy documents that contain sensitive information with a secure paper shredding service.