How to Develop and Implement a Retention Policy

business team creating a retention policy

From employee records to financial statements, most businesses are responsible for storing confidential information. More often than not, much of this information is stored on paper. 

For this reason, it is absolutely critical that businesses establish a comprehensive retention policy to ensure the proper management and timely disposal of sensitive records. 

A records retention policy is crucial for legal, regulatory, and operational reasons, and creating one should be one of your top priorities as a business.

In this guide, we will delve into proper records retention, its key components, and best practices for developing and implementing an effective retention policy for your business.

What is Retention Policy?

A retention policy is the set of guidelines and procedures that an organization establishes to maintain, preserve, and dispose of sensitive records in accordance with legal, regulatory, and operational requirements.

Retention policies define how long specific types of records should be kept, how they should be stored, and the methods of disposal used once their retention period expires.

What is the Purpose of a Retention Policy?

The purpose of a retention policy is to ensure that an organization complies with legal and regulatory requirements, minimizes risks associated with improper record handling, and maintains operational efficiency by keeping only the necessary records. 

What Types of Records Does a Retention Policy Address?

There are several different kind of records that have retention requirements based on legal, regulatory, and operational needs, including:

Financial records

These include invoices, receipts, tax documents, financial statements, and accounting records. Retention periods for financial records can vary depending on the jurisdiction and applicable regulations. 

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 depend on labor laws, tax regulations, and 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 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 the specific 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.

What are the Components of a Records Retention Policy?

A well-crafted records retention policy should include the following 6 elements:

Purpose: Clearly state the objectives and applicability of the policy.

Definitions: Define key terms and concepts related to records retention.

Roles and responsibilities: Assign responsibilities for records management tasks to specific individuals or departments within your organization. Properly distributing responsibility is key to the long term success of any retention policy.

Concrete retention schedule: Establish the duration for which each type of record must be retained. These periods should be closely aligned with state mandated retention schedules and federal data retention regulations to ensure legal compliance.

Legal and regulatory requirements: Identify the relevant laws and regulations governing records retention that apply to your organization.

Disposal methods: Define the accepted methods for the disposal of sensitive records after their retention period expires. 

How to Create a Records Retention Schedule

A records retention schedule is a key component of a records retention policy. It outlines the specific retention periods for each type of record and serves as a roadmap for managing the organization’s records.

Steps to Develop a Retention Schedule

  1. Inventory: Conduct a thorough inventory of all records within the organization.
  2. Categorize: Group records into categories based on their function or subject matter.
  3. Research: Determine the legal and regulatory requirements for each category of records.
  4. Establish retention periods: Assign a specific retention period to each category based on the research findings.
  5. Review and approve: Have the retention schedule reviewed and approved by relevant stakeholders, such as legal counsel and management.

Implementing Your Records Retention Policy

After developing a records retention policy and schedule, organizations must take the following steps to effectively implement them:

  1. Communicate: Clearly communicate the policy and schedule to all employees and relevant stakeholders.
  2. Train: Provide training to employees responsible for records management, ensuring they understand the policy, schedule, and their responsibilities.
  3. Establish procedures: Develop detailed procedures for managing records throughout their lifecycle, from creation to disposal.
  4. Monitor: Regularly monitor compliance with the records retention policy and schedule, addressing any issues that arise.
  5. Enforce: Implement appropriate consequences for non-compliance with the policy and schedule, including disciplinary action when necessary.

The Importance of Regular Audits and Updates

Organizations should conduct periodic audits of their records retention policy and schedule to ensure ongoing compliance and effectiveness. This process may include:

  1. Assessing compliance: Review records management practices to identify any gaps in compliance with the policy and schedule.
  2. Updating legal requirements: Stay up-to-date with changes in laws and regulations that may impact records retention requirements.
  3. Modifying retention periods: Adjust retention periods as needed, based on changes in legal requirements or operational needs.
  4. Improving processes: Identify and implement process improvements to enhance records management efficiency and effectiveness.

Legal and Regulatory Compliance

Compliance with legal and regulatory requirements is a critical aspect of records retention. Some key considerations include:

  1. Data protection: Comply with federal data privacy laws by implementing appropriate safeguards for personal data.
  2. Industry-specific regulations: Adhere to industry-specific regulations, such as the Health Insurance Portability and Accountability Act (HIPAA) for healthcare organizations or the Sarbanes-Oxley Act (SOX) for publicly-traded companies.
  3. Records preservation: Ensure records are preserved as required by law. For universities, government agencies, and some non-profit organizations, this includes following state mandated records retention schedules.

The Role of Technology in Records Management

Technology often plays a vital role in records management, allowing organizations to automate most record keeping processes, improving efficiency and enhancing the security of their records. Key technology solutions include:

  1. Electronic records management systems (ERMS): An ERMS streamlines records management by providing a centralized platform for organizing, storing, and retrieving electronic records.
  2. Document management systems (DMS): A DMS simplifies the management of physical records, facilitating organization, storage, and retrieval.
  3. Data archiving solutions: Archiving solutions help organizations preserve records for long-term storage while ensuring they remain accessible and searchable.
  4. Secure destruction services: Professional destruction services ensure that sensitive records are disposed of securely and in compliance with legal and regulatory requirements.

Final Thoughts

Developing and implementing a comprehensive records retention policy is essential for organizations to ensure compliance with legal and regulatory requirements, maintain operational efficiency, and minimize risk. By following the best practices outlined in this guide, organizations can create a robust records retention policy that serves as the foundation for effective records management.

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