How Long to Keep Employee Files: Best Practices for Organizational Compliance

Effective employee file retention is incredibly important. These records hold a wide range of sensitive information, from employment contracts and performance evaluations to tax forms and benefit enrollments. Proper retention is critical as it supports legal compliance and efficient decision-making. 

Understanding the intricacies of employee file retention can help HR professionals promote organizational stability. Explore how you can safeguard your employees’ rights with a record retention plan.

The Basics of Employee Record Retention

When HR professionals know how long to keep employee files, they are better prepared to navigate federal and state laws. This is especially important, as failure to adhere to these regulations can result in costly legal repercussions. 

Federal laws, such as the Fair Labor Standards Act (FLSA), require employers to retain records related to wages, hours worked, and conditions of employment for specified periods. Similarly, state laws often impose their own record retention requirements, which can vary considerably. Compliance with these laws mitigates legal risks and helps protect employees’ rights.

How Long to Keep Employee Files

Many organizations use a 7-year retention period as a rule of thumb since that often covers legal compliance for most federal and state laws, according to SHRM.

However, there are several form types with much shorter retention periods, like I-9 forms. Even more noteworthy are the forms that have a longer one, like OSHA exposure records. These general retention guidelines can help you establish a timetable for your filing system — but always check with your legal team to stay compliant with local laws. 

Ultimately, retention guidelines differ for each category. HR teams are typically responsible for creating policies specific to each employee file type.

Personnel

Employee personnel files, which include information like employment contracts and performance evaluations, should be retained for the duration of employment plus seven years. Hiring and applicant tracking documents should be kept for at least one year. However, there are a few exceptions, such as maintaining records for minors until they reach the age of majority.

Eligibility

Documents related to employment eligibility, such as I-9 forms, must be retained for three years after an employee's hire date or one year after termination, whichever is later. This helps employers comply with immigration laws and provides proof of an individual's eligibility to work in the United States.

FMLA

Family and Medical Leave Act (FMLA) records, including leave requests and medical certifications, should be kept for three years after the end of the leave. The FMLA allows employees to take job-protected leave for specific family or medical reasons, and retaining these records helps protect both employees' rights and employers' interests.

Payroll

Payroll records — including timecards, wage rate tables, and tax withholding forms — should be retained for at least four years. Tax records, such as W-4 forms and payroll tax returns, should be kept for at least four years after the tax due date. These records are essential for tax audits, and responding to inquiries from tax authorities.

Best Practices for Storing and Maintaining Employee Records

There are several benefits to strategic storage, including data accuracy and accessibility. Following these best practices can help your organization stay on top of managing employment files.

Utilizing a Human Resources Information System (HRIS)

HRIS software streamlines record management by centralizing employee data in a secure, digital platform. It offers benefits like easy retrieval and real-time updates. HRIS also enhances data security and privacy by providing role-based access control and encryption.

Physical Records

Maintaining physical documents can be challenging due to space constraints, as well as a risk of loss or damage. Of course, many organizations opt for digitizing physical records to overcome these challenges. If that is not an option, consider using archival-quality materials. Consider adopting a systematic retention and disposal schedule to optimize your space with only the necessary documents. 

Spreadsheets

Spreadsheets are a double-edged sword. They offer flexibility for record-keeping, and some specialists may prefer the control or customization of spreadsheets. However, they lack the robust security and data validation features of specialized HRIS software. Over-reliance on spreadsheets may lead to data errors and limited scalability. 

Employee Data Security

Protecting employee data is an ongoing responsibility. This means implementing strong access controls and performing regular security audits. Another important compliance consideration is data privacy laws, like GDPR or HIPAA. Your company should train HR staff on data security best practices to foster a culture of data protection.

Overall, these practices not only enhance HR operations but also safeguard sensitive employee information and ensure compliance with legal requirements.

Handling Employee Record Requests and Audits

Effective management of employee records can help HR professionals avoid audit penalties and uphold data security. When handling record requests, it's important to verify the request's legitimacy and protect sensitive information in accordance with privacy laws.

To navigate HR audits, your team can follow this checklist:

• Review records for accuracy, completeness, and retention policy compliance.
• Organize records according to legal requirements and company policies.
• Restrict access to authorized personnel only by using robust data security measures.
• Ensure compliance with employment laws, including wage regulations and anti-discrimination statutes.
• Evaluate training and certification records for industry-specific compliance.
• Assess records related to leave policies like FMLA and PTO.
• Verify I-9 compliance and the currency of employment eligibility documents.

Of course, managing employee records is an ongoing task. Instead of organizing your files once, HR teams may need to continuously update records to reflect changes. It can also be beneficial to provide regular training on record-keeping and data security. 

It is important to stay vigilant in reviewing and updating HR policies as it helps align your strategy with evolving laws and regulations. This proactive approach to employee record management helps boost data security and compliance standards in your organization.

Proper Disposal of Employee Records

Proper disposal of employee records is another critical component of data management and privacy protection. You can maintain compliance and safeguard sensitive information by following secure data disposal practices.

Secure Data Disposal

Effective data disposal is vital because improperly discarded records can pose significant security risks. If the documents are not disposed of appropriately, they can be used by unauthorized personnel.

It's important to maintain a clear, documented policy for disposing of employee records and regularly educate staff on these procedures. Inadequate disposal can lead to data breaches, which may result in legal liabilities.

Document Destruction

Paper records require methodical document destruction. Shredding is one of the most common and widely accepted methods as it is extremely effective. Consider using cross-cut or micro-cut shredders, as they render documents virtually unreadable. 

Establish secure storage for documents awaiting destruction, and maintain a clear chain of custody during the disposal process. Consider outsourcing document shredding to professional services that adhere to strict security protocols. This can save you time while still ensuring you follow best practices.

Electronic Record Deletion

Securely deleting electronic records is just as important as destroying physical documents. Your team can begin by identifying all electronic employee documents that need to be deleted. This is when it is beneficial to use reliable data erasure software that overwrites data multiple times to make it unrecoverable. 

Ensure that backups and archived copies are also deleted in accordance with your organization's data retention policies. You may want to document the entire process, including who performed the deletion and when it occurred, for auditing and compliance purposes.

By implementing secure data disposal practices for both physical and electronic records, your organization can protect sensitive information and maintain the trust of your clients or customers.

Building a Strong Foundation for Employee Wellness

Adhering to retention guidelines for employee records whether physical or digital, supports decision-making and protects sensitive employee information. It’s a foundational step in creating a healthy work environment. 

This is just one of many ways to take care of your employees. Another idea is offering a wellness program that supports employee health. Wellhub helps you provide a variety of wellness resources, including access to local gyms. This support from employers builds a healthier workforce and helps with employee retention, too. 

When 87% of workers say they would consider leaving a company that does not focus on employee wellbeing, there is no time like the present to look into wellness programs. Talk to a Wellbeing Specialist for more ways to support employee wellness within your organization.

References

• Wellhub. (2023, October 18). The State of Work-Life Wellness 2024. Retrieved February 16, 2024 from /en-us/resources/research/work-life-wellness-report-2024/.