Unsure of Which Employee Records to Keep?

Over the course of the hiring process, an employer accumulates quite a bit of information, some mandated by law, about a new employee.

Once the employee has completed the hiring process, employers typically keep a number of different employee records, often called personnel files, as a way of documenting the history of an employee’s relationship with a company from employment application through exit interview.

Employers may also be required to keep certain records to comply with specific state and federal laws. Understanding what employment records to store in a secure personnel file helps you avoid potential mistakes and fines.

Which records should be kept in an employee’s personnel file?

  • Basic Information Documents: The employee’s full name, social security number, address, birth date, and emergency contact.
  • Hiring Documents: Job descriptions, employment applications, and resumes.
  • Job Performance Documents: Performance evaluations, notes regarding performance issues, corrective action or disciplinary letters, awards, nominations, commendation letters, promotion records, and records of training or education.
  • Employment-Related Agreements: Employment, non-compete, and nondisclosure agreements.
  • Compensation Documents: Salary letters, state and federal Form W-4s, and timecards.
  • Termination Documents: Termination letters, exit interview forms, benefits notices, and unemployment compensation forms.

 Which records should be kept in a confidential file separate from an employee’s personnel file?

  • Medical records
  • Records relevant to workers’ compensation claims
  • Employee leave documents
  • Form I-9s
  • Workplace investigation documents
  • Background check documents

How long should records be kept?

  • Numerous federal laws impose specific requirements and can vary, depending on the document, from one to six years. State laws impose their own recordkeeping time requirements as well. A best practice would be to retain required records and keep a personnel file for seven years after any employee terminates employment. Among the reasons for this recommendation are that your business may be called upon to provide an employment reference for the employee in the future or may be drawn into a dispute over the reason for the termination.

How should records be secured?

  • All paper records should generally be kept in a secure location, such as a locked cabinet or locked office.
  • Electronic records should generally be kept on password-protected systems.
  • Identify individuals authorized to access personnel and confidential files, and ensure that administrative, physical, and technical safeguards are in place that restrict access to those individuals only.
  • Define the specific circumstances in which employee files may be accessed or copied.

Please note that additional requirements apply to group health plans that create or receive employees’ electronic protected health information.

How should records be disposed of?

  • Papers should be burned or shredded
  • Electronic files should be destroyed or erased

Audit files periodically

You should establish a time to periodically review each employee’s personnel file, perhaps when you conduct their annual evaluation. During this review, consider whether the documents in the file are accurate, up to date, and complete. When you audit the personnel files, you should be looking to take out any documents that are not necessary. As you review each employee file, determine if it contains:

    • Every written evaluation of that employee, to the best of your knowledge.
    • Every written document that pertains to all raises, promotions and commendations that the employee has received.
    • All written documentation that pertains to all warnings or other disciplinary action taken against that employee.
    • Copies of current contracts or other agreements between you and the employee.
    • Written and signed acknowledgement of receipt of the current employee handbook.

What kind of records need to be kept for applicants who aren’t hired?

To cover your business in case you’re accused of unfair employment practices, it’s best to keep a folder for job seekers with their application information. Documents in this file, including resumes and applications of candidates you didn’t hire, can be purged after one year. If you use online job boards, all applications, resumes and communications are available online so you don’t have to maintain paper copies at all.

Better safe than sorry

Because record keeping rules vary according to federal and state government requirements, it’s prudent to maintain employee records for the maximum length of time. It’s perfectly fine to store those records electronically, so you don’t have to allocate space and resources to paper records. When handling sensitive employee data and information, you’ll want the best possible policies and procedures in place. Non-compliance with the law — even if it’s an honest mistake — can ruin your business. Whenever you are in doubt about retaining a document, hang on to it or seek legal advice before you destroy it.

Article Written By: Jim Jarvis with Southwestern Payroll