Posted in HR | by: Elizabeth Robinson

Which Employee Records Do You Really Need to Keep? Here’s Your Breakdown.

Well-kept employee records are like a rain jacket on a tropical trip—you hope you won’t need them, but they’re critical if you do. With the stacks of paperwork you already have in your office, it can be tempting to cut corners. But if an employee takes action against your company or you’re audited by the IRS, you’ll want to access all the employee information you need without freaking out.

Does this mean you need to stash away every scrap of paper your employees touch? Not quite. In fact, you can ditch some records right away. The requirements for what and how long to keep employee records vary by state, so be sure to check with an expert in your area.

To get you started, here’s an overview of which files you’re required to hold onto after an employee leaves, and which you can throw away, worry-free.

The employee records you need to keep on file

When it comes to employee paperwork, protecting yourself is the name of the game. Here are the types of files to keep on former and present employees, and what needs to go in each one.

1. Basic employee data

Start off by keeping the basics. The law requires it, and you’ll thank yourself when it’s time to tackle performance reviews. What to include in your employee’s file? The following bits of information for each team member:

  • Name
  • Address
  • Job title
  • Dates employed
  • Wage or salary  

The federal law requires that these records be kept for one year after an employee’s termination. However, some local laws can differ, so take a look at your state’s requirements.

A quick heads up: there are some records you shouldn’t keep separately, as they’re considered confidential. Only keep records about employment-related decisions, so put any medical information as well as internal notes that express opinions in a separate private file. 

2. Hiring and performance records

You’ve hired solid-gold employees so far, and any candidates you haven’t hired have taken the news perfectly fine. But if anyone does question a hiring decision, you’ll want to prove you didn’t discriminate during the process. To protect yourself, keep the following items:

  • All copies of your job postings. 
  • A list of candidates you considered and their resumes, notes from interviews, and a written case for why you selected your new hire.

Experts recommend you hold onto these records for one year after the creation of the document or hire/no hire decision.

It’s also a good idea to preserve performance reviews, promotions, and any notes related to problems on the job. If a former employee sues you for what they think is wrongful termination, any records that document sub-par performance can come to the rescue.  

3. Payroll and benefits details

Employment laws like the Age Discrimination in Employment Act (ADEA) and the Fair Labor Standards Act (FLSA) require you to keep payroll documents on hand for four years. Thankfully, this means simply keeping a copy of pay stubs you already have on file.

If you use an online payroll provider like Gusto, those paperless paychecks are accessible at any time—no need to mess around with the printer.

As for benefits, keep information on employee retirement, life insurance, health insurance, COBRA, and short- and long-term disability plans for six years. Also hold onto records related to Family and Medical Leave Act (FMLA) benefits for three years. Why keep all this? When it comes to a dispute over benefits or insurance, it’s your job as an employer to prove how much you do or don’t owe.

4. Tax paperwork

Tax forms make everybody’s heart racing faster, right? Okay, they aren’t the sexiest of documents, but they’re important to keep safe because your business can be audited anytime within three years of filing a return. Here are some of the main documents to hold onto for four years:

  • W-2s
  • W-4s
  • 1099s
  • Form I-9s
  • Federal and state payroll tax deposit forms
  • Federal and state payroll tax forms, including Forms 940 and 941
  • FICA (Social Security and Medicare) and FUTA (unemployment) taxes

The employee records you can ditch

Retaining more than you need can weigh you down. Here are the records you don’t necessarily need to keep when an employee leaves:

1. Duplicates

Between employee reviews and W-2s, you have plenty to keep track of already. Doubling that amount is just overkill. So keep the forms and records you need to comply with laws and protect your company from potential jams. Then, let yourself off the hook when it comes to backups.

2. Worksheets and goal-setting records

Let go of educational transcripts, awards, certificates of excellence, and details on completed training programs. They may be super helpful when you’re planning for a performance review, but they’re not worth the storage space when the employees they refer to are no longer around.

3. Emergency contacts

If a member of your team has an accident, you need to know how to reach their spouse, partner, or family member pronto. After they’ve left your business, there’s no need to call their next of kin, so delete away.

Keeping a paper trail for every employee—both past and present—can be a little daunting. But there’s no better peace of mind than being prepared for a rainy day. Take the time to create a recordkeeping system that works for your business, and don’t forget to ditch what you don’t need. Then you can get back to the work you actually want to do.

About Elizabeth Robinson

Elizabeth is a copywriter with a long history writing for tech and finance. She has an MFA in poetry, a keen eye for misplaced modifiers, and a soft spot for shar-pei mixes like her sidekick, June.