Employees ink a lot of paperwork when they're hired, and the flow of documents continues throughout their tenure with your company. Within that flow there are private documents, legal documents, signed and unsigned documents, and some documents you may not even need.
An employee's personnel file is an official company record. In some states, current and former employees have the right to see their personnel files.
Federal agencies such as the Internal Revenue Service or U.S. Citizenship and Immigration Services (USCIS) may also request documents in your personnel files. Your records may also be required to answer a lawsuit.
When that happens, you don't want to go searching and wondering what to leave in and what to leave out.
With many employee forms migrating to electronic document systems, it's more important than ever to have a plan for filing, retaining, and storing employee documents.
A human resources (HR) document retention policy can ensure that you always have current, accurate, and relevant papers right where you can find them. It also lets you take advantage of the intelligence buried in all that paperwork.
Overview: What files should you have on each employee?
It's important to document an employee's record of employment, beginning all the way back to the recruiting and hiring process. Many employers are surprised to learn that they must keep records of job applicants as well as hires in case of a discrimination complaint.
HR software can collect this information and even crunch the numbers and run reports for you. Then you can work proactively as your own watchdog, checking for unintentional bias and fine-tuning your recruiting and hiring practices.
The importance of maintaining HR records continues as your employee stays on year after year. For example, say you have an employee with serious performance issues. You create a performance improvement plan, but the problems continue. Eventually, you terminate the employee.
That trail of performance appraisals and progressive discipline prepares the employee and backs your decision in case the terminated employee complains. One again, careful paperwork can reinforce HR best practices.
Proper HR document management is also important to protect your employees' sensitive information. Personal identifying information, financial documents, and health records must be securely stored. Mismanaging this information can harm your employees and cause legal problems for your company.
How long should you keep employees files and records?
Once an employee leaves your company, the clock on record retention starts. Knowing how long to retain records and which records you can archive or destroy is important to maintaining a manageable, efficient, compliant employee document repository.
This chart shows the employee documents you should maintain for job applicants and employees, along with minimum retention requirements following their separation or rejection from employment. Many legal and financial advisors recommend retaining documents for longer periods.
It's OK to set longer horizons for disposing of documents. The important thing is to deal with them consistently across all HR processes.
Chart of the employees’ files and records:
|Record Type||Minimum Retention Period|
|Job advertisements, position descriptions, resumes, application forms, and nonmedical screening tests for all applicants||3 years under ADEA|
|Background checks, credit reports, and financial records||1 year with secure storage and disposal|
|I-9s and copies of forms of identification (IDs)||3 years after hire or 1 year after separation in a secure, separate file with all employee I-9s|
|Employment offers and contracts, employee handbooks, and other signed documents||1 year|
|Medical records, health insurance enrollment forms, disability records, accommodation requests, medical exams, doctors' notes, and drug test results||1 year with separate, secure storage and disposal|
|Performance appraisals, disciplinary records, awards, and attendance records||2 years|
|Payroll records, W-4s, and time cards||4 to 7 years|
|Separation records including exit interviews, reasons for termination, termination or resignation letters, severance agreements, and other separation agreements||1 year|
|Nonmedical benefit plans, offers, and records||1 year|
|FMLA leave requests and documentation||3 years|
|Accident and injury records||5 years|
|Hazardous exposure records||30 years|
|Complaint and investigation documents||Until the claim is resolved|
1. Recruiting materials
You need to retain documents on applicants and hires to ensure that you're not discriminating against qualified candidates. Title VII of the Civil Rights Act (Title VII) requires you to keep records for one year, but the Age Discrimination in Employment Act (ADEA) requires three, so you'll need to comply with the higher standard.
Discrimination can be intentional or caused by policies with a "disparate impact" on protected employees. For example, you may require an English literacy test for employees who don't need advanced English skills, a practice that disproportionately eliminates candidates based on national origin.
2. Background checks
If you run criminal or credit checks, tread cautiously. Title VII, the Fair Credit Reporting Act (FCRA), and other federal laws limit your right to use this information and require that you securely store and destroy it.
You're responsible for IDs, but you don't have to copy them. If you do copy IDs, you must do so consistently for all employees, store them securely, and destroy them when the retention period ends.
4. Employee contracts
All signed contracts should be kept in your employees' personnel files to document your policies and agreements. This is important for defending your company from complaints and lawsuits. If new contracts replace old ones, keep the current copy in the file and destroy the old version.
5. Medical information
about your employees and their family members must be stored securely under the Americans With Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), and health standards overseen by the Occupational Safety and Health Administration (OSHA).
This includes doctors' notes, accommodation requests for medical conditions, and other medical information provided by employees.
6. Performance appraisals
Keep all performance assessments and disciplinary records on file for at least two years. This documentation can protect you in case of complaints regarding promotions and compensation. It also supports best practices in managing employees consistently, fairly, and legally.
7. Payroll records
and other payroll records must be stored for two to three years to comply with antidiscrimination and wage and hour laws such as the Fair Labor Standards Act (FLSA) and Age Discrimination in Employment Act (ADEA).
8. Separation records
Under antidiscrimination and wage and hour laws, all documents concerning an employee's resignation or termination should be kept for one year after separation from employment.
9. Benefit records
Nonmedical benefit records including enrollment forms and plans may be discarded after one year. You must take steps to protect employees' financial or personal identifying data, so some of these records may require secure storage.
10. FMLA leave
11. Accident and exposure records
Anytime an employee complains or files a lawsuit, you must retain related records until the claim is resolved. Your document management system should put an automatic hold on an employee's personnel file following a complaint to avoid accidentally destroying any relevant documents.
Legal implications of small business record-keeping
Failing to store and secure employee records can be costly. Potential fallout includes:
Citations and penalties: OSHA, the U.S. Department of Labor, the IRS, and other federal agencies, as well as state authorities, enforce record-keeping requirements with citations and fines. For example, record-keeping errors are the second-most common violation cited by OSHA. The maximum penalty for a violation was raised to $13,494 for 2020. Failing to keep documents such as payroll records can even lead to criminal charges.
Legal liability: If an employee sues and you can't produce records required by the court, you could lose the lawsuit and face additional charges of spoliation of evidence. An example is an Illinois case, , in which the company discarded an employee's calendar after her termination for excessive absences. The employee sued for discrimination and the calendar was requested during discovery. When the company couldn't produce it, the employee filed a negligent spoliation claim. In this case, the employer won, but that's a lot of time, money, and grief spent over a missing calendar.
Take charge of employee records
A comprehensive HR record management plan lets you direct the flow of employee information through your company to serve your ends.
In addition to ensuring legal compliance, careful records management can provide insights to drive HR policies, protect your employees' sensitive information, and reinforce HR best practices.