When running a business, it’s important to know which records to keep and the purpose they serve. A business that invests in a strong record-keeping system most of the time avoids costly legal and compliance risks.
Aside from maintaining accurate financial and accounting data, which comes in handy in potential IRS audits, it’s good practice for employers to keep staff records to avoid dire consequences.
How Long to Keep Records
If you have hired employees, the Equal Employment Opportunity Commission (EEOC) requires that you maintain all employment records for one year even after you have ended the employment of a worker.
However, to be on the safe side of federal and state laws, you should retain personnel records for at least 3 to 7 years after termination of an employee’s position.
Employee Records to Include in Personnel Files
Depending on the size of the firm, employers may have to deal with volumes of information involving their employees. If you have invested in a good record-keeping system, make sure to optimize it, so you have retrievable and well-organized information without any hassles. The following are critical records you should routinely maintain and the correct way to keep them as an employer.
Fair Labor Standards Act (FLSA) Records
The FLSA lays down rules on record-keeping which every employer must adhere to or risk penalties. You should retain the following information for at least three years, either manually or using a system as you see fit.
- Full name and address of the employee
- Date of birth and gender of the employee
- Social security number
- Date of employee’s first day of work
- Wage rate tables showing items such as total hours worked every workweek and hourly rates offered
- Schedules of employee shifts
- All deductions from employee’s compensation
Note- Make sure to retain tax records if you’re deducting from employees’ wages for benefits such as under the employee retirement income security act (ERISA), state SITW(state income tax withholding) and other withheld state taxes.
- Date when an employee is demoted or promoted
- Date of employee’s termination or discharge
How to keep them- In general, the FLSA doesn’t dictate how you should keep the above records. However, keep in mind that the Department of Labor (DOL) gives you 72 hours to submit all records they require to determine the correct compensation of your employee.
There will always be information relating to the hiring and onboarding processes that you may need in the future for reference at least for one year. They are:
- Job descriptions
- Employment applications and resumes
- Interview notes
- Letters of offer
- Employee handbook
- Form I-9s
- Payroll and benefits records
- Wage rates records
- Performance evaluations
- Awards and nominations for outstanding performance
- Any warnings or disciplinary action taken against an employee
- Notifications of termination
How to keep them- Due to laws of retention, it’s advisable to keep these files in a secure place that promotes confidentiality.
Some laws require some information to be kept separate from personnel files, including:
- Employee medical records
- Information under COBRA regulations
- Employee background checks, either paper or online
In addition, there are other records to always safeguard to avoid serious legal consequences:
- Records of employees EEOC or DOL complaints
- If an employee is in communication with a lawyer
- From 2021, always have secure and confidential medical records for any vaccination mandate and COVID-19 and influenza test results.
How We Can Help
Keeping accurate personnel records saves your business’s time, effort, and money when filing taxes, facing legal disputes, and reviewing your employees’ pay.
As bookkeeping experts and QuickBooks Pro advisors, J.Zollo & Associates will step in to set up a system that will effortlessly keep track of all relevant employee information in your company so that you can expertly navigate the retention rules. We also offer consultancy and training services, enabling you to access an all-in-one business solution. You will be partnering with a team of experts with a proven track record of working with industry-wide clients for a 100 % satisfaction guarantee. Please contact us today.