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How to Comply with Employee Record Requirements

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Knowing what employee records to keep can be confusing. There are federal, state, and local requirements. If your business is a government contractor, you may have additional employee records you have to keep. 


How Long Do Employers Keep Employee Records?

After termination, the length of time employee records must be kept will vary. Often, employers will use a 7-year rule after termination for destroying employee files.  This timeframe usually covers most federal and state laws. 

Under federal law:


One Year

  • Keep all employment records for one year after the date of separation. These include hiring documents, employment documentation, and termination information. 
  • Keep I-9’s for one year after the employee’s termination date (three years from the date of hire). 
  • You should keep all benefit plans such as insurance and pension for the full period of the plan or system while it is in effect and at least one year after termination. 


Two Years

  • Any employers covered by the federal anti-discrimination laws must keep items such as wage rates, job evaluations, seniority or merit systems, and collective bargaining agreements for two years.
  • Any documents that explain the basis for paying different wages to employees of the opposite sex for two years. 


Three Years

  • Keep all payroll records such as timecards for three years. Payroll tax records should be kept for four years (e.g., unemployment taxes). 
  • All family and medical leave documents should be kept for three years. 


Six Years

According to the Employment Retirement Income Security Act (ERISA), keep retirement income, and 401k plan details for 6 years. 


Records that Should Be Separated

For physical records – never combine the files of employees. Every employee should have one folder with subfolders. Supervisors shouldn’t have access to some confidential files. Some information is only for the business owner or the HR department.

  • Medical Records – The Americans with Disabilities Act (ADA) requires that medical records be confidential. 
  • Immigration Forms – Keep I-9’s separate from all other employee records. Since these records can be audited, you will want to keep them in a file on their own. They can also be kept electronically but an inspector should be able to access those records. 
  • Credit Information – Keep credit reports or financial data separated.
  • Complaints or Investigations – Any investigation or lawsuit information should be kept separate from the employee personnel file. 



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State Guidelines

Most states follow federal guidelines. As laws change each year, it is important to research your state.  

These states require you to keep payroll records longer:

  • New York – six years
  • California – four years for nonexempt, eight years for exempt
  • Illinois – five years
  • Washington – three years. They also have more specific requirements on what to maintain. 

It is a good practice to keep all payroll-related employee records for at least three years. However, you should follow your state laws or other guidelines if more time is required. 


How to Maintain Employee Records

Records can be maintained by keeping paper files or electronic files. Whichever method you choose it is important to be consistent. There are benefits to keeping your files electronically.

Maintaining your records in an electronic format can:

  • Prevent using physical storage for all your records 
  • Prevent records being lost or misplaced 
  • Keep files confidential 

It is important to note however that some records such as retirement information must be accessible to the employee after their termination.  

Vendors that keep your electronic information should provide reliable service and security features as well. For a vendor that keeps all your employee files, you may need to establish access to different job titles. For example, your supervisors may not have the same access as you, the owner, for confidential records. 


Best Practices of Record Keeping

If you choose to keep paper files or some files paper and some electronic, here are some best practices to keep in mind.

Keep timecard records electronically. Using paper records can result in mistakes, lost files, and unauthorized access. Electronic storage can keep your records more secure. 

Supervisors should not have access to confidential information such as medical forms or employee tax information. It is important to understand employee privacy.  You can be held accountable if private information is released. 

Record keeping laws can change and especially state laws. Know the requirements for your state. 

Allow employees access to their personnel records. There are no federal laws, although some states can restrict the information an employee is allowed to see. Don’t make any personal notes about an employee. If you put any document about an employee in their file, remember it can be discoverable should litigation occur. 

If your employee records will be kept in paper format, they should be stored at a secured location. 

When disposing of your employee records, keep a log of the items you shred. 


Sick Leave

Some states and cities require you to track employee sick time. For example, New York states that employers with 5 or more employees and an income of $1 million must provide paid sick leave. Employers with 4 or less employees and an income less than $1 million must provide unpaid sick leave. 

Maine requires employers with at least 10 employees in the state to provide paid time off that can be used for any reason, including emergencies, illnesses, and vacations.

California has a statewide paid leave law and some cities have further paid sick leave requirements.  

Because of these laws, you want to ensure your timecard records are accurate. You should be able to access these records when needed at any moment. This is another reason electronic records can be vital especially when it comes to timecards. 

If you do not have good timecard records, you could be responsible for back pay later. 


Why are Accurate Employee Records Important?

With accurate employee records, you will know you are compliant with federal and state labor laws. With accurate time clock rules, you can track attendance, sick leave, vacation, and know exactly why someone is not at work. You can also see trends and know an employee’s history. These employee records are vital in case of litigation or inspection.  

Consider using systems that may help you such as an inexpensive time tracking app for your small business like ezClocker. It keeps track of your employees’ hours, schedules so your employees don’t exceed their hours, and reports any overtime when it’s time to run payroll. 

Using this valuable timekeeping app will help you get rid of paperwork. Furthermore, using an app like ezClocker will help you calculate overtime. It will automatically calculate daily, or weekly overtime based on the hours you specify. If you are using EzClocker for your time tracking, all timecard records are easy to access anytime they are needed. There is no need for physical timecards when you are using an electronic system. 

Find good systems and establish good processes to store your records. If your business falls under OSHA guidelines you may have more laws depending on your industry. Likewise, if you are a government contractor, you may be required to maintain affirmative action records. 

If you are a small business owner with the potential to grow, establish your recordkeeping strategy early before you get too many new employees. You want systems and processes which will take minimum time to use but are efficient. Whatever methods you choose, ensure they are reliable and confidential. 


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Author: Kimberley Kay Travis

Kim Travis, co-owner of Travis and Adams Consulting Group, has over 20 years’ experience in human resources and leadership roles. She has specialized knowledge in employment law, employee relations, recruiting, management consulting, leadership development, manufacturing safety programs, and writing business articles and blogs.

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