Complying with employment record requirements is just one of many time-consuming (and confusing) areas that takes you away from running your business. The laws and regulations are constantly changing and add to that, federal, state, and local agencies have separate mandates for managing your employment records. Here are a few guidelines to consider for record-keeping.
ESTABLISH AN EMPLOYMENT RECORD POLICY
Keep and destroy employee records under your company’s record retention policies , as well as federal and state laws governing record retention. If you don’t have a system, it’s essential to seek advice from your legal and tax adviser to address areas specific to your business.
Generally, your record policy should include a definition of types of records, a retention schedule, storage location, security and privacy guidelines, and destruction and audit procedures. The Society of Human Resources Professionals (SHRM), provides the framework on how to create a policy for record-keeping here.
Types of Records To Keep
You should maintain an employment history for each employee, including records on potential candidates. Keep the following information for each employee:
Pre-employment documents. This includes resumes, job applications, job descriptions, offer letters, and acknowledgments of receipt of your company's employee handbook.
Employment documents. Examples include records related to job performance, reviews, promotions, compensation, attendance records, warnings, and employment contracts.
Separation of employment documents. This may include exit interviews, resignation letters, and unemployment documents.
DEVELOP A RECORD RETENTION SCHEDULE
How long should you keep employment records? There are many different federal and state laws that govern employment records. Employers must ensure that all documents are maintained, either in hard copy or electronically, for the following recommended periods:3 Years. Keep sales commission, expense reports and new hire reports by state.
4 Years. Keep records of employment taxes for at least four years after filing. Include, wage, annuity, and pension payments, reported tips, payment records while absent due to sickness or injury, W-4 forms, tax deposits and filed returns.
5 Years. Affirmative action plans and records, VETS-4212 reports, and OSHA Forms 300/300A (posting date plus five years).
6 Years. Form 5500.
30 Years. Required medical exams and exposure records (OSHA).
Keep Permanently. EEO-1 Reports, USERRA leave records and training manuals.
You can find the complete list and details on the IRS site here.
TERMINATION RECORD REQUIREMENTS
Termination + 3 years. Keep employment records such as, job descriptions, recruitment notices and ads, applications and resumes, interview evaluation, assessment results, background checks, references verification, offer letters, employment contracts, Form I-9, EEO Data forms, disciplinary records, pay history, performance reviews, relocation agreement, resignation letter, and termination forms. Also keep health and benefits records, such as beneficiary forms, health plan elections, drug test results, education assistance records, FMLA leave reports and reasonable accommodations records.
Termination + 4 Years. Direct deposit records, garnishment records, final payroll deduction checklist and unemployment claim records.
SAFELY DISPOSE OF EMPLOYMENT RECORDS
Destroy paper and electronic personnel records and confidential employee data after the retention deadlines have passed. Because employment records contain confidential and sensitive information, employers should establish specific policies and procedures for disposing of records safely. The Federal Trade Commission (FTC) recommends destroying or erasing electronic files, shredding, paper documents or hiring a certified contractor.
FOR THE RECORD
HR record-keeping is just one of many time-consuming areas that take you away from running your business. Relief from the complex, administrative tasks is one of the primary reasons many companies outsource their HR-related tasks to an IRS-certified professional employer organization (PEO), like Propel HR. This certification provides businesses with another level of added protection. If something goes wrong, the certified PEO is responsible, not the business.