How long do employers keep employee records?
Recordkeeping is a core part of any human resources department, and it also happens to be one of the most confusing and complex.
Why is that?
It has to do with the myriad of recordkeeping requirements & employment record retention laws that vary from state to state.
Not only that, but the IRS, Fair Labor Standards Act (FLSA), and the U.S. Equal Employment Opportunity Commission (EEOC) each have unique record retention requirements that you must follow. Otherwise, your organization could wind up in hot water if you’re subjected to an audit, which is something you definitely don’t want to deal with.
A question most new HR professionals ask is, “How long do I have to hold onto these employee records once they’re no longer with the company?”
Answering this question is easier said than done, which is why I’ve put together the ultimate guide for retaining employee personnel records.
By the end of this article, you’ll know how long to keep:
As you can see, there are many different types of employee files that you need to retain after termination, which is why understanding employee record retention is a must for any HR department.
Stick around to learn which documents you need to keep and which you can get rid of without experiencing any consequences.
Which Files Do You Need for Your Employees?
First, let’s start by breaking down the records you must create and keep for each employee.
Important note: In addition to employee records, you should also hold onto every job application you receive for open positions. Should an unhappy applicant file a discrimination claim against your organization, having job application & interview records on hand can be a lifesaver.
Besides appeasing employee record retention laws, keeping employee records serves another vital purpose for HR departments – to provide a paper trail to protect your organization in case of complaints or lawsuits.
In general, there are three types of employee files you should keep:
Personnel files. These include performance evaluations, signed copies of your employee handbook, employee identification numbers, emergency contact information, awards, training records, and termination letters.
Payroll files. Your payroll files should include W-4s, W-2s, timesheets, direct deposits, and wage rates.
Medical files. All employee documentation related to benefits should go in your medical files. This is where you should also store FMLA (medical leave) paperwork, OSHA injury reports, and requests for accommodation under ADA (Americans with Disabilities Act).
While it may seem like your I-9s should go in your personnel files, a better strategy is to store I-9s in a completely separate file.
Why is that?
Should your organization undergo an immigration-related audit, the investigator will want to examine all your I-9s. If they’re lumped in with your personnel files, the investigators could also access sensitive employee contact information, which could violate your employee’s privacy or subject you to further employee investigations.
That’s why it’s best to create a unique file just for your I-9s.
Federal Employee Record Retention Laws
It’s essential to know all the federal laws that require employee record retention, including the following:
ADEA (Age Discrimination in Employment Act) record requirements state you must retain payroll records for three years. You also must retain employee benefits files for the entire duration of the plan plus one year after termination.
The Fair Labor Standards Act (FLSA) states employees must hold onto payroll records for three years.
The EPA (Equal Pay Act) states that employers must retain all records justifying paying different wages to members of the opposite sex for two years.
If an employee is involved in a federal civil rights dispute, you need to hold onto all employee files until there’s either a resolution or when the EEOC issues a decision on the matter.
You also need to consider any state laws that may affect your employee record retention (more on this in a bit).
Reference this list if you’re ever unsure about whether you should keep an employee document or not, as you don’t want to violate any of these federal laws.
How Long Should You Keep Employee Records?
Now that you know more about federal record retention laws, it’s time to learn how long you should hold onto each type of document.
How long do employers keep employee records?
It varies based on a few factors, including the employer’s industry, state, and any federal laws that apply.
It’s imperative to hold onto employee records after layoffs, but how long should you keep them? Let’s find out by examining the most common types of employee records.
I-9 forms verify the identity & eligibility of employees to work inside the United States.
You need an I-9 on file for every employee at your organization, and as stated previously, you should keep them in a file separate from other records.
You need to keep employee I-9s and accompanying ID documents for 3 years after hire or 1 year after separation.
Once the retention dates pass, you must shred the documents to ensure employee privacy. This ensures compliance with the INA (Immigration & Nationality Act) & IRCA (Immigration Reform & Control Act).
Does your company provide background checks for all potential employees?
If so, you’ll need to hold onto them for at least one year after employment termination.
While background checks cost money, sometimes employers choose to conduct multiple background checks on a few qualified candidates.
However, there’s no need to retain background checks for employees that you do not hire, so you can get rid of them.
For employees that you do hire, you need to hold on to any credit checks, driving records, consent forms, criminal history forms, and any other documentation related to background checks.
Once one year has passed, you’re free to shred all background check documents tied to that employee.
Retaining background checks for one year ensures compliance with the EEOC, FCRA, and TITLE VII.
This one will also depend on your state, as some states require that employers retain employment offers & contracts for up to 3 years.
However, most states only require that you hold onto them for one year following employee termination.
What types of documents are included under the umbrella of employment offers?
All your resumes, job applications, recruitment & hiring records, interview notes, screening tools, and job opening advertisements all count as employment offer documents.
Keeping these records for one year will ensure compliance with the EEOC, ADA, and ADEA. Once the year is up, you can shred all employment offer documents without fear of any repercussions.
Regardless of state, you must hold onto employee medical records for 3 years after termination.
The ADA, GINA, and OSHA are the top governing bodies for medical records, and they all require you to keep medical documents for 3 years.
That includes FMLA records, employee rate of pay, employee benefits documents, identifying employee data, doctor’s notes, ADA requests, hours of leave, and other medical information provided by your employees.
You can shred all medical records once three years have passed.
That includes employee time cards, which you must store for three years to comply with the Fair Labor Standards Act (FLSA) and ADEA.
Payroll information includes:
Employee name, address, social security number, date of birth, and gender.
Pay period dates
Payment dates and amounts
Deductions & additions
Besides these documents, you also need to keep a record of variance in pay between genders for two years after termination. That ensures compliance with the EPA, and the rest of the documents will help you comply with FMLA, FLSA, ADEA, and the Davis-Bacon Act.
Regarding employee tax records, you need to hold onto them for 4 years since the tax was due or paid.
Tax records that you need to keep include employee identification numbers (EINs), tips, dates of employment, income tax records, and PTO.
Keeping tax records for 4 years will ensure compliance with the IRS, FICA, FUTA, and Internal Revenue Code.
Important note: Certain state laws will require you to retain tax records longer than four years, so it’s best to keep tax records for up to seven years to ensure you don’t run into any issues.
Notable State Laws for Employee Record Retention
While we don’t have enough room to share retention laws for all 50 states, Texas and California have some notable laws worth mentioning.
The California Fair Pay Act requires employers to hold onto any documents expressing variance in pay between genders for 3 years.
You need to retain payroll & tax information for 4 years in Texas.
Final Thoughts: How Long Do Employers Keep Employee Records?
The quality of your employee recordkeeping will directly affect the success of your HR department, which is why you need to master the process.
Part of that includes knowing how long you need to retain your records to comply with federal & state laws.
If you ever aren’t sure if you should keep or get rid of an employee record, consult this guide to find out.
Are there any unique recordkeeping requirements in your state? Let me know in the comments.