Keeping Employee Records: Three Things to Avoid

The human resources (HR) department of a company is responsible for handling important employee documents that include government forms, sensitive employee information and company policies. People who work within the HR department are expected to keep employee records safe and confidential.


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Why keep employee records?

There are many reasons why companies should keep employee records on file. The most important reason is that it’s required by law. Besides the convenience of having an employee’s basic employment dates and information within reach, companies must also keep financial documents on-hand in the event of a lawsuit or an IRS audit. There may also be times when employees who have left your company request information from their personnel file.


The basics of employee record-keeping

The HR department stores confidential records for future reference. These documents must be kept in a safe place that is inaccessible to the rest of the company. Knowing which documents are worth keeping can be challenging at first because certain forms have special requirements in regards to safekeeping. There are five basic types of records an HR department manages. Each file must be kept for a specified period of time.

  • Personnel files
  • Payroll and benefits information
  • Medical files
  • Tax paperwork 
  • Staffing file 


Personnel files

An employee’s personnel file includes their basic contact information and hiring documents. You can also add more documents to this file later on, like promotions, salary agreements, performance reviews, special awards, disciplinary forms and termination notices. By law, you’re required to keep this type of information on file for at least a year, though requirements may vary by state.


Payroll and benefits information

Employment laws state that all payroll-related documents must be kept on hand for four years. This applies to copies of pay stubs, though if you’re using an online payroll provider, it may not be necessary to print these records out. Simply access them online when needed. Benefits include records pertaining to health insurance, life insurance, COBRA, retirement plans and any short or long term disability plans. By law, these must be kept for six years.


Medical files

Employees often have medical-related documents that warrant a separate folder. Medical files typically contain documents like doctor’s notes, drug test results, Family and Medical Leave Act of 1993 (FMLA) paperwork and anything else related to an employee’s well-being.


Tax paperwork

In the event of an audit, it’s important to store tax-related documents in a specific file. This includes forms like the W-2, W-4, 1099, Form 1-9, Forms 940 and 941, plus other federal and state payroll tax deposit forms. You might even have Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) forms to file as well.


Staffing file

Anytime you post a new job listing, you should keep a copy of it in this special file. You can add to this file once you start getting resumes from applicants and conducting interviews. Any notes related to the hiring and selection of employees should also go in this folder in case your company gets accused of discrimination or wrongful termination. The details of your documents may support your case in court.


Three things to avoid

When you’re tasked with keeping employee records, there are three things you should avoid when setting up a filing system to ensure you’re meeting legal requirements:


1. Combine the files of employees

You should never mix one employee’s documents with another or put all of the information pertaining to an employee in one master file. Every employee should have their own folder with subfolders for each type of file. For example, personnel files, payroll and benefits information, medical forms and tax paperwork should all have their own folders due to confidentiality and privacy laws that protect certain documents from exposure.


2. Throw away files early

When employees quit, you may be tempted to shred their information in an attempt to create more room for new hires. However, due to federal requirements, certain types of files need to be kept for a specified period of time. Here is a quick guideline regarding specific documents for reference:

  • Keep personnel files for at least a year.
  • Keep payroll documents for four years.
  • Keep benefits details for at least six years.
  • Hold onto medical records like FMLA benefits for at least three years.


3. Give unapproved access to confidential files

You may have someone in a supervisory role request the personnel file of another team member. In this situation, you’ll want to make sure you’ve properly separated the details of their performance evaluations from the confidential documents that are only meant for the HR department. Letting a supervisor see another employee’s tax documents or medical forms is a violation of privacy and may result in legal action.


Employee record FAQs

Here are some of the most frequently asked questions about keeping employee records:


Am I allowed to see my HR record?

Yes, you should be given access to view and make copies of your personnel file if you request it. It is wise for companies to have a viewing policy in relation to employee records so they know what to expect. There are no federal laws pertaining to personnel files, though some states can restrict the information you’re allowed to see in your personnel file. 


Can my employer find out if I was fired from another company?

Technically, there are no laws preventing previous employers from telling new employers about the details of your termination. Many companies have policies that limit the information given to hiring managers from other companies. In some cases, they may only be allowed to provide your dates of employment and job title.


Should I keep paper copies of employee forms if they’re available electronically?

You don’t have to print out a special paper version of a document if you can access it online. Whether you do so is a matter of personal preference and convenience. 


How long should you keep the I-9 form of a previous employee?

You should hold onto this form for at least three years from the date of hire or one year after the employee’s termination date.


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