Maintaining organized business records is crucial to efficient operations of any company. However, without specific records maintenance guidelines, this task can overwhelm the human resources department. Some of these records need to be maintained for a certain number of years to comply with labor laws and other federal directives.
The Need to Rationalize Record-keeping
Paper records take up space and require manpower to maintain, retrieve and manage. More records mean more files to slog through when records need to be accessed. Even with most files converted to digital format, records management can still be an unwieldy process without a system to weed out and destroy expendable files.
Furthermore, keeping records at manageable levels by judiciously eliminating records that are no longer required enhances operational efficiency and contributes to data security. It is estimated that paper records generated by human resource departments double every four years with maintenance costs averaging between $12 and $14 per cubic foot. Microfilm and digital storage have reduced this burden, but records management remains taxing for many companies.
Guidelines from the U.S. Equal Employment Opportunity Commission specify that personnel files and employment records should be retained for at least a year. Records for employees who have been terminated should be retained for one year from the date of termination although legal experts recommend a seven-year retention period for employees who are terminated for cause.
Companies who receive a Notice of Charge from the EEOC should maintain all records pertaining to the aggrieved employee until the case is resolved and all opportunities for appeal are exhausted.
Employment Tax Recordkeeping
According to the IRS, records of employment taxes should be kept for at least four years after filing the 4th quarter for the year. These should be available for IRS review. You can find which records to keep from the IRS website.
Under the Age Discrimination in Employment Act or ADEA, payroll records must be maintained for three years. The Fair Labor Standards Act echoes this records maintenance guideline, specifying that a two-year retention period is required for all files that are relevant to explaining the wage basis for employees especially those that may show why pay grade variations vary across genders. These records include job evaluations, merit systems, collective bargaining agreements, piecework tickets and wage structures.
The U.S. Department of Labor does not require a specific format for payroll records, but they specify that the files should include certain demographic date to identify employees and an accurate account of hours worked and wages paid. You can find more information from the U.S. Department of Labor on Recordkeeping Requirements under the Fair Labor Standards Act (FLSA).
Businesses can use machine-stamped time cards, paper reports or records compiled from digital login, but these records must be accurate and complete, providing details such as date, time in and time out and total hours worked. These records must be maintained with personnel files.
Clearly, companies need to have a systematic plan to manage business records to comply with federal guidelines, to ensure secure and convenient retrieval and to maximize productivity. With many years of experience, Integrated Payroll Services (iPS) can help your company stay compliant with the many government regulations that are out there.