Running a small business that employs others requires no shortage of paperwork—especially when it comes to human resources. Everything from interview notes and onboarding documents to benefit enrollment forms and disciplinary records all go into an employee’s file. It doesn’t take long to get buried under paperwork, especially if you’ve got a lot of employees.
How long to keep employee files is a million-dollar question for many small businesses. Determining the answer isn’t always so simple. While it may be tempting to shred old employee files and call it a day, doing so could come back to bite you if you inadvertently violate specific labor laws. It’s something that deserves your attention considering that a U.S. Chamber Institute of Legal Reform study found that 43% of small businesses had been threatened with or involved in litigation.
A lot goes into each individual employee file—and there are unique rules around different types of documents. With that in mind, we put together this step-by-step guide to help your HR team feel more confident navigating the process.
Why Keep Employee Files at All?
It’s obvious why you would want to keep files for current employees. Your human resources department needs to have easy access to information regarding team members who are on the books. However, it’s equally important to retain documentation for former employees—and, in some cases, prospective employees who never actually got hired.
There are two sides of the coin. One is making sure your company is staying compliant with federal (and possibly state) recordkeeping rules. The other is protecting yourself against potential lawsuits that could crop up in the future. Being diligent about recordkeeping may be your best defense if you’re confronted with, say, a workplace discrimination charge.
Now that we’re clear on why recordkeeping is so vital, let’s dive into how long you should keep different types of employee files.
From sending initial emails to extending a formal offer, recruiting a new employee is a thorough process. Even if a candidate ends up not being the right fit for your company, it’s still wise to retain important documents for prospective, current, and past employees. This includes anything your company evaluated during the selection process.
Specific federal recordkeeping laws have a direct impact on your hiring process. Employers are required to hang onto all applicant records for a minimum of one year from the creation of the record. In the event of an audit or if an inquiry is made into discriminatory hiring practices, you’ll have to provide this documentation. Employers that don’t will be deemed noncompliant and could face additional legal headaches.
On top of that, not being able to prove fair and equal hiring practices could give you a major disadvantage if you’re faced with a discrimination claim. Legislation like the Americans with Disabilities Act, the Age Discrimination in Employment Act, and Title VII of the Civil Rights Act prohibit unfair hiring practices and are designed to even the playing field for all applicants.
One other note: Be sure to check if your state has any additional recordkeeping guidelines you should be aware of. With that being said, it’s wise to create a system for retaining employee hiring records for at least one year. The following documents should be on your radar.
- Interview notes
- Reference and background checks
- Drug screens
- Skills testing
- Any other documents that factored into your hiring decision
Active Employee Records
Once an offer is made and a new employee joins the team, a flood of onboarding documents often follows. Employee records typically swell with more paperwork as time goes on. Here’s a rundown of the rules around how long to keep employee files.
The I-9 Form, also known as the Employment Eligibility Verification form, is required for new hires to prove two things—their identity and their legal ability to work in the U.S. (Keep in mind that independent contractors and temp workers hired through an agency do not need to fill out an I-9.)
As an employer, you’re required to keep each individual employee’s I-9 Form for as long as they’re on the payroll. After that, you must retain it for whichever is later—either one year from the termination date or three years from the hiring date. Whether you store them on-site or in a storage unit, employers must be able to present them within three business days if a government official requests to see them.
Medical records generally go hand in hand with individual employee files. Per the Americans with Disabilities Act (ADA), employers must keep these records confidential and store them separately from the employee’s general file. According to the Society for Human Resource Management, this would include the following documents:
- Disability benefits claims
- Health insurance enrollment and COBRA notices
- Doctors’ notes
- Employee medical exams
- Family and Medical Leave Act (FMLA) leave requests
- Requests for ADA accommodations
- Drug/alcohol test results
- Any health-related information pertaining to the employee or their family members
All FMLA-related documents must be kept for at least three years. Keeping all medical records for that length of time isn’t a bad idea, either. As for health insurance enrollment records, it’s wise to retain these for six years, as it’s considered an employer-sponsored benefit. (More on this in the next section.) When all is said and done, it’s better to hold onto employee files for too long instead of not long enough.
While we’re on the topic of medical records, experts suggest retaining records related to any employee workplace accidents for at least seven years after they were resolved. Alternatively, you could keep them for up to 10 years after any workers compensation benefits were paid.
Documents Related to Benefit Plans
If an employee has opted into an employer-sponsored retirement plan, you’ll want to hang onto those records. This also includes forms related to pensions if they apply. Experts say it’s in your best interest to retain federal forms, along with documents related to enrollment, participation, and administrative reports, for at least six years. As we hinted at earlier, the same goes for documents related to health insurance plans.
Per the Fair Labor Standards Act (FLSA), employers are required to retain payroll records for a minimum of three years. On top of that, for two years they must also keep any records that explain why they paid different wages to employees of opposite sexes. This might include job evaluations, wage rates, collective bargaining agreements, and any merit or seniority systems that are in place.
The FLSA also requires employers to retain timecards for at least two years. This is important in clarifying hours worked, standard wages, overtime pay, and so on. In the event of a lawsuit, you’ll be happy to have these records on hand.
The Bottom Line
How long to keep employee files is a loaded question. It has everything to do with the type of documents you’re talking about. There are some strict federally mandated recordkeeping rules to follow, which we outlined above—but again, your state may have additional regulations, so be sure to do your homework there.
At the end of the day, it’s always better to err on the side of caution. The issue then shifts to storage. If you plan on keeping employee files on-site, delegate an HR point person to create a clear and efficient filing system. In the event of an audit or lawsuit, you’ll want to be able to easily retrieve whatever records you need. A filing system will also be necessary if you’re storing documents in an offsite storage facility.
- InstituteforLegalReform.com. “U.S. Legal System is World’s Most Costly, According to a New Study”
- SHRM.org. “EEOC: Unselected Applicants’ Information Must be Saved, Too”
- EEOC.gov. “Recordkeeping Requirements”
- SHRM.org. “Tips for Retaining and Storing the New Form I-9”
- SHRM.org. “Complying with Employment Record Requirements”
- DOL.gov. “Family and Medical Leave Act Advisor”
- Nolo.com. “How Long Should You Keep Business Records?“
- AxiaAdvisory.com. “How Long Should Retirement Plan Records Be Retained?“
- EEOC.gov. “Recordkeeping Requirements”
- SHRM.org. “How to Comply with Payroll Record-Keeping Requirements”