I know that many of my readers are managing companies that are too small to have an on staff HR person. It is hard enough for the human resources professional to stay on top of federal and state regulations, let alone the company owner/manager. So, here is a short primer on personnel files: what belongs, where it belongs and how long to keep it. I’ll only be speaking about federal laws here, so be aware that you may have state laws that differ.

Every agency that you can think of with a four-letter abbreviation has a law with regard to personnel files -- FICA, FUTA, FLSA – and some with longer names: Federal Income Tax Withholding, Equal Pay Act. There are even more if you are a federal contractor (which I won’t get into for this blog). And these regulations come with varying sizes of dollar penalties if you don’t conform.  You may think, “I don’t need to conform – how will they ever know that small-sized me is not following the rules?” Better think again as all it takes is one unhappy employee to upset the apple cart. One complaint to the government over a pay issue or non-compliance with a labor or tax law and WHAM! – the auditors are on your tail.

Each of these agencies have set their own policies which leaves us in a quandary as to how to follow all of the different rules. There really is only one way to do it: follow those rules that are the most stringent and demanding. For example, if 2 laws require you to keep the same records, but for differing retention limits, use the longer amount of time.

So here we go….

FICA, FUTA and Federal Income Tax Withholding – Gather and retain the following information for each employee: employee demographics; total compensation; tax forms; hours worked (both regular and overtime); payments the company has made to any benefit plans such as annuities, pension, health plans; taxable wages and taxes withheld; all benefit records. These records must be held for 4 years. If the employee has left your employ you must still keep the records for 4 years from the last date of any entry.

Fair Labor Standards Act (FLSA) – Make sure that you are keeping files containing the employee’s full name as used for their social security number. If you assign employees an ID number, this number should be retained on the same record as that with their full name. Other demographics such as employee address with zip code, birth date (if younger than 19), sex and occupation should be gathered and filed. Lastly, specific work/job information must be maintained: workweek beginning time and day, daily and weekly hours worked, whether the position is exempt or non-exempt, total daily or weekly regular earnings, total weekly OT earnings, additions or deduction from wages, wages paid each pay period and the date of payment and period covered. If your company has a union (that’s doubtful if you are small) you must also keep a copy of all bargaining agreements. All of these records should be held for three years.

Equal Pay Act – All of the records for the FLSA (above) PLUS all records related to payment of wages, wage rates, job evaluations, job descriptions, documents regarding the merit and seniority systems and any document that describes the basis for any pay differential. Keep all this for two years.

Americans with Disabilities Act (ADA) and Title VII – File basic employee demographic data and all compensation related records for one year.

Age Discrimination in Employment Act (ADEA) – Same records as above for the ADA but retain for three years.

So are you following so far?

• Keep all records regarding the employee’s demographics.
• Keep all records regarding the employee’s pay.
• Keep any documents that may impact the employee’s pay.
• Keep all records about the job.
• Each entity has different retention amounts, so let’s go with the longest: 4 years.

With regard to employment forms, the Civil Rights Act and the ADA require that employers of 15 or more employees retain all records relevant to hiring, promotions, transfer or demotions as well as layoffs, terminations or recalls for a period of one year. The ADEA requires employers of 20 or more to retain these same documents for the same amount of time.

And let’s not forget the Immigration Reform and Control Act which initiated the I9 Form. There are several key points to remember about this form:

1. Make sure that you have copies of their proof of ability to work in the U.S. attached to the form.
2. Keep the I9 forms SEPARATE from the personnel files.
3. Retain the forms for three years from date of hire or one year from date of termination, whichever is later.
4. Even the owner of the company must fill out an I9 form.
5. Given the immigration issue temperature in the country today, I9s are foremost on government auditor’s lists – so pay attention to your I9s!

For all documents related to benefits, health and safety:

ERISA (Employee Retirement Security Act) – retain records of Summary Plan Descriptions, annual reports, plan termination for six years.

FMLA (Family Medical Leave Act) – retain records of basic employee demographics and payroll information, any information related to leave for three years.

OSHA (Occupational Safety and Health Act) – retain records of job related injuries and illnesses for five years.

Last but not least, there’s the matter of the records of a terminated employee. What do you do with them? Retention periods vary greatly by state and as you see by the above, federal laws can vary greatly as well. Good guidelines to follow are to keep personnel files for seven years, medical/benefit files for six years, I9 forms for three years from termination and pre-employment background checks for two years.

Common sense rules that in the event you are involved in an employee related lawsuit, retain all the relevant files – regardless of the law. Most of these files contain confidential information. You don’t want to be responsible for that information getting out into the general public so make sure the files are shredded when you are eliminating them. As with all confidential files, keep all personnel files under lock and key and never, ever, leave a personnel file out on your desk.

It would be best if you instituted a regular audit process of the personnel files. This sounds like a lot of work but if you are so small that you don’t need an HR person, it won’t take long. If you can’t get to it, then maybe it is time to consider at least a part-time HR person to keep your files legal, safe and up-to-date!