Are You Keeping the Right Employee Records? (Most Businesses Aren’t)

As a business owner or manager, you have a lot on your plate. But one of the most important tasks is ensuring that you are maintaining accurate and up-to-date employee records. Many businesses overlook this vital part of HR administration, often leading to serious legal, financial, and operational consequences.

In this post, we’ll explore why proper employee record-keeping is essential, what documents you need to keep, and the risks associated with falling short.

Why Employee Records Matter

Employee records are not just administrative paperwork; they are crucial to your business’s operations and legal compliance. Properly maintained records can help you with:

• Compliance with labor laws: There are federal, state, and local laws that govern employee recordkeeping, including those related to taxes, wages, and safety.

• Managing benefits and payroll: Having accurate records helps ensure employees are paid correctly, and benefits are administered according to company policy and legal requirements.

• Handling disputes or audits: When legal disputes or audits arise, proper documentation can protect your business by providing proof of compliance.

  
  

  

  
  
  
  

What Records Should You Keep?

Not all employee records are created equal. There are different types of documents that you need to maintain, including:

1. Personal Information: This includes the employee’s name, contact information, social security number (SSN), and emergency contact details.

2. Employment History: Record the start and end dates of employment, job title, salary, and any changes to their role or responsibilities over time.

3. Tax Forms: Be sure to keep W-4 forms, I-9 forms (for verification of eligibility to work in the U.S.), and any other relevant tax documents.

4. Performance Records: Document appraisals, performance reviews, disciplinary actions, and any other assessments of employee performance.

5. Health & Safety Records: Any documentation related to workplace injuries, workers' compensation claims, and health-related accommodations should be kept for compliance with Occupational Safety and Health Administration (OSHA) regulations.

6. Leave of Absence Records: Track any leaves taken by employees, whether for vacation, medical leave, or family leave, as well as their accrued leave balances.

7. Training and Certification: Keep records of any required training, certifications, and development programs that employees have completed.

8. Compensation and Benefits: Include records of salaries, bonuses, commissions, benefits, and retirement plan details.

   
   

Common Mistakes Businesses Make with Employee Records

Many businesses fail to properly manage employee records due to lack of organization, confusion about legal requirements, or simply oversight. Here are some common mistakes:

• Not Keeping Records for the Required Timeframe: Federal laws mandate that certain records be kept for specific periods. For example, you must keep payroll records for at least three years.

• Failing to Update Records: It’s easy to overlook making updates when employees change positions, salaries, or personal details. Failing to do so can lead to confusion and errors down the line.

• Not Keeping Digital Backups: Paper records are at risk of being lost, damaged, or destroyed. Digital backups offer a safer, more efficient way to store employee records and ensure they are accessible when needed.

  
  

The Risks of Poor Record-Keeping

Failing to keep the right employee records can result in:

• Legal consequences: Improper documentation can lead to violations of labor laws, resulting in fines or lawsuits.

• Financial penalties: Mismanagement of employee records can result in tax issues, missed benefits, or underpaid wages, leading to costly penalties.

• Damage to your reputation: When employees or government agencies discover discrepancies in your recordkeeping, your company’s reputation can take a hit.

  
  

Best Practices for Maintaining Employee Records

To avoid these risks and ensure that your records are always in order, follow these best practices:

• Implement a recordkeeping policy: Establish a clear policy for maintaining and updating employee records regularly.

• Keep digital records: Use HR software or secure cloud storage to maintain digital copies of employee files, ensuring they’re easy to access and safe from damage.

• Review records periodically: Regularly audit your employee records to ensure they are complete and up to date.

• Know the legal requirements: Stay informed about federal and state regulations regarding employee record-keeping so that you comply with all necessary laws.

It’s not just about staying organized—it’s about ensuring compliance, protecting your business from legal issues, and fostering a positive work environment. If you’re not keeping the right employee records, now is the time to start.

Need help with HR administration or ensuring your employee records are in order? I'll be launching a HR Administration online training course soon! Sign up for my emails to get notified on the launch date.