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Are Your Employee Documents in Order? What to Collect, Save, and Destroy

Posted by Pekin Insurance on Jul 27, 2016

As documentation requirements continue to tighten, many employers struggle to keep up with what must be collected, saved, and destroyed. Here's a high-level overview to help you keep your employee documents in order.

employee-documents.jpgIf you've ever seen an employee file room or cabinet, you already understand the mounting problem—literally—of collecting, saving, and destroying employee documents. From the looks of most file rooms, there's especially a lot of trepidation about the "destroy" part. From federal tax and eligibility forms to EEO and medical records to workplace disputes and beyond, the common practice seems to be to save everything forever. Not only is such a practice unsustainable, it's also unnecessary.

Employee documents should be seen as an added value to your recordkeeping rather than a safe harbor for investigations and disputes. Their purpose is to ensure that your company remains in compliance with federal, state, and local legislation regarding employment practices. This means that while there are definitely records that should be collected and saved, there are probably more documents than you realize that can also be destroyed after a certain amount of time has passed.

What to collect

The collection process begins with any employee application. Whether through an electronic applicant tracking system (ATS) or hard copy forms, all applications should be collected and stored in a folder specific to that job. When a candidate is selected, that person's application should be transferred to a new folder along with the candidate's signed offer letter to begin his or her employee personnel file.

A complete personnel file should include the following employee documents:

  • Employee application: This is a fairly standard form that should include an applicant's basic personal information except for date of birth, marital status, and anything else that can't be asked during the interview process. It should also include work history, criminal disclosure, EEO classification, disability status, and veteran status.
  • Signed offer letter: A signed offer letter should outline a new hire's start date, job title, compensation, and FLSA status. There are no federal regulations around offer letters, but there may be some variation at state and local levels.
  • Employee information form: An employee will use this form to provide some of the same personal information from the job application, only this time date of birth and marital status should be included, as well as an emergency contact.
  • Federal, state, and local (if applicable) tax withholding record.
  • Employee résumé.

Employment eligibility forms (federal I-9) should also be collected and stored together in a separate folder from the employee files. Some HR departments choose to photocopy supporting I-9 documents, but this is not necessary. Whichever way you choose to do it, just make sure to be consistent, i.e., if you're going to photocopy one employee's passport, you must have photocopy records of them all.

Benefit enrollment forms and any medical records provided by an employee should be kept in a separate folder that is securely locked in a separate file cabinet or drawer from the standard employee documents.

Any background check information, reference letters, and other pre-employment information obtained by your company during the hiring process should also be kept in a folder separate from the personnel file.

Finally, where applicable, any immigration files for your employees should be kept in separate folders as well. These folders do not need to be separated from the standard personnel file.

What to save

Federal, state, and local regulations vary on which documents to save and for how long. A conservative rule of thumb is to keep all employee documents for five years following an employee's departure from your employ. That may seem like overkill, but the reality is that an audit or dispute could arise well after someone's employment terminates. Failure to produce sufficient documentation, in either case, could result in hefty fines or other detrimental penalties.

The most important employee documents to save are the ones that have to do with earnings, performance/behavior reviews directly related to promotions or compensation, and medical records provided by the employee. Should any disputes arise within these areas, the burden of proof will likely be on you, the employer, to demonstrate that you acted appropriately. Retention of documents can either be your best friend or your worst enemy in these cases.

It's also a good idea to save any notes on employee performance even if no action is taken. Sometimes an employee who is a poor performer may quit a job and then reapply at a later date. Without a record of that employee's history, you may end up rehiring someone who you didn't care for the first time around.

What to destroy

Whether you follow the specific guidelines set forth for all the different employee documents or you choose a round number of years to keep these records, the good news is that when it comes time to destroy documents, virtually all of them can be fed through the shredder. The only real exception to the five-year rule when it comes to employee documents is workers compensation. Should you have any workers compensation claims against you, those records should be kept for thirty years. That may seem like a long time, but processing such claims can be tedious, and even after a resolution is reached, there may be other disputes that arise. This is the one place where it is definitely better to be safe than sorry. Hopefully you don't have too many of these to begin with.

Shred with confidence

Many employers understandably fear destroying the wrong documents at the wrong times. The result is that too many documents are kept for too long, which is both a financial burden and an increased liability should a dispute arise past the required time frame for retaining employee documents. (If you destroy documents after a dispute arises, regardless how much time has passed, you may be seen as potentially destroying evidence.) Employers should feel empowered to destroy documents they no longer need to increase efficiency in their own workplaces while also protecting the company from unnecessary scrutiny and/or penalties.

The best thing to do is to create an annual, semiannual, or quarterly retention schedule during which time a dedicated team of administrative professionals can sort through your employee documents and shred all those that are older than five years. This will ensure that you have a standard, ongoing practice of destroying employee documents you no longer need while also ensuring that any documents you do need remain intact should the need for them arise.

Contact your Pekin Insurance agent about your options for business insurance, and we will help identify the risks your company faces, make recommendations for protection, and help put together a business insurance policy you can afford and feel good about.

Are your employee documents in order? Let us know if you have any questions in the comments!


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