Payroll Records: What to Keep & How Long to Keep Them

The Department of Labor (DOL) Wage and Hour division specifies that payroll records need to be kept for three decades; payroll tax records, for example unemployment taxes, have to be kept for four decades; and some states, such as California and New York, and bureaus such as ERISA, need some documents be retained for six decades.

The format in which these records need to be kept varies by service. We are going to offer a best practice list of payroll documents to maintain detail about how long to keep payroll records in order to satisfy the different, and sometimes contradictory, requirements.

Disclaimer: Fit Small Business does not offer tax or legal advice. Please validate document retention requirements with HR, payroll, tax or legal professionals on your state.

What Documents to Maintain & For How Long

Unlike a candidate job applications and interview records which need to be kept for just one year, payroll documents should be retained for three decades after a individual is hired. Finest practice examples of documents to retain include hiring documents that supply the employee’s full name, address, and social security number, in addition to I-9 forms, time cards, and paystubs.

Best Practice Document Retention — What to Maintain & For How Long

	Less than 3 Years	3 Years	More than 3 Years
Implementing Records		✔
I-9 Records		✔
Time Cards		✔
Paystubs			4 Years
Employee Handbook		✔
Merit Increases and Pay Grade	Two Years
Tax Records Like W-4s			4 Years
FMLA Leave Details		✔
Retirement Income and 401k Plan Details			6 Years
Termination Information		✔
Any Records Relating to a Payment or Employment Dispute			Varies

There are some exceptions, for example tax records that have to be stored for four years and retirement income records which need to be kept for six, which we’ll explain in more detail below. In addition, whenever you have a conclusion dispute with an employee, it is a best practice to continue to deductions documents before the dispute is solved.

State-Specific Payroll Documentation Retention

The majority of states abide by the payroll document retention guidelines provided by the DOL and other federal agencies. However several states — California, New York, Illinois, and Washington — have enacted laws which impacts what payroll records to keep and how long to keep payroll records. Here are the state’s particular requirements, with links to more information.

New York has a Wage Theft Prevention Act that increases the necessity to retain payroll records from three years demanded by DOL to six years.
California requires that all payroll records be maintained for six years.
Illinois requires employers to retain payroll records for five decades.
Washington state’s Department of Labor and Industries matches the DOL concerning requiring payroll records to be maintained for three years, however, the prerequisites for what to keep are more special. They include penalties of $250 for every non-compliance offense.

Because state laws can vary, make certain to confirm any exceptional citizenship document retention requirements in your state.

What Kinds of Payroll Records NOT to Keep

Some company owners wonder if there is danger to maintaining documents longer than required. The answer is yes. Financial or private information associated with citizenship that’s no longer required, such as bank account information, credit reports or photocopies of a social security card ought to be destroyed after the retention interval to prevent confidential data being misused.

By way of instance, I-9 forms, typically kept in a seperate folder by date, should be kept three years, but no more.

How to Store Payroll Records

In most cases, you’ve got three storage options for payroll records you have to keep. You can keep the documents yourself, box up and save the newspaper files offsite, or keep the files and data electronically. Here are some considerations for paper versus digital payroll file storage.

Shop Required Payroll Information on Paper Records

There are storage firms like Iron Mountain which can maintain your paper records securely in the event that you don’t have space to keep them onsite. The benefit of a protected off-site storage facility is that you don’t need to worry about storage space, or maintaining confidential health information such as render request forms, from being available to employees in violation of HIPAA lawenforcement.

Try Iron Mountain

Shop Required Payroll Information Electronically

Many HR and Payroll software has record storage capacities, either allowing you to upload scanned files like I-9 forms. Or you can input employee information directly into the computer system. In fact, Gusto handles all onboarding and payroll documentation electronically… keeping all of your required files in one place and making record retention simple.

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Additionally, there are businesses like Docusign that store electronic data for you. But you would need to verify the internet data storage accounts is secure because payroll data contains sensitive information like birth dates, bank accounts, and social security numbers.

Who Determines What Payroll Information to Keep

Along with what payroll documents to keep, the Society for Human Resource Management (SHRM) provides a complete list of all document retention requirements by present employment and anti-discrimination legislation. We have provided only those agencies, like DOL and IRS, which influence what payroll records to keep and how long to keep payroll records:

DOL Wage and Hour Division, Fair Labor Standards Act (FLSA)

The FLSA requires citizenship information to be kept for three decades. It does not specify any specific record be stored, but does need specific information such as employee name, address, social security number and cover rate. Most of this information can be found in hiring docs, paychecks or paystubs and time cards, including:

Full employee title
Social security number
Total home address with zip code
Gender
Job Role (Job Title or Function)
Pay Type (Hourly, Salaried, Commission)
Hours Worked
Pay Rate
Earnings by Type (Regular, Overtime and Additional)
Total Net Earnings
Date of Payment
Work Period (Pay Interval )

Internal Revenue Service (IRS)

The IRS requires employee/employer tax records to be kept for four decades including W-4s, payroll tax payments, and any W-2s that were returned undelivered. While DOL requires payroll information be kept just three years, since deductions tax deductions need to be maintained four years, you may want to hold on to document paystubs for four decades unless you’ve got the information stored electronically.

Equal Employment Opportunity Commission (EEOC)

The EEOC requires payroll information to be stored from a few decades, and contains information such as merit raises and rationale for pay rate modifications to prevent discrimination. By way of instance, job evaluations need only be retained for a couple of years, that’s the duration of time a current or former employee must review their personnel folder and dispute a salary increase, according to the Fair Pay Act. Maintain:

Pay Scales
Pay Increases (and Rationale)

Employee Retirement Income Security Act ERISA

ERISA requires that retirement plan records like retirement payments and 401k plans have to be retained for six decades. However, they also state that payment records Will Need to be keep for as long as it is possible for the retirement program to be reimbursed, such as:

Enrollment Documents
Payment Records
Payroll Deductions Taken

Family Medical Leave Act (FMLA)

The FMLA requires payroll details like the leave policy documents, requests for leave, and leave payments to be retained for three decades, in accord with the DOL payroll record retention requirements. This information is generally available on your employee handbook, render records or on employee paystubs:

Leave Policy
Leave Requests
Leave Balances
Leave Upgrades

Common Payroll Documents to Maintain

We are going to describe below how many of the ordinary documents below fulfill multiple agency’s requirements, such as a project application which has most of the worker information contained or paystubs that include important hours, earnings and tax data.

Hiring documents like an offer letter, include DOL-required data about the worker, their home address, their job title, and their pay rate. If you do not already have one, then you might desire to make and maintain a worker data sheet that also includes required information like the employee’s gender.

I-9 documents include information concerning the worker’s eligibility to work in the US and contains DOL-required details such as the employee’s full name and social security number.

Paystubs show information such as pay period, pay rate, and deductions and typically display hours worked each work week, the foundation for which salaries are paid, as well as regular hourly or salary pay rates, overtime, and deductions. Need a paystub template?

Time cards show hours worked, such as outstanding lunch breaks and overtime hours. They can be paper or electronic, as long as the required data is retained for three years. Click here in order to calculate time cards.

Termination documents show last date worked and any final payments like unused paid time off or severance. Click here for a sample termination letter.

Job evaluations and salary reviews show rationale for pay increases and merit increases as demanded by EEOC. Click here to handle performance reviews.

Leave documentation that shows leave dates, and any depart amounts paid as required by FMLA. Click here to set up a strategy like pregnancy leave.

Retirement income statements that reveal payment amounts and plan records as required by ERISA, including 401k savings policy enrollment and statements that reveal employee contributions. Click here to set up a retirement savings program for employees.

Worker handbooks often describe everything from cover dates and vacations to termination and severance. It is a best practice to continue to your employee handbook for three or more years.

Personnel documents often contain much of this documentation. Therefore, a simple approach to remain compliant is to consume personnel files after an employee leaves the organization and save those files for three years. But if worker tax documentation is saved in the employee personnel file rather than different payroll and tax files, then you will want to keep them for four decades.

The best way to digitize Payroll Records

The main point to keep in mind when destroying files after their retention date has passed, is that they must be destroyed securely. You can shred them in your office, or if the quantity is large, you might want to use an organization that picks up and shreds business documents at your location or off site, such as Iron Mountain.

Payroll Records Showing Destroy After date

Payroll documents tagged with a’ruin after’ date

Keep a Log of What You Have Destroyed

You’ll also want to keep a log of exactly what documents were shredded and if. It could be as simple as a spreadsheet that lists the kind of documents destroyed, how they were destroyed — shredded, incinerated — when they were destroyed. Additionally, it is best to bring a signature or date and first, so that if you have questions about ruined documents, you can speak to the person who destroyed them.

The Most Important Thing

You will need to follow DOL principles as well as state and other national agency requirements when retaining documents. Keep payroll files as long as needed, but no longer to safeguard confidential information from being published. And once the’destroy after’ date has passed, then make sure you shred them to prevent unwanted access to confidential info.

Obviously if you don’t want to worry about payroll record retention, think about utilizing an all-around HR, benefits and payroll support with digital record storage, such as Gusto.

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