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Employment Records Retention Guide: Read this before you toss that file!

Exactly how long to keep employee files and other employment-related records can be an area of confusion for employers.  Different federal government agencies have their own record retention rules and guidelines but individual states may also have additional requirements.  Adding to the complexity is that some rules are dependent on the size of employer and number of employees.  Other rules may affect most employers but some are only applicable to government contractors and subcontractors. Regardless of all these factors, employers should carefully consider federal and state rules and guidelines when developing a record retention plan.

Failing to properly maintain employment records including retention / disposal of these records can carry stiff penalties and in some instances both individual and criminal liabilities.  Proper maintenance of records is crucial to defending against employment-related litigation.  For example, an employer can be sued for wrongful destruction of employment records under the theory of spoliation of evidence.

Employers are able to maintain employment records in both hard-copy and electronic format.  For those that decide to maintain electronic records only or go through a conversion process, a good standard to follow for all electronic record-keeping are the guidelines published by the U.S. Department of Labor in its Final Rules Relating to Use of Electronic Communication and Recordkeeping Technologies by Employee Pension and Welfare Benefit Plans. These rules provide that electronic media may be used to comply with records maintenance and retention requirements for documents governed by the Employee Retirement Income Security Act (ERISA).  Several areas are addressed such as safety, accessibility, privacy, and storage of electronic records.

This chart can serve as a reference for those responsible for maintaining employment records: Federal Record Retention Requirements and Relevant Laws by Number of Employees. The information in the chart was compiled from SHRM (www.shrm.org) and depicts the type of records, the retention period for those records, and the relevant federal law by employer size.  Employers should be sure to review federal laws and state employment laws in order to determine employer coverage and responsibilities for maintaining employment records.

Pennsylvania employers can note the following laws that affect employment records retention:

  • Pennsylvania Unemployment Compensation Law requires an employer to retain for four years all employment and payroll records and supporting evidence relating to unemployment compensation applications and to retain daily attendance records for two years.
  • The Pennsylvania Workers’ Compensation Law obligates businesses to retain records of accidents and illness prevention programs provided to members for a period of three years.
  • The Pennsylvania Wage Payment and Collection Law requires employers who deduct money from employees’ wages to obtain written consent from their employees for certain deductions. The written consent and other wage-related documentation should be retained for the full period of the employee’s employment, plus an additional three years.

For more information regarding this article or the Federal Record Retention Requirements chart, please contact Suzanne Sentman, Human Resources Director with McKonly & Asbury at ssentman@macpas.com.

About the Author

Mark Heath

Mark is a Partner with McKonly & Asbury. Serving as Director of Tax Services, he brings a wealth of experience in federal, state, and international income as well as franchise tax issues for both publicly and privately held corporatio… Read more

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