Payroll Records: What to Include & How Long to Keep Them
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
This article is part of a larger series on How to Do Payroll.
Payroll records are documents with any information about a company’s payroll, including data about employees, paychecks, and taxes. These include hiring documents, pay stubs, timecards, and leave documents, among other items.
Per federal law, you should retain payroll records for three years and payroll tax records such as unemployment taxes, for four years. States such as New York and laws such as the Employee Retirement Income Security Act (ERISA, governing private retirement and health plans) require you to keep some records for six years.
If you don’t want to worry about payroll records, HR software like Bambee can provide you with electronic document storage. You can create compliant policies with the help of its HR experts and invite your employees to e-sign their important employee documents using secure technology for just $99 per month.
Types of HR & Payroll Records
Many agencies have specific payroll compliance requirements on what types of data each payroll record should show, and there is an overlap among the agencies. It saves time when records have sufficient information to meet multiple agencies’ requirements—for instance, having pay stubs that contain important hours, earnings, and tax data that satisfies both the Department of Labor (DOL) and the Internal Revenue Service (IRS).
Need help creating your own payroll records to start? Check out our guide and download our free payroll templates.
- Hiring documents: New hire documents, such as an offer letter, include DOL-required data about the employee, their residential address, job title, and pay rate. You can also create an employee data sheet that includes required information, such as the employee’s gender.
- I-9 documents: Include information about the employee’s eligibility to work in the US on the I-9. It’s best to also insert DOL-required information such as the employee’s full name and Social Security number.
- Pay stubs: Show information such as pay period, pay rate, and deductions. These also typically display hours worked each workweek and the basis for which wages are paid, as well as regular hourly or salary pay rates, overtime, and deductions. If you need a pay stub, download our free pay stub template to give you a head start.
- Timecards: Display hours worked, including unpaid lunch breaks and overtime hours. These can be paper or electronic, as long as the required data is retained for three years. If you still need a time sheet, download one of our free time sheet templates to get started and use our free timecard calculator to calculate total work hours.
- Termination documents: Show the last date worked and any final payments, such as unused paid time off or severance pay.
- Job evaluations and salary reviews: Include rationale for pay increases and merit increases as required by the Equal Employment Opportunity Commission (EEOC).
- Leave documentation: Show leave dates and any leave amounts paid as an FMLA requirement.
- Retirement income statements: Include payment amounts and plan documents as required by ERISA, with 401(k) savings plan enrollment and statements that show employee contributions.
- Employee handbooks: They describe everything from pay dates and holidays to termination and severance pay. It’s a best practice to hold on to your employee handbook for at least three years.
Tip: Personnel files often contain much of the documentation listed above. Therefore, a simple way to remain compliant is to box personnel files after an employee leaves the company and retain them for the appropriate period, which we discuss in the next section.
How Long to Keep Payroll Records—Best Practices
Though you may only be required to hold on to most documents for three to four years, we’ve gathered what we believe to be best practices for payroll records retention, keeping in mind not only federal regulations but also state guidelines.
2 years | 3 years | 4 years | 6 years |
|---|---|---|---|
Merit Increases and Pay Grade | Hiring Documents | Pay Stubs | Retirement Income and 401(k) Plan Details |
I-9 Documents | Employment Tax Documents like W-4s | ||
Time Cards | Documents Relating to a Payment or Employment Dispute | ||
Employee Handbook | |||
FMLA Leave Details | |||
Termination Information |
Job applications and interview records only need to be kept for one year, but once you’ve hired a candidate, their payroll documents need to be kept for three years. A few exceptions are employment tax documents like W-4s, which need to be kept for four years, and retirement income documents, which need to be kept for six.
A best practice for employers is to keep copies of all hiring documents that include the employee’s full name, address, and Social Security number, as well as time cards, pay stubs, and pay registers that are used while doing payroll.
Tip: Any time you have a termination dispute with an employee, it’s a best practice to hold on to payroll documents until you resolve the dispute.
State-Specific Laws About Retaining Payroll Records
Most states abide by the federal payroll document retention guidelines. However, a few states—New York, California, Illinois, and Washington—have enacted legislation that affects what payroll records to keep and how long to keep them.
Here are those states’ specific requirements, with links to more information:
Disclaimer: Fit Small Business does not provide legal or tax advice, and state laws change often. Please confirm document retention requirements with HR, payroll, legal, and/or tax professionals in your state.
Who Determines What Payroll Information to Keep
Federal agencies like the DOL and IRS determine how long to keep payroll records and which ones to keep. Other agencies, like the EEOC, are more specific and govern record retention for documents it uses exclusively to serve its mission.
How to Store Payroll Records
In most cases, you have three storage options for payroll records that you need to keep. You can keep the paper files yourself, box and store the paper files off-site, or maintain the documents and data electronically.
Here are some considerations for paper versus electronic payroll file storage:
How to Destroy Payroll Documents
Some business owners wonder if there’s a risk to keeping documents longer than required. The answer is yes. Financial or personal information related to payroll—such as bank account information, credit reports, or photocopies of a Social Security card—should be destroyed after the retention timeframe to prevent confidential data from being misused.
The most important thing to remember when destroying files after their retention date is that you should destroy all files securely. You can shred files in your office, or if the volume is large, you may want to use a company that picks up and shreds business documents at your location or off-site.
Tip: You’ll also want to keep a log of what documents were destroyed. It can be as simple as a spreadsheet that lists the documents and how and when they were destroyed. It’s also best to add a signature/initial and date so if questions arise, you can contact the person who destroyed them.
Bottom Line
You’ll need to follow the DOL’s rules, as well as state and other federal agency requirements, when retaining documents. Keep payroll documents as long as needed but no longer than reasonable to prevent confidential information from being released. Once the “destroy after” date has passed, be sure to shred or incinerate all documents to prevent unwanted access to confidential information.
If you don’t want to worry about payroll record retention, all-in-one HR software like Bambee often provides electronic document storage. Bambee gives you a dedicated HR manager who helps you to craft compliant HR policies and allows you to invite your employees to e-sign all of their important employee documents using secure technology for just $99 per month.
