The Paper (Or Paperless) Trail: Tips For Successful HR Recordkeeping

Elizabeth Rice, SPHR
October 18, 2010 — 2,438 views  
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Recordkeeping: at best, the term is enough to make an HR Manager's eyes glaze over. At worst, it's the cause of some serious stress and anxiety. Tedious and time-consuming though the HR recordkeeping process might be, it's one of those absolutely necessary evils that employers know is a critical component of maintaining security, minimizing risk, and protecting your company from lawsuits or expensive government-imposed penalties. Unfortunately, however, litigation often ends up being the first time a company's recordkeeping process is checked. Many businesses fail to pay much attention to their record storage and disposal methods until a legal investigation or lawsuit is underway - and by then it may be too late. Worst-case-scenarios such as this can be avoided by staying informed of legal requirements and taking steps to ensure your processes are compliant.

Below are a few guidelines and suggestions for reducing the hassle and improving the legality of your HR recordkeeping policies and practices.

What to Keep, and for How Long
When deciding which types of personnel records to keep, a good rule of thumb is to hold on to anything you or your company may be asked to provide in the event of a lawsuit or investigation. In general, each employee's personnel file should include documentation of the following:

  • Employment/on-boarding: application materials, resume, job description, education/employment verifications, background checks, employment offer letter, welcome letter, and emergency contact forms
  • Payroll/hours worked: timesheets, attendance records, and any payroll authorizations such as direct deposit
  • Performance management: progress and performance reports, written warnings, and/or corrective action

documentation

  • Training and Development: training certifications, award nominations, and training history records
  • Wage/salary administration: compensation history, notifications of wage/salary increases or decreases, jury duty summons, and any change in employment status
  • Separation: exit interview form, final performance appraisal, and any other documents given at time of separation

It's important to remember that an employee's file should only contain items related to his or her job or employment status. Due to federal laws regarding employee privacy rights (such as HIPAA and the Patient Safety Rule), any medical records or other information regarding employee health and/or disability must be maintained separate and apart from personnel files.

Other government-mandated forms such as I-9s and court-ordered documents (including wage garnishments or restraining orders) must also be kept separate from a personnel file. One advisable practice is to store all I-9 Forms together in one folder for USCIS. In the event of a government inspection, investigators who are entitled to review your employees' I-9 forms will not have access to personnel -- and personal -- information at the same time. This lowers your risk of compromising employees' privacy and/or opening your business up to additional questions and investigation.

As for how long to store personnel records, opinions vary. To be safe, most employment law experts recommend retaining personnel records for the duration of an employee's employment, plus an additional 5 years. Federal law requires I-9 Forms to be maintained for three years after an employee is hired, or one year after termination (whichever is later). Furthermore, it's a good idea to keep applications from non-hires for at least 2 years after submission. Be sure to check local laws in each state where your employees are working, as these regulations may sometimes differ from federal stipulations. If both federal and state laws have specified retention periods for the same type of employment document, follow the law with the longer retention period. And in the event of pending litigation or investigation, preserve any and all documents pertaining to the litigation indefinitely, regardless of the mandated retention period.

What about Electronic Records?
One of the biggest hassles involved with HR recordkeeping is organizing and storing of all that paper. Electronic storage can be a tremendously effective way to save space, cut storage costs, and make your business practices more environmentally friendly. But are electronic records still in compliance with Federal and State recordkeeping regulations? According to Business and Legal Reports, "one major obstacle for HR is determining the permissibility of storing legally require documents electronically," because "at this time, there is no comprehensive federal or state law governing electronic records retention and management, and a totally paperless office is not yet possible."

The good news is that the federal government is moving slowly but surely toward policies that favor electronic storage. The Department of Homeland Security has moved to an electronic I-9 form, allowing for online employment verification through E-Verify. Meanwhile the Equal Employment Opportunity Commission (EEOC) has approved of electronic storage for a number of documents, and the Employee Retirement Income Security Act (ERISA) regulations now permit an electronic recordkeeping system as well.
If your company is using or plans to use electronic recordkeeping, here are a few recommended guidelines to keep in mind:

  • Be ready and able to furnish a hard copy: Make sure that electronically-stored records can easily be converted into paper copies if necessary
  • Don't compromise security: Ensure your recordkeeping system has reasonable controls and security measures in place to keep records confidential, accurate, and authentic.
  • Make sure documents are still legible: Scanners, copiers, and fax machines can compromise a document's legibility. Invest in quality technology and instill measures that ensure any documents stored electronically are still readable when displayed on a screen or printed.
  • Back up your data: Electronic documents are no different than their paper counterparts, in that you must have a back-up version available in the event that something happens to your primary storage method. Regularly create back-up electronic copies of documentation and store them in an off-site storage location.
  • Conduct evaluations: Conduct systematic evaluations of your electronic recordkeeping system to check for quality, security, safety, and legal compliance.

By staying abreast of the latest legislation as well as new advances in technology, you can develop a recordkeeping policy that ensures privacy for your staff, legal protection for your business, and minimal impact on your company's bottom line.

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Elizabeth Rice, SPHR