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

When it comes to managing your business’s payroll, keeping accurate records is not just good practice—it’s the law. Not only are you required to maintain certain payroll records for your employees, but you also need to know how long to keep them to comply with United States and IRS guidelines. In this article, we’ll discuss the essential payroll records you should keep, how long to keep them and the specific requirements outlined by the Department of Labor (DOL), Internal Revenue Service (IRS), and Equal Employment Opportunity Commission (EEOC).

1) What Payroll Records Should Be Kept?

As an employer, you should keep a range of payroll records to ensure compliance with various federal and state laws. These records include:

  • Employee Information: This includes names, addresses, Social Security numbers, and job classifications.
  • Wage and Hour Records: Records of hours worked, wage rates, and total wages paid.
  • Time Sheets: Records of hours worked by each employee, including overtime hours.
  • Payroll Tax Records: Records of federal, state, and local taxes withheld from employees’ paychecks.
  • Benefit Records: Records of employee benefits, such as health insurance and retirement plans.
  • New Hire Documents: Documents related to hiring, such as job applications and W-4 forms.
  • Termination Records: Documents related to employee terminations, including final pay and benefits information.

2) New Hire Documents

When hiring a new employee, you must collect certain documents to verify their eligibility to work in the United States. These documents include:

  • Form I-9: This form verifies an employee’s identity and eligibility to work in the United States. It must be completed by both the employee and the employer.

3) I-9 Form

The I-9 form must be kept for three years after the date of hire or one year after the date of termination, whichever is later. This form should be stored separately from other payroll records.

4) Pay Stubs

Employers must provide employees with pay stubs showing their gross pay, deductions, and net pay for each pay period. Pay stubs should be kept for at least three years.

5) Timesheets

Timesheets should be kept for at least two years. These records should include the hours worked by each employee, including any overtime hours.

6) Job Evaluations

Job evaluations should be kept for at least one year after they are conducted. These evaluations help track employee performance and can be used to make decisions about promotions or raises.

7) Leave Documentation

Records of employee leave, including vacation, sick, and personal days, should be kept for at least three years. These records help ensure compliance with federal and state leave laws.

8) Termination Documentation

Documents related to employee terminations, including final pay and benefits information, should be kept for at least three years after the termination date.

9) How Long Do We Need to Keep Payroll Records?

The length of time you need to keep payroll records depends on the specific record and the relevant federal or state law. In general, you should keep most payroll records for at least three years. However, some records may need to be kept longer. For example, the IRS requires employers to keep payroll tax records for at least four years after the tax is due or paid, whichever is later.

10) Department of Labor

The Department of Labor (DOL) has specific recordkeeping requirements for employers. These requirements vary depending on the size of your business and the type of records you keep. The DOL may audit your records to ensure compliance with federal labor laws.

11) Internal Revenue Service

The Internal Revenue Service (IRS) also has recordkeeping requirements for employers. These requirements include keeping payroll tax records, including W-2 forms and payroll tax returns, for at least four years after the tax is due or paid.

12) Equal Employment Opportunity Commission

The Equal Employment Opportunity Commission (EEOC) requires employers to keep records related to employee demographics, such as race, gender, and ethnicity, for at least one year. These records help ensure compliance with federal anti-discrimination laws.

In conclusion, keeping accurate and up-to-date payroll records is essential for compliance with federal and state laws. By understanding what payroll records to keep and how long to keep them, you can avoid potential legal issues and ensure your business runs smoothly.