Terminated Employee Records: Best Practices for Retaining Documentation
This article was updated on September 13, 2018.
The decision to terminate employment can be complicated. When, why and how an employee is separated depends on the business as well as on federal, state and local law, but in all cases, a good system for documenting and storing terminated employee records is a must.
Here are best practices for maintaining employee records:
Proper Documentation
If an employee is at risk of termination, you are likely aware of the reasons; a history of conflicts with co-workers, attendance issues or performance warnings. It's up to you and your human resources contact to carefully document any activities that lead up to termination and properly store these records securely in a confidential employee file. This practice helps protect the best interests of the organization should the employee later challenge the termination decision.
Notes from regularly scheduled meetings between supervisors and employees and disciplinary meetings should be kept on file. Employees should sign off on performance reviews forms once the review is complete. Then, furnish one copy to the employee and store the original in the file regardless of whether the employee has committed a terminable offense or is separated for another reason.
In cases where an employee is investigated based on a complaint of sexual harassment or bullying, you or your HR director should discreetly question the complainant, the employee and the named witnesses. Keep detailed, dated notes in a separate investigative file as they will likely serve as the basis for discipline and/or termination, if warranted.
How Long to Keep Employee Information: I-9 Forms and Benefit Elections
For best HR recordkeeping practices and to help ensure compliance, keep both hard and digital copies of terminated employee records for several years, depending on the type of document and applicable federal and state record retention laws. Under FLSA guidelines, payroll records must be maintained for three years; records related to wage calculations for two years. Additionally, some states may have longer retention periods for payroll and wage records.
In addition, federal law requires businesses to keep I-9 forms for one year following separation or three years from the employee's hire date, whichever is later, according to the U.S. Citizenship and Immigration Services. Payroll and tax records stay on file for four years after separation, as per the IRS. Refer to ERISA rules regarding retaining general benefits information on file for six years after the plan decision. Time requirements for specific medical benefits may vary, according to the U.S. Government Publishing Office. Maintain all employee records in a secure location, such as in a locked filing cabinet accessible only by you or your HR director, or encrypted in digital format.
Shredding Expired Employee Records
Many states require businesses to shred certain employee records or otherwise render them undecipherable — that is, they cannot be read, reconstructed or used to identify an individual — after the required retention time has passed. Be sure to remain compliant with your state's laws.
