Minimize Liabilities with Proper Employee Recordkeeping

By Margaret Hintz, Insperity Manager of HR Services on Feb, 17 2012

Busy small business owners have countless tasks on their to-do lists, topped with keeping customers happy and generating new business. Administrative tasks such as employee recordkeeping are often low among the priorities. That is understandable, but overlooking the importance of maintaining crucial employee records can expose a company to great risk. An inability to produce complete documentation when faced with an employment-related audit or lawsuit, for example, could compromise a company’s case and result in costly fines and penalties. Additionally, many federal and state laws mandate that employers maintain and update specific employee records. There are also regulations that may require employers to destroy certain documents after a designated period.

Paperwork to Retain

Employee records should be handled professionally and confidentially, and should only include work-related documents. Personal information not relevant to a job, such as hobbies or religious and/or political beliefs, should not be kept on file. The Society for Human Resource Management (SHRM) recommends employers include the following in personnel files:

Recruiting and hiring documents

Job descriptions

Compensation records

Employee-recognition information

Termination documents

Medical information and records should be maintained separately and confidentially from other files, according to rules outlined by the Americans with Disabilities Act (ADA) and Health Insurance Portability and Accountability Act (HIPAA). These include:

Medical records, including doctor notes

Drug-test results

Leave-of-absence requests

Benefits enrollment

Workers’ compensation

Documents that contain Social Security numbers, such as Forms I-9 and W-4, also should be filed independently and made accessible only to designated human resources (HR) staff and investigative auditors.

Creating Guidelines

Every business should have a policy that clearly outlines employee recordkeeping procedures to protect companies and employees’ sensitive information.Identifying those who have permission to access these records also is crucial. Typically, these individuals are HR staff, the employee and supervisors, when applicable. Payroll employees do not need employees’ medical records to perform their jobs. However, an HR manager may need access to a wide variety of documents, ranging from payroll information to medical files. To help safeguard private information, consider requiring employees who handle or review records to sign a confidentiality agreement, especially if it is not already included in an employment contract. Employers also should establish guidelines with a timeframe of when and what documents need to be destroyed, and the appropriate steps to follow should information be missing or compromised. Documenting the company’s security measures is helpful, especially should an audit occur. With ongoing changes in federal and state employment laws, procedures should be reviewed and updated regularly.

Paperless Recordkeeping

Some employers find that technology and paperless recordkeeping can help a business to better manage employee records. However, companies are still required to continuously monitor employee data and processes to ensure that privacy and ever-changing legal requirements are being fulfilled.

When it comes down to it, properly organizing and managing employee records is good business. Employees should be able to trust employers to protect their confidential information, and employers find that regular maintenance of records eases the overall paperwork burden while also minimizing the possibility of fines and penalties.

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Minimize Liabilities with Proper Employee Recordkeeping

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