Your HR team invests significant resources into recruiting, hiring, and onboarding top talent. Despite the best planning, employees will come and go. That’s just the way things are.
A recent report from the US Bureau of Labor Statistics shows that the average separation rate for companies was 3.2%. Like it or not, you stand to lose more than 3 out of 100 employees for any given month.
You have records for every team member, whether it’s personal details you collected during recruitment or employment details stored as part of the onboarding process. When they leave, what do you do with all of this employee data?
Chances are you need to retain it. But for how long? Keep reading to find out.
What is Employee Data?
Employee data entails any information you’ve collected on individual team members. Job interview notes, benefits forms, and performance reviews are just a few examples.
Managers and HR professionals typically handle team member data collection and storage. Regardless of how they do this, all employee records should be well organized, easily accessible, and secure.
Types of Employee Data
With consent from employees, you likely begin collecting relevant information as soon as someone applies for a job. During the lifetime of the employer-employee relationship, your company gathers and stores more and more data on them.
Let’s examine some of the basic employee data categories:
- Personal information: Identifying information and contact details
- Demographic information: Age, gender, nationality, etc
- Job-related details: Applications, qualifications, experience, portfolio, and training data such as a degree and test scores
- Compensation: Offers and negotiations, pay rises, and enrolled benefits
- Employee feedback: Engagement and satisfaction surveys
- Performance and reviews: Appraisals and in-house assessments
- Legal compliance: Workforce eligibility, tax records, health and safety documentation, and other records
- Attendance: Absences, holiday requests, sick leave, and time tracking
That’s a lot of data to manage. What’s more, a lot of it is personal and sensitive. As a result, more businesses use software for compliance management. If you do need to show evidence of compliance, you can easily generate reports that offer full visibility.
The Importance of Employee Data and Its Retention
When used properly, the benefits of employee data can be widespread, from helping your HR team administer payroll to personalizing employee engagement programs.
It’s also beneficial for creating a detailed employee profile from which you can monitor and assess employee performance and career development planning, potentially using AI for HR to enhance these processes. Showing team members that data is handled securely builds trust and improves morale.
Of course, there are less romantic reasons than promoting a positive company culture. You need to collect data for the simple fact that, in most cases, it’s a legal requirement.
You must comply with various regulatory bodies, including the IRS and the US Equal Employment Opportunity Commission (EEOC). Regulations such as the Federal Insurance Contributions Act (FICA) and the Age Discrimination in Employment Act (ADEA) also require documentation.
What are the Legal Requirements for Retaining Employee Records?
Regardless of why a team member is exiting, you are required to retain employee data for a minimum period of time.
Different data types are governed by varying laws and regulations. Let’s examine the major categories to learn more about data retention requirements.
Recruiting Records
You need to prove your recruitment process is fair and non-discriminatory. Under the EEOC, you must retain applications and hiring documentation for at least one year. The ADEA requires you to keep hiring and recruitment data for three years. This includes interview notes and any assessments required during the application process.
Applicant and hiring documents include:
- Job posting
- Job application
- Pre-employment tests
- References
- Background checks
- Offer letter
- Contracts and non-competes
- Onboarding documentation
Keeping recruitment data for three years ensures compliance with Title VII of the Civil Rights Act. This period also exceeds that required by the Americans with Disabilities Act (ADA).
Personnel Files
Personnel files are comprehensive records containing an employee’s job history and personal information. It’s best practice to retain this data for at least two years.
General employee personal data includes:
- Name
- Address
- SSN
- Contact information
- Any document the employee has signed, including those processed with esignature technology
- Tax information
Some personnel data types can be further categorized as below.
Employee Performance
Employee performance information is a critical subset of personnel data. It documents any promotions, disciplinary actions, and skill assessments during employment.
Employee performance records include:
- Completed training courses
- Performance evaluations
- Pay rates and raises
- Changes in job role, title, or responsibilities
- Leaves of absence
- Site transfers
- Inadequate performance leading to disciplinary action or complaints
- Termination of contract or probationary period
It’s not only written records. Consider every area of the employee’s performance. If you operate call service centers and record calls for training and monitoring purposes, you may also need to retain this data.
The ADA, ADEA, and Title VII all require you to keep performance-related data for at least one year after termination. Federal contractors may need to keep performance records for two years.
Employment Eligibility
Federal law requires documentation of every employee’s legal right to work in the US. Your HR department complies by filling out and keeping I-9 forms, also known as Employment Eligibility Verification, for every new hire.
You are required to verify IDs, birth certificates, and other identification documents. You may have photocopies or scanned copies of some or all of these records.
If reviewed by US Citizenship and Immigration Services, you must promptly provide I-9 forms for employees. Eligibility documents are also required by the Immigration Reform and Control Act (IRCA).
Payroll and Taxes
Employee payroll and tax information could also be considered “personnel” data. These records are regulated by the ADEA. Documents related to payroll are also governed by the Fair Labor Standards Act (FLSA), Equal Pay Act (EPA), and other laws.
These acts require you to keep employee time cards, work tickets, pay scale tables, and work schedules for at least two years.
The Internal Revenue Service states that you must keep payroll tax records for four years. Local state laws may require even longer data retention periods.
Documents you need to retain for the IRS include:
- Employer identification number (EIN), contact address, SSN, occupation, and dates of employment
- Form 940 (for reporting any annual Federal Unemployment Tax Act tax) and Form 1099 (for reporting non-employment income such as stock dividends oro prize money)
- Wage, annuity, pension payments, tip dates and amounts
- Copies of employees’ and recipients’ Form W-4 income tax withholding certificates
- Tax deposits
- Copies of returns filed and confirmation numbers
- Fringe benefits and expense reimbursements
The amount of data you need to store and retain for these purposes underlines the importance of internal audit practices. Retaining tax and payroll records enables you to catch problems before the IRS does.
Another two points to consider: The Lilly Ledbetter Fair Pay Act doesn’t recommend retaining compensation data for an additional five years.
In addition, if you fall under the jurisdiction of the California Fair Pay Act, you must retain documentation of why two employees doing similar work are on different pay rates for three years.
Benefits
You provide benefits to entice, acquire, and retain employees. Some benefits are mandatory such as employer-based contributions to Social Security and Medicare and the Affordable Care Act (ACA).
Your organization might not have high turnover. But you still need to retain benefits data in case disputes arise.
The Employee Retirement Income Security Act (ERISA) requires you to retain the following:
- Retirement plans and contributions such as 401(k)s
- Employee stock ownership plans
- Profit-sharing documentation
- Health insurance eligibility, benefits, claims, and copays
- Welfare benefits
ERISA and the Consolidated Omnibus Budget Reconciliation Act (COBRA) require you to keep benefits information for six years. Benefits data retention is also governed by state laws such as New York’s Paid Family Leave program.
Medical Records
Medical records require an additional level of privacy and protection. All files should be stored separately with highly controlled and limited access.
There are various medical data privacy regulations you must comply with, including:
- Health Insurance Portability and Accountability Act (HIPAA)
- ADA
- Family and Medical Leave Act (FMLA)
- EEOC
- Genetic Information Nondiscrimination Act (GINA)
- Occupational Safety and Health Administration (OSHA)
Each of these regulations covers various types of employee medical data such as:
- Disability claims
- Doctor’s notes and sick leave documents
- ADA accommodation documentations
- Worker compensation
- Drug and alcohol screenings
Since medical data is highly sensitive and governed by multiple regulations, it’s recommended to retain these records for 3-7 years.
FMLA
The Family and Medical Leave Act requires you to provide employees with unpaid leave for qualified reasons. Employees fill out forms to make an FMLA request. You must keep these and any leave-related documents for at least three years.
Accident and Safety
Workplace health and safety falls under the governance of OSHA. You must retain work health and safety documents for five years. Retain records like accident reports, safety training, inspections, and injury documentation.
Hazardous Exposure
Employee exposure to hazardous substances such as asbestos has its own rules. OSHA requires that you retain any hazardous exposure data for 30 years.
Exposure documents to keep include:
- Records of data and duration of exposure
- Safety data sheets (SDS)
- Chemical labels
- Measured levels of exposure
- Copies of information and correspondence with physicians
- Health and exposure monitoring
- Medical surveillance data for individuals and related cohorts
Separation Records
Employee separation records are also part of your personnel data. They cover the end of employment including documentation to back any reasons for termination.
Separation data includes but is not limited to:
- Exit interview notes
- Employee resignation letters
- Performance evaluation
- Severance contracts or agreements
- Disciplinary action
The EEOC requires you to retain employee separation documents for at least one year. You may be required to keep related data such as performance reviews for three years.
Data Retention Best Practices
That’s a lot of employee data. So, how can you track it all and ensure you only delete records when appropriate? And how can you guarantee sensitive data is safe and secure from unauthorized persons.
Streamline your data management and retention by following these best practices.
Err on the Side of Caution
Many types of employee data fall into multiple categories. On the other end of the spectrum, several laws and regulations may apply to each record type, each with its own retention requirements.
Navigating all of these rules seems daunting. You’ll be better served by always going for the longest retention period you think may apply. There’s no harm in keeping a record for longer than necessary.
Establish Retention Policies
Create a handbook or guide for employee data retention. Turn to your in-house subject matter experts; constructing such a roadmap will rely heavily on your HR and legal departments. It’s also worth enlisting an HR legal advisor when drawing up your retention policies.
Don’t send out comprehensive policies to everyone. Instead, break them down into relevant chunks of information.
For example, department managers need clear instructions for retaining employee reviews and assessments, but they don’t need to worry about tax documents. The payroll department handles that.
Train Employees on Data Management and Security
Good data retention starts with good information management and security. Establish policies and procedures for receiving, handling, and storing employee data. You can outsource cyber security and data privacy to the experts.
Alternatively, put together a cross-departmental task force with key stakeholders. HR leaders must collaborate with data engineers and IT security specialists. This will help them design thorough design data management training programs. Ensure guidelines align with COSO framework principles if you operate in the financial sector or any other relevant risk management strategies.
HR can take everyone through the security course or you can train your teams from the top down. Prioritize the most sensitive information such as medical records.
Use the Right Tools
Unless you’re a small business in a niche industry, the bulk of your employee records are likely electronic. Data retention management is much easier when you use the right tools for the job.
Scanned documents and Google Docs are a step in the right direction.
But HR and payroll platforms go a step further. They process and securely store all personnel data in a central space on-premise or in the cloud. It’s easy to access, edit, download, and delete files as needed. Admins control user privileges and access for added security.
Engaging a web development company can further enhance these systems by ensuring they are tailored to meet your specific operational needs and are seamlessly integrated with your existing IT infrastructure.
Just as a theme dictates the visual layout and style elements of a website, an integrated systems framework guides the structure and accessibility of employee data, ensuring consistency and ease of use across all departments.
Other platforms that are useful for managing employee data include:
- Application tracking systems
- Recruitment services
- Employee assessment tools
- Enterprise resource planning (ERP) solutions
- Benefits enrollment platforms
Use a system like Ardoq application portfolio management (APM) to organize these apps and the rest of your tech stack. You want to guarantee every tool you use is integrated, so you can connect and sync all employee data and easily access it if you’re asked to produce records.
Retain Employee Data to Protect Your Business
There are plenty of rules to understand and comply with when managing employee information. Use this guide to strengthen and guide your team. Ensure that when a team member leaves, their data will be retained as long as necessary.
Follow employee data best practices throughout your workflows, and use HR-related platforms to centralize, secure, and streamline data management. Should any discrepancies or an untimely audit arise, you’ll be more than prepared to supply the proper documentation.