Before you toss the records of an employee who left your company a year ago, know that the law requires employers to retain payroll records. However, there are multiple regulating agencies and laws that impact the records you keep, like payroll tax records or records of overtime pay, and for how long.
This list includes each payroll record the FLSA, IRS, EEOC, and other governmental agencies say you need to keep so you’ll know what to keep on file and how long they need to stay there.
Basic Payroll Records Outlined By FLSA
The Fair Labor Standards Act, also known as the FLSA, governs the way employees are paid and how they work. Specifically, the FLSA covers topics of overtime pay, minimum wage, hours worked, child labor laws, and recordkeeping.
Most employers are required to adhere to FLSA standards. The FLSA covers employers that make at least $500,000 in annual sales or engage in interstate commerce, which can be as simple as making phone calls to customers in various states.
The following sections outline the FLSA’s recordkeeping requirements. Note that the FLSA doesn’t require you to keep records in a specific format, so you’re allowed to use payroll software for automatic recording and storage if you choose.
1. Employee Information | Retain for 3 Years
The FLSA requires businesses to keep most of the information they gather from employees upon their hiring. You should maintain these records throughout the employee’s tenure and for at least three years after they separate from the company:
- Full name
- Social Security Number
- Birth date, if younger than 19
- Address
- Sex
- Occupation
2. Timekeeping Records | Retain for 3 Years
The FLSA requires employers to keep records of the time and day the employee’s workweek begins. This defines the employee’s workweek to make their wages, overtime, and pay periods more clear for recordkeeping purposes. If the employee’s typical workweek changes at any time throughout their employment, the change should be documented and records kept for at least three years after the change.
3. Wage Records | Retain for 3 Years
The FLSA also requires you to keep wage records for each employee, which should detail the following information:
- Regular hourly pay rate
- How the employee is paid, such as per hour or per week
- Total straight-time earnings per day or week
- Total overtime earnings for a workweek
- Deductions or additions to employee wages
- Total wages paid per pay period
- Date of pay and pay period dates
Additional Payroll Records Required by the IRS
The Internal Revenue Service, more commonly known as the IRS, also has recordkeeping requirements for tax-related payroll forms and other records relating to employee and employer tax credits.
You can learn more details about the IRS’s recordkeeping requirements on its website, but we’ve compiled an overview of the requirements below.
4. Payroll Tax Forms | Retain for 4 Years
Payroll tax forms denote how much you withheld from employee paychecks for taxes and your company’s actual payments and filings. Retain the following information for the IRS:
- Employer identification number
- Employee names, addresses, Social Security Numbers, and occupations
- Dates of employment for each employee
- Copies of employees’ income tax withholding certificates, like Form W-4
- Employees of W-2s returned to you as undeliverable
- Amounts and dates of all wages, annuities, and pension payments
- Amounts of all tips reported by employees
- Records of allocated tips
- Dates and amounts of payroll taxes paid and filed, along with records of filing
The IRS requires all payroll tax forms to be retained for four years, including Form 940, the Employer’s Annual Federal Unemployment (FUTA) Tax Return, and Form W-2, Wage and Tax Statement. Refer to this list of payroll tax forms for others you need to keep on record.
5. Records of Fringe Benefits and Reimbursed Expenses | Retain for 4 Years
Employers must also keep all records of fringe benefits for four years. Fringe benefits may include:
- Tuition assistance
- Childcare reimbursement
- Health insurance plans
- Employee wellness plans
- Retirement plans
- Vacation time
The IRS also lumps records of reimbursed expenses into this category. For example, you must keep records of any payments you made to employees for meals or travel expenses, office equipment, or continuing education.
6. Sick and Family Leave Records | Retain for 6 Years
Sick and family leave records and any other records that prove your claims for employer tax credits must be retained for at least six years for the IRS. Specifically, the IRS requires records for qualified sick or family leave wages for leave taken after March 31, 2021, or qualified wages for the employee retention credit that you paid after June 30, 2021.
Additional Payroll Records Required by the EEOC
The U.S. Equal Employment Opportunity Commission (EEOC) enforces laws regarding worker discrimination for various reasons, including gender, race, national origin, and pregnancy. The records the EEOC requires businesses to maintain relate to employee and applicant information.
7. Employee and Applicant Information | Retain for 1 Year
Private employers must hold onto employee and applicant records for one year after creating the record or, if the employee was terminated by the company, for one year after termination. You should keep all personnel records, but here are a few examples of what to keep on file:
- Hiring records
- Promotions
- Application forms
- Lay-off records
- Compensation records
- Employee transfers
8. Governmental and Educational Organization Employee and Applicant Information | Retain for 2 Years
The EEOC also requires public governmental and educational organizations to retain employee and applicant records like those named above, except these organizations are required to keep these records for at least two years after making the record or after terminating an employee.
Additional Payroll Records Required by the USCIS
The U.S. Citizenship and Immigration Services (USCIS) oversees the country’s immigration system. The USCIS’ recordkeeping requirements only involve the I-9 form, which verifies every employee’s identity and legal ability to work in the United States.
9. Employee I-9 | Retain for Up to 3 Years
When an employee submits their I-9 to your company as part of the hiring process, you’re required to retain a copy for whichever comes later: three years after their hire date or one year after employment ends.
As an example, say you hired someone on April 1st, 2023. Plan to hold onto their I-9 until April 1st, 2026. However, if they continue working with your company until December 1st, 2026, you’d need to retain a copy until at least December 1st, 2027.
Additional Payroll Records Required by FMLA
The FMLA, or Family and Medical Leave Act, protects an employee’s rights to take unpaid medical or family leave for up to 12 workweeks in a 12-month period or 26 workweeks if caring for an ill or injured service member.
The FMLA’s recordkeeping requirements relate to employee, payroll, and leave information.
10. Basic Payroll Records | Retain for 3 Years
A business should retain payroll records, including the following, for at least three years:
- Identifying employee information, like name and Social Security Number
- Pay rate
- Wages earned per pay period
- Timesheets/hours worked
- Pay garnishments
11. Copies of Leave Information | Retain for 3 Years
The FMLA also requires employers to retain copies of FMLA-related notices given to employees that explain the coverage the FMLA entitles them to. Employers must also keep records of any notices of FMLA-covered leave an employee gives them.
12. Records of Leave Payments | Retain for 3 Years
Although the FMLA doesn’t require employers to pay employees for their leave, employers can choose to pay. If an employer pays for family or medical leave, they should retain records of those payments for at least three years after the pay date.
13. Records of Dispute | Retain for 3 Years
Employers must keep any dispute records regarding FMLA leave for an employee, such as an employer’s written notice to an employee disagreeing with the leave being counted as FMLA leave.
To Sum Up
Payroll compliance is much more than withholding the right amount of taxes from employee paychecks and giving employees their pay stubs on time. To be compliant, you also need to understand every law regarding paying, working, and retaining records on your employees.
Our guide covers recordkeeping requirements from federal entities, but note that states can set their own requirements for payroll records, too. In that respect, it’s best practice to consult with a payroll attorney to ensure you have all your bases covered.
