What payroll records should you keep? How long do you need to keep the records? Can you keep digital records, or do you have to keep paper records?
These are questions that I am often asked regarding payroll records, and the short answer is that it depends. Each agency has its own requirements, and it is essential to know the differences. At any time, you may be required to produce payroll records to demonstrate compliance (such as if an employee makes a complaint); the government typically tends to side with the employees. If you don’t have the proper records, this will occur.
What payroll records should you keep?
In general, you should keep all employee and payroll data. This is also referred to as a master data file.
The master data file should include the employee’s name, address, gender, date of birth, social security number, and W4 information (filing status, dependents and other deductions claimed, additional withholding, exempt status, and if they are a non-resident alien). You also need to include work state, work location, employee ID number, occupation/job title, wage and hour data (hire date, shift differential rate, termination date, bonuses paid, pay dates, pay frequency), exempt/non-exempt status; as well as hours worked (per day/week, work week, regular rate of pay by workweek, any additional income or deductions, OT hours and premium pay) and direct deposit forms.
While that sounds like a lot of information, it is information that you can (and should) be able to access easily.
How long do you need to keep the payroll records?
Can you keep digital payroll records?
Yes. No agency specifies if the payroll records need to be paper or digital. However, if you are in a situation where you need to go to court, you will need to be able to convert the digital records to paper. It is as simple as printing the documents from the digital file onto paper.
The law lists the minimum requirements. You can always keep the payroll records for longer. It is also important to note that every agency considers recordkeeping an employer responsibility. Payroll service providers are only required to keep documents on file for 2 years, so it is important that you maintain your own personnel files.
I hope that you found this information useful.
This information is accurate as of February 17, 2022.