Employee Documentation and Record Keeping Requirements

According to a 2016 study, the average total turnover for all industries in the workplace stands at 17.8 percent. While some businesses might try to cut corners when it comes to employee documentation and record keeping, there are some documents that are absolutely necessary. A lack of proper documentation and record keeping can lead to financial setbacks and even legal problems for companies. Essentially, the average business owner will have to rehire one out of every five employees on a yearly basis. For some industries, of course, turnover rates can be much higher, and have come to be an expected part of maintaining a workforce. For companies who rely on hiring younger workers, turnover can be a major problem. In fact, the median tenure for workers age 25 to 34 is just over three years.

Employee turnover certainly costs businesses an enormous amount of money. One recent study found that turnover costs employers 33 percent of a worker’s annual salary. That cost is divided amongst the human resource costs of recruiting, interviewing, hiring, and onboarding a new employee. In dollars and cents, a company that has to replace an employee earning $45,000 a year can expect a replacement cost of $15,000 per person.

Of course, there are other “hidden” costs that come with employee turnover. Lost productivity that comes from hiring a new employee and waiting for him or her to “get up to speed” is another cost that is rarely accounted for. The cost of employee documentation and record keeping is another enormous expense that takes up a lot of time for HR departments around the country. Filing an enormous amount of documentation and records for each and every employee not only requires human work hours, but it can also distract human resource personnel from dedicating time to more important job tasks that can boost productivity and profit levels for the company.

Below, we offer a concise summary of the most important employee documentation and record keeping requirements that all companies and HR departments need to be aware of.

What Compliance Risks Entail

If you hire employees, you absolutely must keep personnel files in order to risk potential problems down the road. Not only do detailed personnel files protect the rights of workers, but it can also protect the company from potential disputes and lawsuits that disgruntled workers might bring against the company. Furthermore, for companies that have 15 or more employees, there are a series of federal guidelines which dictate necessary documentation and the time you must keep those documents on record.

Of course, more detailed record keeping is also an essential part of a well-organized HR department. Documentation can show employee time and attendance and job performance. Not only will this documentation allow senior level members to decide on whether or not to retain certain employees, but it can also come in handy when payment disputes arise.

The Bare Minimum

At the most basic level, every employer should maintain personnel files with some of the most basic information. In terms of legality, the following forms and documentation are an absolute must for federal compliance.

W-4 Form: This IRS form is completed by all employees to let the employer know how much money to withhold from your paycheck for federal taxes.
Form I-9: Form I-9 is used for verifying the identity and employment authorization of individuals hired for employment in the United States. It makes sure that your workers can legally work in the United States.

Other bare bone information that should of course be kept in individual personnel files include:

The Initial Job Application: This is indispensable record keeping and can be helpful when employee complaints arise.
Basic Employee Information: Once hired, an employee “bio” should be kept on file that includes basic information such as their full name, their employee number if applicable, home address, contact information, date of birth, gender, and job title.
Basic Payroll Records: To avoid salary disputes down the road, employees should also keep basic payroll records that allow the company to verify payment.
Job Performance Documentation: These documents can include records of job movement such as promotions or transfers, documentation related to layoffs, documentation related to involuntary termination, and others.

Special Documentation and Record Keeping for High Risk Environments

Lastly, certain industries will also want to keep special types of documentation when they operate in different types of high risk environments. For employees working on private, censored, or classified business material, a confidentiality agreement is an absolute must to avoid potentially catastrophic economic losses. Similarly, non-disclosure agreements between employees and employers can legally prohibit employees from sharing or revealing confidential and proprietary information or trade secrets.

In workplace environments that can be considered dangerous or potentially hazardous, employers would also do well to include extensive records and documentation wherein employees sign off on their understanding of these risks.

Each and every industry will have specific types of documentation that will accompany the basic documentation and record keeping outlined above. Of course, investing in the digitalization of these documents is not only safer and more reliable, but it can also drastically reduce the amount of time HR departments dedicate to record keeping.

For this reason, HR departments across all industries would do well to implement a digitalized central repository that makes it easy to manage digital, personnel documents and records. A high quality software solution can reduce compliance risks, make information flows quicker and more reliable, and also reduce HR costs through improved efficiency. Certain technologies can also alert HR leaders when certain mandatory documents in an employee file are missing to avoid the risks that come with incomplete documentation.