Employee recordkeeping: You may not want to do it, but you have to

I once had a very part-time contractor (10 hours a week) who tried to get unemployment after I let her go for cause. Thankfully, I had kept good records, but somehow, her file grew to be three inches thick. Man, I don’t miss her.

Since then I have thought, “There should be an app for that,” something that allowed you to handle and manage your employee recordkeeping with one simple tool. Well, as I recently discovered, now there is, and I’ll get to it in a moment, but first let’s talk about employee recordkeeping in a little more detail, because it is one of those things that small business people have to deal with, but usually don’t like doing.

As my sweet mom used to say, “Sometimes in this life, you have to do things you don’t want to do” (like letting Aunt Rhoda give me a kiss on the cheek).

No, I am not saying that keeping good records is quite the same as having Aunt Rhoda’s red lipstick smeared on my cheek, but recordkeeping is indeed one of those things that is a “have to do” for the small business owner instead of a “want to do.”

Now, maybe you are saying, “Hey, Steve, you are getting ahead of yourself. There aren’t that many records to keep track of when I hire someone.” And to that I say, au contraire, my entrepreneurial friend. Knowing what records to keep, and for how long, is key to staying compliant and out of trouble.

There are basically five areas of records that you need to track for each employee. Here’s what you need to know and do:

1. Hiring: To avoid any hint of favoritism or impropriety in the hiring process, you need to retain resumes, job applications, and any hiring tests you administer. Keep all of these records for one year (although you are not required to retain unsolicited resumes).

2. Time, salary, and payroll records: Here you need keep all payroll records, including raises, bonuses, and timekeeping W-4s. Under federal law, a good rule of thumb is to keep all of these documents and records for four years.

3. Medical records: Your third recordkeeping bucket should contain documents as they relate to employees’ medical information. This would include:

  • Drug test results
  • Physical exam results (if applicable)
  • Family and Medical Leave Act (FMLA) documentation
  • Requests for accommodation

Again, though federal and state laws vary, it is good practice to retain all of these records for one year, albeit FMLA documentation should be kept for three years.

4. I-9 legal employment verification records: I recently wrote a good blog about this, and the point bears repeating here. Small businesses need to retain I-9 forms. These forms should be kept for three years from the date of hire, or one year from the date of termination, whichever is later.

5. Performance reviews, discipline and termination records: Finally, you need to document and retain performance reviews, disciplinary warnings, and termination records. The reason should be self-evident, but still: Employees sue for wrongful termination, even when they have very rightly been terminated. Your defense are your meticulous records. Keep performance reviews for two years and termination records for one year.

As I said, yes, this is a lot to manage and keep. There must be a better way, right? Right. That’s what my pals at HRdirect thought too. So they created a great little app that helps you store and retain these documents. This app also keeps information organized, and secure in the cloud. Employees can even update their own records if you allow.

Pretty nifty. You can check it out here. My mom might even say, using it is one of those things that you get to do, not that you have to do.