Small business owners often get overwhelmed when they begin the hiring process. It is during this time they realize they have to deal with tons of paperwork. Setting up employee records and personnel files is a daunting task, especially if you are a startup with a limited budget.
Here are some handy guidelines to help you set up your efficient and compliant employee records and personnel files for your business:
Step 1: Choose a system of filing records.
There are two choices for setting up an employee record: paper and electronic. Most businesses with only a few employees start with a paper-based recordkeeping system. However, for growing businesses with a good number of employees, electronic recordkeeping is much more advisable. They are easier to organize and store and costs much less than keeping tons of paperwork that often takes up space in the office. Additionally, electronic records maintained in a cloud-based system are more accessible for employers.
Whatever method you use, you have to maintain consistency. For instance, if your hiring records are arranged alphabetically, your payroll records must follow the same format. This system keeps your recordkeeping system more organized.
Step 2: Know what type of records you must keep.
While there is no specific law that mandates you to keep a personnel record for each of your employees. However, it would be to the best of your interest if you keep records that require an applicant or employee to fill out and sign such as:
Some federal laws require you to keep specific employee records, such as:
Employees Full Name
Employee Number, if any
Complete Home Address with Zip Code
Date of Birth
In Nevada, employers must comply with the state personnel file law. Under the NRS 613.075 employers must:
Allow employees a reasonable opportunity to check any employee records, including qualifications for hiring and any disciplinary actions that led to the termination of employment.
Give a copy of the records to the employee.
Under the NRS 608.115, employers must also provide a copy of the records of wages for two years. This copy must be given within ten days of the request.
Due to these provisions, businesses in Nevada need to set up employee records and personnel files.
Step 3: Set up necessary employee records
In general, business owners must maintain three types of records:
Personnel Files. These files will cover an employee’s entire employment history. Data included here must include hiring documents, contact information, and acknowledgement of the company’s employee handbook. As you go along, you can add performance assessments, employee recognition, training records, disciplinary forms, and termination letters.
Tip: Do not keep I-9 forms with personnel files. Keep them in a separate file. Should your business be chosen for an immigration-related investigation, you don’t risk of exposing the privacy of your employees. It would also save your company from dealing with other associated employment audits.
Payroll Records. Payroll records will include all documents pertaining to salary, company benefits, and any financial awards. Include here all necessary timesheets, W-4 Form, W-2 Form, and direct deposit information.
Step 4: Know how long you should keep employee records and personnel files
One of the critical things you must remember is the time frame in which you must keep these records. This time frame will allow you to remain compliant with federal laws while keeping your documents organized and well-kept.
Tip: Adhering to time frames avoid penalties and protects you from any potential lawsuits. Keeping a record longer than necessary is not advisable as any kept records may be used against you in a court of law.
Form I-9 – 36 months from the date of hire or 12 months after termination from position (whichever is later applies)
Payroll files (includes wage and promotion documentation and timekeeping records) – 3 to 4 years
W-4 forms – 4 years after tax due or payment
Performance reviews – two years
Physical exam results – 12 months after action taken based on results
Drug tests – always keep the most recent report for one year
Request for reasonable accommodation – 12 months after action taken or after document creation (whichever is later applies)
Benefit plans – 12 months after termination
FMLA documentation – 3 years after the end of the leave
Termination records – 12 months after the termination date
Step 5: Keep records confidential.
If you are keeping paper records, make sure you keep confidential files in a secured cabinet. Only authorized individuals must have access to these files. Some examples of sensitive data that you must secure include all documents pertaining to medical records, marital status, and other significant numbers such as Social Security numbers. You may also want to invest in fire-resistant cabinets and make electronic backups of all your files.
Setting up employee records and personnel files may be a daunting task, especially if you’re starting your business from scratch. However, the job should be easy once you’ve got everything set up. You’ll soon realize that all your efforts will be rewarded because it would be easier for you to organize and manage your files.