

As a small business owner, you’re no stranger to long to-do lists. This is especially true if you’ve begun hiring, which generates a lot of employee paperwork.
But if you’re like most startups, there’s no room in the budget for an administrative assistant, never mind an HR specialist. How do you get ahead of this issue when you’re in charge? What’s the best approach to tackling employee recordkeeping as your business and staff grow?
Many businesses start out with a paper-based recordkeeping system. This can make sense when you have just a couple of employees, but eventually, it can become cumbersome. For most growing businesses, electronic documents are easier and less costly to maintain, organize and store. Plus, when records are stored “in the cloud” (online), you can access them anywhere, any time you have Internet access.
Whether you use paper, electronic files, or both, consistency is the key to effective recordkeeping. For example, if your hiring records are sorted by employee name, organize payroll records the same way. Keep the same system across all types of records, and make sure your file folders have accurate, uniform names.
In most cases, you’ll need to maintain three types of employee records: personnel, payroll, and medical files.
Personnel files cover employment history and should include hiring documents, employee and emergency contact information, and a signed acknowledgment of your company’s employee handbook. Over time, you can add performance reviews, disciplinary forms, employee awards, training records, and termination letters.
Don’t keep I-9 forms (used to verify employment eligibility in the U.S.) in the personnel file. Store these forms all together in a separate file. If your business is selected for an immigration-related audit or investigation, the investigator will ask to inspect these forms. Keeping these records separate helps to protect the privacy of your employees and reduces the risk of exposing your business to additional employment investigations.
Documents related to salary, benefits, and financial awards should be filed under payroll. Examples include timesheets, direct deposit information, and W-4 and W-2 forms.
The medical file should include application forms for health, life insurance, and other employee benefits if you offer them. Other possible medical records include requests for reasonable accommodation under the Americans with Disabilities Act (ADA), injury reports required by the Occupational Safety and Health Administration (OSHA), and paperwork concerning employee leave under the Family and Medical Leave Act (FMLA) should those laws apply to your business.
Federal employment laws specify how long you must keep certain employee records. It’s important to adhere to those timeframes to avoid penalties. At the same time, holding on to documents longer than necessary (instead of discarding them) isn’t recommended, as any retained records could still be used against you in the event of a lawsuit.
Maintaining an effective recordkeeping system is challenging when you don’t have dedicated administrative personnel on staff. But with proper planning and follow-through, you can get organized and meet the legal requirements.
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.