Keeping payroll records is both required (for a certain period) and smart.
Deciding what to keep—and for how long—is where things get debatable.
The idea that you should purge payroll records after a certain number of years
is based on the time and space needed for retaining paper records. But the
digital age has opened up new opportunities, including permanent record
storage and on-demand retrieval.
But for global employers who are still in transition and dealing with time and
space constraints, here are a few guidelines for how long to keep your payroll
records.
Types of payroll records
The term ‘payroll records’ refers to any form or documentation collected or
produced for the purpose of processing payroll. These records include things
like:
- Collective bargaining agreements
- Wage rate increase forms
- Timekeeping logs and timecards
- Tax withholding forms
- Etc.
Each document serves a different purpose, and the minimum length of time to
store these documents depends on their purpose.
For example, tax documents can vary by the taxing authority, often somewhere
between three and eight years. In this case– always err on the side of
caution and go with the longest enforceable duration.
Who determines how long you keep payroll records?
Most businesses retain payroll records to document compliance. Any governing
body that applies enforceable regulations on your business has a say in how
long you keep your payroll records.
For example, if you employ workers in the European Union, the European
Commission requires that you are able to produce documentation proving compliance with directives such as providing your employees with a
minimum of 11 hours of rest every 24-hour period. Detailed timekeeping logs
with at least two years of historical data are the best way to comply with
this requirement.
Newer legislation under the General Data Protection Regulation
(GDPR) requires that employers maintain personnel records for at least six years.
And this is just for payroll records in the EU.
The best approach for an effective global payroll strategy is to efficiently
maintain complete historical payroll data with records that are never
purged. It will save you from a sizable headache when an old complaint
resurfaces in the form of a federal investigation.
If keeping your payroll records indefinitely is not an option, consider these
recordkeeping requirements as you build your policies.
Short-term payroll records (two-year minimum)
Generally speaking, documentation that supports short-term arrangements should
be maintained for at least two years from the expiration date on the document.
This may include documents like a collective bargaining agreement with an
expiration date or wage and benefits explanations for equal opportunity
legislation.
| 2 Years: Wage and Rate Information | |
|---|---|
Type of Documentation | Description |
Employee Schedules | Documentation of when and how often individual employees are expected to work |
Timecards | Documentation of when and how often individual employees performed work |
Wage and Rate Scales | Documentation of how wages are determined |
Personnel records (three to six years minimum)
Personally, we don’t see any reason to purge personnel records. These
documents include personal information like the full name, social security
number, address and personal wage history for every employee on your payroll.
- In the US, the Fair Labor Standards Act requires employers to maintain personnel records for a minimum of three years .
- In the EU, the General Data Protection Regulation requires employers to maintain personnel records for a minimum of six years .
- In Brazil, the statute of limitations on labor-related complaints is five years .
| 3-6 Years: Personnel Records | |
|---|---|
Type of Documentation | Description |
Personal Identifiers | Name, address, social security number, date of birth, gender, etc. |
Employment Identifiers | Job title and description |
Workweek & Payroll Scheduling | Time and day workweek begins, and the average hours worked per day/week, along with all regular and off-cycle payroll dates |
Employee Wages | Hours worked, base wage rates and earnings, overtime earnings, additions and deductions, as well as data on total wages paid |
Payroll tax records (four-year minimum)
If you’ve never been audited, count yourself as lucky!
Once you’ve filed your taxes and paid what you owe, the taxing authority has a
set amount of time (usually a number of years) to review your self-reported
taxes for accuracy. If they don’t agree with your math, you may have to pull
out your records and revisit them.
In the US, the Internal Revenue Service dictates that employers maintain payroll tax records like
employee rosters, wage payments, tax withholdings, deposit records, and copies
of tax returns for at least four years—and the longer, the better.
| 4+ Years: Payroll Tax Records | |
|---|---|
Type of Documentation | Description |
Employment Eligibility Forms | Forms that provide proof to work in a specific country or region |
Identification Numbers | Employer and employee ID numbers for tax purposes |
Dates and Amounts of Earnings, Withholdings, and Payments | The ‘who’, ‘what’, and ‘when’ of your payroll taxes |
Personal Identifiers | Names, addresses, and tax ID numbers for payroll employees and dates of employment |
Tax Reporting Documents | Required notices sent to employees regarding tax payments |
Tax Returns | Copies of your tax return forms for quarterly estimates and annual
reconciliations |
Tips and Fringe Benefits | Records of allocated tips and additional, taxable fringe benefits as
appropriate |
How to maintain complete payroll records
So, how long do you keep payroll records? The answer is that it depends.
Global employers hold onto payroll records for many different
reasons—compliance, financial management, and workforce planning, to name a
few. Ideally, you’d want to keep your important payroll documents
indefinitely.
The problem is that paper records consume a lot of resources, and digital
storage is still evolving. This leaves many companies to make hard choices
around what to keep and when to discard.
But there is a way to efficiently maintain complete digital payroll records
for your employees around the globe.
Working with Payroll 360, you can have access to streamlined, efficient digital
recordkeeping for your entire payroll process. That’s organization-wide
transparency for better compliance, stronger financial decisions, and more
strategic workforce planning.
Learn more about how you can keep your payroll records as long as you’d like
with international payroll services
Schedule a free consultation
Meet with one of our payroll experts to discuss your current business challenges and how our solutions can help.