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But how do you know which records to keep, and which records are confidential? If you’re not sure, don’t worry. In this article, we explain what should and should not go in an employee file, and provide tips for how to best keep your records safe, complete and legal.
What is an Employee Personnel File?
Record keeping is a key task for every company, particularly for HR. Employee record keeping is very important because it helps companies keep track of data and metrics related to employees. It’s also key for legal compliance.
Many types of employee records must be kept in a safe, secure place where they’re unlikely to be lost or damaged. In practically all companies, most employee records are kept in an employee personnel file. However, each employee will have at least one additional file designated as a confidential file. Depending on the size of your company, you may have more; see details below.
Definition of Employee Personnel File
An employee personnel file is a folder that contains all human resource-related documents, including payroll records, performance records and employment contracts, among others. Although many organizations have switched to electronic files, some organizations still use paper files, or a combination of both
Why It’s Important to Maintain Up-to-Date Employee Files
There are many reasons why it’s important to keep complete records in an employee’s personnel file. A few of the most important reasons include:
- To keep track of employee performance and development. Employee records help HR and managers track an employee’s performance and professional development. Performance records are often used to calculate raises or incentive pay and for disciplinary reasons.
- To maintain important records for tax and payroll purposes. Tax and payroll records are very important for the employee and the organization because they help the company ensure that the employee’s pay is accurate. Tax documents ensure that the company processes deductions correctly.
- To promote transparency. Keeping complete records helps promote transparency between employees, their supervisors, and the rest of the company. This is particularly important if an employee has received a poor performance review or a reprimand. If the employee finds any records missing from their file, even if it was an honest mistake, it will cause distrust and legal compliance issues.
- For legal compliance purposes. Record keeping is extremely important for legal compliance. First, there are various employment and privacy laws that require employers to keep certain records for a certain period. And second, there are certain records that you must keep in case the employment relationship ends on bad terms.
What to Keep in an Employee File
Be sure to create an employee file checklist for every file so that you can keep track of which records are in the file. Here’s an example.
General Employee Records
There are some documents that all employee personnel files should have, including:
- Employee name and address
- Employment agreements
- Noncompete and nondisclosure agreements
- Employee Handbook signature page (some organizations have employees sign an acknowledge of receipt and understanding)
- Onboarding documents
- Termination documents
Many companies forget to keep recruitment records since they were created prior to hiring the employee. It’s important to keep these records for the employee and for legal compliance.
- Job descriptions
- Job application materials
- Job offer letters
- Other recruitment-related documents
Payment records help payroll make sure that they’ve paid all employees on time and correctly. Employees may also need these records for tax or other personal financial reasons:
- Direct deposit forms
- Pay stubs, including stubs for bonuses and other incentive pay
- Tax withholding documents (W-2, W-4, W-9)
- Reimbursement records
- Other pay and compensation information
Performance and Disciplinary Records
All performance and disciplinary records should be kept on file, as employee performance is integral to any human resource strategy. Performance and disciplinary records include:
- Performance reviews
- Promotion or demotion records
- Warnings or disciplinary records
- Merit pay or other incentive pay reviews
- Any other documents related to an employee’s performance and behavior
What Not to Keep in an Employee File
Other employees, including supervisors, should not have access to all records. Below are records you must keepーbut not in the personnel fileーso that they remain confidential.
Confidential Employee File
The following are general employee records that must be kept in a confidential file:
- Background checks
- Reference checks
- Child support documents
- Garnishment documents
- Benefits Records
- Medical, dental, and other insurance enrollment forms
- FSA or HSA forms
- Beneficiary information
Be aware that certain benefits records, such as benefits eligibility questionnaires, may be protected by Health Insurance Portability and Accountability Act (HIPAA). These records should be kept in a medical records file.
Medical Records File
No medical records should ever be in an employee personnel file. Instead, they must be kept confidential in a separate file. Make sure that your medical record practices comply with HIPAA and applicable anti-discrimination laws. Below are some examples of medical records:
- Accommodation requests and approvals
- Benefits claims, doctor’s notes, and leave requests
- Worker’s Compensation Documents
- Medical questionnaires and exams
Other Documents That Should Have Their Own Files
There are certain unique confidential documents that should each be kept in separate files to further limit the number of employees who see them. These files include:
- Affirmative action identification documents should be kept separately, since they’re typically only needed for data and reporting purposes.
- Documents related to past or pending litigation should be kept in a file accessed only by your legal counsel.
- I-9s contain social security or tax identification numbers, and should therefore be protected in a separate file.
How to Store Employee Files
All employee files should be kept safe and secure. How you maintain electronic files differs from how paper records are kept.
Digital Employee Records Require Encryption and Permissions
If your employee records are electronic, then you must make sure that their storage location is encrypted and/or restricted by permissions. Encryption is a security measure that turns information into data that can’t be read or understood unless it’s decrypted by a password. Permissions limit who can see which records.
Good HR software allows you to adjust permissions so that you don’t have to keep track of multiple passwords and who you share them with. Rather, each staff person only needs to remember their own password, and software permissions do the rest.
Physical Storage Requires Multiple Folders, Cabinets and Keys
It may be that your company keeps paper records instead of digital records, or some combination of both. In this case, all hard-copy employee records must be kept in a safe place that can only be accessed using a key. Because you’ll have to keep certain documents separate from each other to maintain confidentiality, you’ll need multiple locations and multiple keys.
Who Should Have Access to Employee Files?
Employee privacy is extremely important. Access to employee files should always be restricted to the furthest extent necessary to comply with the law. Beyond legal compliance, employee information should be kept on a need-to-know basis. This means that only the employees who need to know the contents of some part of an employee’s record should have access to it.
For example, if your HR department has multiple benefits specialists and one specialist helps an employee access a benefit, even if they can legally share the request with another specialist, they should not (unless they must in order to process the request). Anonymity should be applied whenever possible.
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