There is a common misconception that payroll is strictly in regard to paying an employee. However, according to the DOL (Department of Labor) there are several key bits of employee information which must be retained and kept by a business.
This information is vital for computing monthly, quarterly, and yearly labor statistics which are important for creating new labor laws as well as defining the health of the labor force and national business. So, whether you currently handle payroll on your own or are interviewing payroll service providers keep in mind the importance of maintaining proper documentation and vital information regarding each employee.
There might be several reasons why a business doesn’t maintain these records. One of the most common is simply a matter of de-cluttering digital and physical paperwork. Afterall, if you have a lot of employees, seasonal employment, or high turnover, your employee files can grow quickly. It’s also common that a company simply doesn’t realize the information that must be kept. Afterall, much of the information is not directly related to an employee and pay, but rather helps the DOL to derive statistical demographic information.
So, before you throw out those records, understand that payroll services companies will likely provide or request that the following information be maintained according to the DOL:
An employee’s full name as can be verified on a driver’s license or other form of acceptable identification.
The employee’s address (and updated addresses)
Employee’s birthdate if younger than 19-years-old.
The time and day that an employee’s work week begins.
An employee’s scheduled hours each week.
The employee’s terms of pay. For example, $15 an hour.
The employee’s hourly pay (prior to adjustments)
The employee’s daily or weekly earnings before bonuses and overtime.
An employee’s overtime earnings for each reported work week.
Additions and deductions from an employee’s wages.
An employee’s complete wages paid per period.
An employee’s payment date and the period which that pay covers.
According to the FLSA (Fair Labor Standards Act) these records should be maintained for a minimum of three years and provided to the DOL within 72 hours of a representative’s request. These records can be maintained on-site or in a central records office.
Payroll record retention is a lot more than just keeping track of an employee’s wages. It is important to understand the labor requirement in order to ensure your business stays complaint with labor laws.