What are the Requirements for Keeping Paycheck Records for Employees?

Federal law requires that you keep paycheck records and other documentation

Businesswoman Filling Weekly Time Sheet
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The Department of Labor's Wage and Hour Division and the Fair Labor Standards Act both mandate that businesses keep paycheck records and other employee documentation. The Internal Revenue Service also requires that you keep payroll records for all current employees for a minimum of six years after employment ends. Employers must keep track of compensation and time off.

What Paycheck Records Are Employers Required to Keep? 

You would normally keep most of the records required by law in the course of doing business so complying shouldn't take much in the way of extra steps. Review the records you already have to make sure you're in line with IRS and FLSA requirements. 

Records can be maintained in any form, including electronically. For all non-exempt employees and those covered by minimum wage requirements, you'll need: 

  • Personal information, including the employee's name, home address, occupation, sex, and birth date if he's under 19 years of age
  • The hour and day when his workweek begins
  • Total hours worked each workday and each workweek
  • Total daily or weekly straight-time earnings
  • Regular hourly pay rate for any week when overtime is worked
  • Total overtime pay for the workweek
  • Total wages paid each pay period
  • Date of payment and pay period covered.

Non-Exempt Employees

Non-exempt employees must be paid at least minimum wage and receive overtime for any hours worked over 40 a week. Beginning November 30, 2016, an employee might be exempt if he's paid at least $455 a week on a salary basis and if he performs certain job duties. These duties are typically administrative, executive, or in management. 

Straight-time pay is that which is earned during the first 40 hours in a workweek.

Exempt Employees

Records required for exempt employees differ from those for non-exempt workers, and special information is required for household employees, for employees working under uncommon pay arrangements, for employees to whom lodging or other facilities are furnished, and for employees receiving remedial education. If any of your workers fall into these categories, consult with an attorney. 

Forms You Must Keep  

In addition to paycheck records, you should keep a few other documents on file for each employee.

  • A signed copy of his W-4 form showing federal withholding. Employees can change this form at any time so make sure you keep the most recent form on top. 
  • A copy of any form on which an employee has authorized pay deductions, including benefits and special donations like United Way or other charities.
  • A copy of the employee's original application form and any supporting documents such as a resume or transcripts.
  • Records on changes in pay levels, including promotions or demotions, and the reasons for these actions. 

What's the Best Way to Keep Paycheck Records?

Paycheck records, including those documenting all hours, worked, changes in pay status, and pay rates should be kept in a separate file for each employee. 

You must also keep records of all changes made to employee pay and benefits, including employee consents. You must have a written consent on file for any deduction from an employee's pay with the exception of FICA taxes and garnishments

Who Is Permitted to See Employee Records? 

Most businesses keep employee records in a restricted area and permit access only to individuals who might need to review them due to their employment rank or position. Designate which company employees can see employee records. Access is usually restricted to those in the human resources department and managers and executives above a certain level.

Employee records should never be removed from the record room. In a very small business, you might want to keep these records in your personal office, or in your bookkeeper's office if he has his own segregated space. Employees should be allowed to see their own records, but you might want to have someone stay in the room with the worker while she's viewing her documentation.  

If you have more than a few employees, you might want to set up a personnel file access policy so human resources employees know how to respond to requests.  

Various federal and state auditors might be allowed access to employee records for purposes of auditing. You can request a warrant before allowing an auditor access to employee records. 

Attorneys representing employees in lawsuits might be given access in certain specific cases. A top-level official or the company's attorney should verify the attorney's request before allowing records to be viewed, and a warrant or subpoena might be necessary in this case as well.