About 543,000 small businesses are started each month, which equates to over 6.5 million businesses opening in one year alone. With the start of a small business comes many questions about what forms need to be completed and how long they must be kept. As a small business owner, it can be hard to keep track of the many files you have to retain throughout the year.
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As we look through a few federal recordkeeping requirements, it is important to note that individual states have requirements and employers should review state employment laws. The Society for Human Resource Management (SHRM) put together an extensive list of federal record retention requirements that we will review in this blog. Some of the requirements listed apply to most or all employers, while others relate more to government contractors and subcontractors.
Selection, hiring and employment records.
Without a job description, it is hard to hire employees. But did you know that even your job description has to meet certain compliance requirements? To learn how to right a compliant job description, look to our recent blog for help. After making sure that your job description is compliant, be sure to hold on to the following hiring records:
- Job Applications and Resumes
- Job Advertisements
- Screening Tools and Tests
- Interview notes that relate to the hire/no-hire decision.
Once you have hired your best candidate, the record retention doesn’t stop there. Throughout the employee’s life, you also must maintain record of:
- Performance Appraisals
- Reasonable Accommodations/Requests
- Training Records
- Incentive Plans
- Merit Systems
- Seniority Systems
Each of the above records must be retained for one year after the creation of the document or the hire/no-hire decision, whichever is later. When the employment terminates, employers must keep records for one year from date of termination. However, records for federal contractors must be kept for two years after the creation of the document or the hire/no-hire decision. But, if the contractor has less than 150 employees or does not have a government contract of at least $150,000, the minimum record retention is just one year.
Keeping these documents during the hiring and employment process ensures you will have the necessary documents if a lawsuit arises from any of these relevant laws:
- Age Discrimination in Employment Act (ADEA)
- Americans with Disabilities Act (ADA)
- Civil Rights of 1964 Act
- Section 503 of the Rehabilitation Act
- Vietnam Era Veterans Readjustment Assistance Act (VEVRAA)
Wage and hour records.
Without employees, you have no business. Without paying your employees accurately and on time, you won’t have employees for long. The wage and hour recordkeeping standards are established by the Fair Labor Standards Act (FLSA). The FLSA is a federal labor law of general and national application that covers overtime rules, minimum wage laws, child labor laws, and the equal pay act. The FLSA requires overtime compensation at time plus one-half per hour over the 40-hour threshold per week for nonexempt employees.
A small business only needs to keep records for its nonexempt employees, so it is important to know the difference. The terms exempt and nonexempt refer to whether the employee is exempt or nonexempt from FLSA rules. Exempt employees must be paid a salary by their employer rather than hourly wage. Every covered employer must retain the following records for each nonexempt worker:
- Employee’s full name and social security number.
- Birthdate (if younger than 19)
- Time and day of week when the employee’s workweek begins.
- Hours worked each day.
- Total hours worked each workweek.
- All additions or deductions to employees’ wages.
- Total wages paid each pay period.
- Date of payment and pay period covered by payment.
These wage and hour records should be kept for three years if a lawsuit from any of these relevant laws comes your way:
- Age Discrimination in Employment Act (ADEA)
- Fair Labor Standards Act (FLSA)
- Service Contract Act
- Davis-Bacon Act
- Walsh-Healey Act (federal contractors)
- Family Medical Leave Act (FMLA)
For more information on wage and hour guidelines, visit the wage and hour website here.
How can PrimePay help.
PrimePay’s small business HR solution, HR Advisory, will help you with your recordkeeping compliance. Click here to learn more.