Every year you review the boxes of files and prepare a large shred. Boxes upon boxes of files that you have been holding onto for years. You come across boxes labeled “PAYROLL,” should you shred these too?
How long should you keep payroll files?
In most cases, you may find it safest to never destroy them. As with all employee files and payroll related files, how long you should keep your payroll files really depends on what documents are filed within your payroll file. Federal and state records retention requirements can be different and it’s best that you know how long to keep each of the documents. According to the Society for Human Resource Management (SHRM), the retention timeline can be different for many of these documents you would typically file together.
Documents Commonly Found in a Payroll File:
- Payroll Register and/or Paycheck Copies
- Payroll Reports: such as tax calculations, employee deductions, employee changes
- Payroll tax payments
- Payroll backup: such as employee health benefits deductions, employee a/r deductions, sales commission reports, chargebacks
- Timecards, edits, employee and manager approvals
- Ad Hoc/Off Cycle Payroll Checks and backup
- Final paychecks
- Garnishments, paperwork and/or calculations
- FMLA/Employee on Leave paperwork
Many of the record retentions identified by the SHRM specify that you retain your employee personnel files based on the employee’s termination date. For example, garnishment records should be kept through the employee’s termination plus 4 years. Do you typically file your garnishment records in the payroll file or do you file these documents with the employee personnel file? Paychecks are required to be held for only 4 years, so without knowing the requirements for each document, you might be falling short. It might be a good idea to review how you process and use each of these documents to evaluate if you are retaining documents for the appropriate amount of time.
Where do you store payroll files?
If you never destroy your payroll files, eventually they will add up. They will take up space in your office, the storage room, your external storage facility… the list goes on. And while you are “retaining” these files, how accessible are they? How quickly can you retrieve a file from last year or two years ago? In a wage claim or lawsuit, you need to have paperwork to support your case. In some cases, several years of payroll files may be audited. Without proper access to these files, your company will be at risk of losing the case.
Can you use the payroll software as your paperwork for an audit or wage claim?
In a legal dispute, some types of documents or reports from your payroll or accounting software may be sufficient backup. Yes, you can print a copy of an employee’s timecard from last year. Can you also print a copy of their signature, authorizing the timecard edit, adjusting their clock out time? If your payroll software is only storing the data without signatures, your payroll file is incomplete.
How much time are you spending retrieving payroll files?
Are you constantly looking back to the last payroll or two to confirm what commissions were paid or what ad hoc checks were cut? If you are storing payroll files in the storage room or another building, you could be spending several minutes per employee payroll question just to locate the file! With ever-shrinking deadlines for processing payroll every minute counts.
Scanning your Payroll files can reclaim your time and space
Once you have decided how long you will retain payroll files you will need to decide on a plan for where you will store the files and how you will access them. When you think of your labor time and storage space in terms of line items on your financial statement, you can understand how quickly your payroll files for your organization can add up. When choosing to scan and store your payroll files electronically, you are choosing to reclaim time and space. Your payroll staff and other team members will appreciate the minimal time required to retrieve payroll files, answer questions about timecards, commissions or payroll deductions. You will appreciate the efficiency brought to your team as well as the space in your offices and storage rooms that has been reclaimed. Time will no longer be spent traveling to offsite storage facilities to research payroll questions and payroll files will always be accessible when your payroll team has web access.
W-2 tax reporting – Create efficiencies when reconciling payroll reports
With your payroll files and employee files stored electronically, you will always have W-2 payroll information quickly accessible for those who need it. Quickly retrieve payroll files, print reports and reconcile your employee’s income, taxes and deductions to prepare and verify your wage totals for W-2 tax reporting. Store your W-2 files in your Payroll cabinet to quickly retrieve and print W-2 requests that come in throughout tax season.
Who Needs Access to Payroll in Your Organization?
Once your Scan123 Payroll cabinet is setup, have your Company Admin grant access to the correct people on your team:
- Office Manager
- Payroll Clerk
Click the link above to create a Payroll cabinet and start scanning your payroll timecards, check register, and payroll reports.
Do you already have a Payroll cabinet or are currently scanning your Payroll files? Review these helpful tips to keep your scanning on the right track:
Tips For Scanning Payroll Files
- Choose a folder naming system that works for your business: File by Pay Period End or Paycheck Date
- Scan each part of your payroll file as its own scan: timecards, commission schedules, a/r schedules, off cycle paychecks, garnishments, etc for quick access
- Review scanned pages for readability before sending to your cabinet
Want to learn from someone already scanning payroll files? Christina from the Brenengen Auto Group has been scanning Payroll Files for years. Click the link above to learn more about how Christina uses Scan123 to efficiently scan and store her important documents.
Do you need to add a scanner to your HR office to start scanning payroll files?
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