Payroll records help you stay organized, but how long do you have to keep them for?
While there are a few payroll records you can offload at the two-year mark—including records that pertain to pay grade increases, timecards, schedules and wage rate tables—you will need to keep the majority of your payroll records on hand for at least three years.
As the years pass and you hire more hourly employees, those payroll records can quickly become a lot to keep track of. So, the question is, what are the specific recordkeeping requirements? And which records can you take off your hands (and out of your office)?
Let's review how long you need to keep different types of payroll records—and when it’s safe to clear them out.
Why Is Keeping Payroll Records Important?
First things first—before we jump into how long to keep your payroll records, let’s talk about why proper recordkeeping is so important in the first place.
Federal, state, and local laws require you to keep your payroll records. If you don’t keep them, not only are you breaking the law, but you’re putting yourself at serious risk. If you were to ever get audited, sued, or have any other type of legal action brought against you or your small business, you wouldn’t have the records to defend yourself—and you could lose a lot of time, money, and energy as a result.
Clearly, payroll record retention is a must for protecting your business. But again, the question is—how long do you need to retain those records?
Payroll Records To Keep For Two Years
Different types of payroll records have different retention requirements—or, in other words, you can get rid of some of your payroll records sooner than others. But the very soonest you can get rid of any payroll records? Two years—and even at the two-year mark, there are very few payroll records you can get rid of:
The first type of payroll record you can get rid of after two years are any records concerning pay grade increases. According to the United States Equal Employment Opportunity Commission (EEOC), “employers must keep for at least two years all records (including wage rates, job evaluations, seniority and merit systems, and collective bargaining agreements) that explain the basis for paying different wages to employees of opposite sexes in the same establishment.”
According to the US Department of Labor (DOL) Wage and Hour Division, you can also offload records on which wage computations are based at the two-year mark, including timecards, work and time schedules, and wage rate tables.
Payroll Records To Keep For Three Years
While there are a few records you can offload at the two-year mark, you’ll need to keep the majority of your payroll records on hand for at least three years.
Under the Fair Labor Standards Act (FLSA)—and as summarized by the Department of Labor (DOL)—employers must keep the following employment records and payroll information on all non-exempt employees for at least three years:
- Employee's full name and social security number
- Address, including zip code
- Birth date (if younger than 19)
- Sex
- Occupation
- Time and day of week when employee's workweek begins
- Hours worked each day
- Total hours worked each workweek
- Basis on which employee's wages are paid (for example, "$10 per hour" or "$500 per week")
- Regular hourly pay rate
- Total daily or weekly straight-time earnings
- Total overtime earnings for the workweek
- All additions to or deductions from the employee's wages
- Total wages paid each pay period
- Date of payment and the pay period covered by the payment
The FLSA doesn’t require employers to use any particular form in their recordkeeping; how you track this information is up to you. Just make sure to keep payroll records with all the required identifying information for each employee on hand for at least three years to comply with the FLSA record retention requirements.
According to the US Citizenship and Immigration Services (USCIS), you’ll also need to keep I-9 forms for three years after the date of hire or one year after the date of termination—whichever is later.
How Long Does The IRS Require You To Keep Payroll Tax Records?
Any records having to do with payroll taxes, you’re going to need to keep on hand for longer—more specifically, for four years.
According to the Internal Revenue Service (IRS), you’ll need to keep all records of employment taxes (and, if necessary, make them available for IRS review) for at least four years, including:
- Your employer identification number (EIN)
- Amounts and dates of all wage, annuity, and pension payments
- Amounts of tips reported
- The fair market value of in-kind wages paid
- Names, addresses, social security numbers, and occupations of employees and recipients
- Any employee copies of Form W-2 that were returned to you as undeliverable
- Dates of employment
- Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them
- Copies of employees' and recipients' income tax withholding certificates (Forms W-4, W-4P, W-4S, and W-4V)
- Dates and amounts of any tax deposits you made
- Copies of returns filed
- Records of allocated tips
- Records of fringe benefits provided, including substantiation
Want To Play It Safe? Keep All Your Payroll Records For Six Years
When you have a lot of employees, keeping track of payroll records—and how long to keep them—can feel overwhelming. And while the time companies keep records on file varies between two and four years (depending on the record), the Small Business Association (SBA) recommends businesses keep their payroll records for six years.
Because different federal government agencies, states, and local municipalities may have different requirements, keeping your records for six years (instead of four) will ensure you’re in compliance with all relevant employment laws—and that your business is protected if anyone requests those records. Here's a payroll records checklist you can use to stay compliant:
Let Hourly Keep Track Of Your Payroll Records For You
Manually managing and maintaining your payroll records on your own can take a lot of time, energy, and resources. With Hourly, you don’t have to worry about how, where, or how long to keep your payroll records. We’ll take care of organizing your employee information and keeping all relevant files on record. And if you ever need employee payroll information—whether from last month or last year—you can easily access your records through our mobile app.
Want to experience first-hand how Hourly can help you manage the payroll process? Sign up for your 14-day free trial today!
1. Introducing Yourself
Your introductory email needs to pack a lot of information into a small package. Try something like this:
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Hello Jane,
My name is John Doe and I work for ABC Agency, where we provide business insurance policies to many of Dallas' rockstar small businesses.
Congratulations on your new business, Jane's Bakery. Are you wondering if you have all the insurance you need? Or if your policies will really cover you in a pinch?
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Are you available this week to talk more about how we can help? I can help you find the most affordable rates and the best policies out there.
I look forward to speaking with you soon.
Cheers,
John Doe
2. Presenting a Quote
Once you've met with your potential client, a quick reply with their quote will get the ball rolling.
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Hi Jane,
Thanks so much for meeting with me this morning. I loved touring Jane's Bakery–I can still smell those delicious chocolate chip cookies baking! You have a great location, and I'm sure you're going to do great on Front St.
After reviewing my notes, I've pulled together an insurance quote for you (attached). I recommend a business owner's policy. A BOP includes several insurance products in one: liability, property insurance, and business interruption insurance. It offers robust coverage at a competitive price.
I'll call you in a few days to see what you think about this insurance plan. In the meantime, if you have any questions, don't hesitate to email me or call me at [phone number].
Again, thank you for your time today. I look forward to working with you in the future.
Cheers,
John Doe
3. Thanks for Purchasing a Policy
Gratitude is important! It's never a bad idea to thank your clients for their business.
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Hi Jane,
Thank you for choosing a business owner's policy with ABC Agency. We know it's so important to get the right coverage for your business, and we are honoured you've placed your trust in us.
We're excited to work closely with you, and our no. 1 goal is to make sure you're business is always protected.
Do you have any questions? We are here to help. Reach out whenever something comes to mind.
Thank you again for choosing ABC Agency to insure Jane's Bakery.
Cheers,
John Doe
4. Welcome Email
A welcome email helps clients feel like you're there to help–and can softly pitch other insurance products you offer.
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Dear Jane,
Welcome to the ABC family! We are thrilled to have you as a new customer and can't wait to meet all of your insurance needs.
As an independent insurance agency, we work with multiple insurance providers to find the best coverage options for all our customers. If you need any other type of insurance–like [include additional offerings unique to your agency, like life insurance, health insurance, home insurance or anything else]–we can help you too.
Do you want to discuss any of these policies?
Cheers,
John Doe
5. Introducing a New Product
A happy client may want to expand their business with you.
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Hello Jane,
I hope all is well with you and Jane's Bakery. I stopped in yesterday for a blueberry muffin and coffee, and they were delicious. I loved the hint of cinnamon in the muffin! Was that your idea?
I wanted you to be the first to know we are now offering commercial vehicle insurance to our policyholders. Auto insurance for your catering vans is super important since your personal car insurance won't cover them.
We're offering this insurance coverage solely to our current business clients at the moment and have some very competitive rates.
Would you like me to work up a quote for you?
As always, thanks so much for being a part of the ABC family.
Cheers,
John Doe
6. Asking For Referrals
Once your relationship is established and comfortable, let your clients help you grow.
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Hi Jane,
You've been a valuable member of the ABC family for two years now, and we so appreciate your business–not to mention the muffins you supply for our monthly meetings!
Because you are a valued policyholder, I wanted to ask a quick favour. I know you are active in the local Chamber of Commerce, and I'm hoping you might know some colleagues who would benefit from working with our insurance company.
Referrals are one of the most effective ways to connect with our community since people really trust their friends, family and colleagues. Is there anyone you'd recommend I speak with?
Remember that in addition to business insurance products, we offer everything from life insurance policies to pet insurance.
As a thank you for your help, we will send you an Amazon gift card of $100 when your referrals buy insurance from us.
Thanks so much for your help!
Cheers,
John Doe
7. Policy Renewal
If your client needs to renew their policy with you, send an email like this:
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Hi Jane,
I hope you're doing well! What a year it's been—from being listed as one of the top 5 bakeries in Dallas to being an official vendor for the city—you have so much to be proud of.
Just a heads up that your business owner's policy is up for renewal soon and will expire on June 15, 2023.
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Do you have some time to chat this week?
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Cheers,
John Doe