How Long Must You Keep Payroll Records?

Not all companies handle payroll records the same way. Firms may keep data in multiple systems — payroll, HR, timekeeping and the general ledger. There’s no one-size-fits-all rule for everyone.

Same goes for ditching payroll records that aren’t required by law to be kept. The two main regulatory agencies that focus on payroll record retention differ a bit in what they require employers to keep and for how long.

Payroll departments may need a refresher on what the Department of Labor (DOL) and the Internal Revenue Service (IRS) require employers to do. Vicki Lambert recently shared her best practices in a webinar, “Payroll Record Retention Requirements: What to Keep, What to Toss,” hosted by Premier Learning Solutions.

Basic Best Practices to Comply with the FLSA

Under the federal wage and hour law of the Fair Labor Standards Act (FLSA), an employee’s payroll record must be kept for three years after the last dated entry. So for an employee who left a company in March 2020, his or her records are now fair game for deletion/shredding.

The DOL can fine companies that don’t keep the following records for a minimum of three years:

• all payroll and other records containing employee information
• collective bargaining agreements such as union contracts, and
• certificates authorizing employment of industrial home workers, minors, learners, students, apprentices and disabled workers.

The FLSA mandates companies keep records for two years of:

• basic employment and earnings records, including all basic time cards or sheets
• wage rate tables, and
• records of additions to or deductions from wages paid.

IRS Guidelines Payroll Teams Need to Remember

The IRS Internal Revenue Code mandates that employment tax records be kept for four years after the date the tax becomes due or is actually paid (if later than the due date).

Both the IRS and DOL don’t care if payroll records are paper, electronic files or microfilm/microfiche. The agencies do expect a business to be able to produce files in a timely manner if asked.