Maintaining payroll records are necessary for every organization. The payroll department and HR department are the responsible ones for record-keeping. This includes documenting the detailed information of each employee, their determined wages, taxes withheld, and much more.
Another fair reason that increases the importance of payroll record-keeping is the federal and state laws. The federal and state government requires employers to keep employee records for several years. So, keeping the payroll records of each employee is to stay compliant with the laws and regulatory bodies. The payroll documentation and other payroll-related laws fall under the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL).
Let’s also not overlook the fact that maintaining such detailed records has its benefits for your company as well. These records can be used in several areas of decision making such as decisions for employee raises or promotions, and also you can protect your organization from foul claims.
What is the best format to keep payroll records?
The traditional ways of paper records are always an option, especially for small businesses. Though you may soon run out of sufficient space to store more paperwork in case you wish to expand your business. Since these documents are important to your business, in addition to the space you need, you will also be required to safeguard these documents.
Generally, the preferred way to ensure hassle-free record keeping, which is both safe and doesn’t require much space is to digitally store your files. There is payroll software available that not only makes the process easier for you but also provides payroll-related reports and details necessary to help you stay compliant with the laws. It also updates records every time the payroll is run. In addition to that, cloud services are nowadays considered the safest spaces to store confidential data and also to keep it safe from any harm or danger. That’s exactly what every organization would need to keep their payroll documentation safe.
Remember that regardless of what method you choose for record-keeping in your organization, you must make sure that you will be able to maintain the record for the specific time limit given by federal and state laws.
Since you are holding on to someone’s confidential details, ensure to destroy the records of employees who have left the organization and that the time limit for record-keeping as per laws has been met.
What is some common information documented for payroll records?
There are many documents required for payroll recordkeeping, so to ensure you are compliant with the laws. Here are some examples:
- Employee’s personal information; their names, addresses, contact details, DOBs, SSN, benefit plan enrollments, insurance, deposit information, etc.
- Employee’s employment information. Including offer letters, credit status, background checks, etc.
- Timesheets of employees. The number of intended working hours, regular in-and-out hours, overtime hours, weekend work, and pay period (weekly or monthly).
- Employee’s payment information and bank details. Including the pay rates, salary amount, agreement details for payment, pay basis details, commissions, bonuses, raises, exempt or non-exempt details, and records.
- Tax documents for federal, state, and local jurisdictions. This includes the tax forms, amount withheld, tax returns, and tax withholding certificates.
- Employee wage deduction records, leave records, unpaid leave records, medical leave records, Reimbursement forums and details, and all the payment records including the registers and other details such as dates, payment times, etc.
Final Words
Payroll departments hold a great responsibility in an organization. Payroll record keeping can be a burdensome task, as it must be error-free work or the organization might face heavy penalties during annual audits.
