Business owners should know their local payroll record retention laws, keep digital and paper copies, and store paper documents in a fireproof cabinet. Records should be kept for 4-10 years and include taxes, wages, and benefits. Retaining records can help with compliance and audits.
Payroll record retention requirements vary greatly from one jurisdiction to the next, so business owners should familiarize themselves with the laws in their area. Some of the documents that may need to be withheld concern payroll taxes, employee benefits, and hours worked records. They should also consider keeping digital and paper copies of payroll records. If possible, paper documents should be stored in a fireproof cabinet to prevent damage.
It’s a good idea to find out how long payroll records need to be kept. This can vary from country to country and is generally governed by local revenue agencies. As a rule, most records need to be kept between four and ten years after transactions occur.
Business owners must also determine which specific payroll records need to be maintained. Some important ones might include documents that prove that certain taxes have been withheld from employees’ salaries. An individual may also need to stick to records that show how much he was paid and the number of hours worked. This practice of retaining payroll records can help prove that employees were paid at least the local minimum wage, if any. It can also help establish compliance with child labor laws, if applicable.
Other options for retaining payroll records may include overtime wages, employee benefits, vacation or sick pay. If the company contributes to a retirement fund or pays part of its employees’ insurance premiums, documentation of this should also be saved. If employees are paid on commission, a supervisor may also need to maintain the company’s sales reports.
Digital and paper copies of records must be maintained. This is so that there is a backup file in case a recordset is destroyed. Digital records should be kept on removable storage devices such as a backup hard drive, disc or flash drive, in addition to having them on your computer’s hard drive. Paper copies should be locked in a fireproof cabinet located in an area that is not prone to flooding, as this can help ensure the security of these documents.
Retaining payroll records can be an important part of any business’s regular operations. Doing this is usually easy if the work is maintained regularly. Saving documents in an orderly manner and for as long as necessary can save a manager a huge headache in the event of an audit or sale of the business.
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