How Long do Employers Need to Keep Payroll Records?

Under U.S. federal law, employers must keep the payroll records of their employees or former employees for a certain length of time. The amount of time, however, varies according to which statute you refer to, which can make knowing how long to keep employee records confusing. By keeping in mind the required time limits under each statute as well as what payroll-related records the statute wants you to retain and why, you can more easily develop a system that keeps payroll records as long as the law requires.

Woman at a file cabinet (Image: John Lund/Drew Kelly/Blend Images/Getty Images)

Identification

Payroll records are, generally, any records that relate to the hours an employee works and the wages paid to him or her, according to the U.S. Department of Labor. Under the Fair Labor Standards Act, payroll records include information on the hour and day each work week begins; the number of hours worked in each work day and each work week; the total amount the employee earned working non-overtime hours; the regular hourly pay for any week in which the employee worked overtime; total overtime pay for each work week; the amounts of any additions or deductions to the employee's pay each week; the total amount paid for each pay period; and the dates covered by each pay period, according to the U.S. Department of Labor. This information should be marked with the employee's personal information, including name, address, occupation and sex. If the employee is less than 19 years old, also include his date of birth.

Applicable Laws

As of 2010, only two federal statutes require employers to retain payroll records for any length of time, according to the U.S. Department of Labor and the U.S. Equal Employment Opportunity Commission, or EEOC. These two statutes are the Fair Labor Standards Act and the Age Discrimination in Employment Act. For the FLSA and the ADEA, most payroll records must be kept for three years, according to the U.S. Department of Labor and the EEOC. Although the FLSA allows employers to discard some supplementary payroll records, including wage tables, after two years, the ADEA requires that employers keep these records for three years.

Format

The ADEA does not require employers to keep payroll records in any particular format, as long as the records are available when the EEOC requests them, according to the EEOC. The FLSA does not require that time clocks be used to keep track of employee hours, according to the U.S. Department of Labor. Nor does the FLSA require that records be kept in a particular format. However, according to the U.S. Department of Labor, microfilm or punched tape should not be used unless the employer also has the equipment to make these formats easily readable.

Function

The purpose of maintaining employee payroll records under the Fair Labor Standards Act is to protect an employee's rights to fair pay, according to the U.S. Department of Labor, including the right of covered, nonexempt workers to the minimum wage and to overtime pay. The records may also be used to ensure an employer is not employing children too young to work legally and is not employing children who may work legally for an illegal number of hours. Maintaining records under the Age Discrimination in Employment Act is intended to ensure an employee who discovers she may have been discriminated against due to his age is able to find the information necessary to prove or disprove her claim, according to the EEOC.

Considerations

Under the FLSA and the ADEA, payroll records are generally kept for three years following the date of an employee's termination, according to the EEOC. The ADEA, FLSA, and other statutes may require an employer to keep different portions of an employee's file for different lengths of time. For instance, while the ADEA requires payroll records to be kept for three years, it requires basic information about the employee to be kept only one year, according to the EEOC. To ensure your business meets all its recordkeeping retention requirements, consult a qualified employment law attorney.