Payroll Records
What payroll records must employers keep and for how long?
Employers must keep specific payroll records under the FLSA, IRS, ERISA, and state laws. FLSA requires 3 years of payroll records (basic earnings, hours, deductions) and 2 years of supporting time records. IRS requires 4 years of employment tax records. ERISA requires 6 years of benefits-related records. State laws vary, with California requiring 4+ years and New York requiring 6 years. Best practice is to keep all payroll records for at least 7 years to satisfy the longest applicable requirement.
Payroll record retention is one of those compliance areas with overlapping federal and state rules and no single answer. The FLSA requires 3 years; the IRS requires 4; ERISA requires 6 for benefits records; some states require 6+. Most employers default to 7 years to cover everything, which also aligns with most personal injury and contract statutes of limitation. Modern payroll systems retain records indefinitely in cloud storage, making the technical retention easy; the discipline is in not destroying records prematurely.
What Payroll Records to Keep
Employee personal information (name, SSN, address, DOB, occupation). Hours worked daily and weekly. Total wages each pay period. Regular and overtime rates. Deductions and additions to wages. Pay period dates. Date of payment. W-2 and 1099 records. Garnishment orders and responses.
Required Retention Periods
FLSA: 3 years for basic payroll, 2 years for supporting records (time cards, schedules). IRS: 4 years for employment tax records. ERISA: 6 years for plan records. State variations: California 4 years, New York 6 years, others vary. Best practice: 7 years.
Digital vs. Paper Records
Most agencies accept digital records as long as they are accurate, accessible, and reproducible. Most employers have moved fully digital. Backup and disaster recovery matter more than physical storage now.
Building a Payroll Records Retention Program That Holds Up to Audit
Document retention schedule by record type. Configure payroll system retention to longest applicable period. Don't destroy records during active disputes or investigations (litigation hold). Audit annually. Coordinate with exit interview and termination processes so terminated employee records continue retention. DOL reference: dol.gov/agencies/whd/fact-sheets/21-flsa-recordkeeping.
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