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Payroll record retention requirements vary greatly from one jurisdiction to the next, so business owners should become familiar with the laws in their area. Some of the documents that may need to be retained concern payroll taxes, employee benefits, and records of the number of hours worked. They should also consider keeping both digital and paper copies of payroll records. If possible, paper documents should be stored in a fire proof cabinet to prevent them from getting damaged.
It is a good idea to find out how long payroll records might need to be kept. This can vary from one country to the next, and is usually governed by local revenue agencies. As a rule, most records need to be retained anywhere from four to ten years after transactions have occurred.
Business owners should also determine what specific payroll records need to be kept. Some important ones can include documents that prove certain taxes were withheld from employee's wages. An individual might also need to hold onto records that show how much he was paid and the number of hours worked. This payroll record retention practice can help to prove staff members were paid at least the local minimum wage, if one exists. It can also help establish compliance with child labor laws, if applicable.
Other payroll record retention choices could include overtime wages, employee benefits, vacation pay, or sick pay. If the business contributes to a retirement fund or pays part of its employee's insurance premiums, documentation of this should also be saved. If employees are paid on commission, a supervisor may need to retain the company's sales reports as well.
Both digital and paper copies of records should be kept. This is so that there is a backup file in the event one set of records is destroyed. Digital records should be kept on removable storage devices, such as a back-up hard drive, disc, or flash drive, in addition to having them on a computer 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 safety of these documents.
Payroll record retention can be an important part of the regular operations of any business. Doing so is normally easy if the work is kept up with on a regular basis. Saving documents in an orderly fashion and for the required amount of time can save a manager a great deal of heartache in the event of an audit or sale of the business.
What is the maximum period for retention of payroll data? Can online payroll processing companies retain data for life? What is the law 'after life' for retention of records?
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