Being a small business owner can mean dealing with endless paperwork, including employee payroll records; this can quickly become overwhelming when this includes previous team members. So, how long do you have to keep payroll records before making room for new ones? Here’s what you need to know about Massachusetts payroll recordkeeping and why a payroll company can help you organize and store information safely for as long as needed.
Similar to federal recordkeeping requirements, the state of Massachusetts requires employers to keep all payroll records for at least three years. All payroll records should include workers’ names, payment amounts, assigned positions, and hours worked. Massachusetts also provides workers the right to view their payroll records at their convenience. Required payroll records include paystubs, personnel records, earned sick time, and further information for domestic workers.
Reasons for Payroll Records
Holding on to former employee records for three years may sound gratuitous, but it’s extremely important for business owners. It helps you comply with the IRS and the U.S. Department of Labor. Keeping payroll records of previous team members can resolve unusual situations. In case of lawsuits or questions about raises amongst current employees, having records helps you make correct decisions and defend your business.
Organizing Old Payroll Records
As a business owner, it’s your responsibility to keep payroll records organized in a secure and accessible manner. There are a few ways to organize old payroll records that will vary based on your personal preferences and circumstances. Many payroll companies store payroll records digitally, and for a good reason. Digital recordkeeping is one of the safest and easiest ways to access important business information. You can also store paper records as long as you have enough space and security (e.g., a fireproof lockbox) to keep them safe.
The Importance of Payroll Recordkeeping
Simply put, payroll recordkeeping is essential to running a business, no matter the size. Both federal and state laws require businesses to store payroll records for a minimum period of time, and this mostly has to do with legal reasons that fall into compliance with the Fair Labor Standards Act (FLSA).
Other laws like the Equal Employment Opportunity Commission (EEOC) and Employee Retirement Income Security Act (ERISA) also include their specific requirements. Plus, keeping payroll records can benefit current employees and help you make the best financial decisions for your business. You can also provide this information If an employee needs proof of income to apply for a loan or rent an apartment.
Working with a local payroll company is the best way to ensure that your important payroll records are safely and correctly stored for your business.