9 Things You Need To Know About HR Policies and Recordkeeping

9 Things You Need To Know About HR Policies and Recordkeeping

Employee handbooks, proper policies, and good recordkeeping can be your best line of defense when faced with an investigation or litigation resulting from an employee complaint. Additionally, should you wish to terminate an employee for violating a company policy without a clearly stated policy that the employee has acknowledged, this can present challenges. 

Why You Should You Have Policies

Why have policies in a handbook? First, they help to welcome a new employee and showcase your company benefits. They also cover what you expect from employees, from the simple like show up on time, to more complicated like how you want them to fill out an expense report or how they should go about asking for time off for jury duty. 

There’s also the often overlooked benefit of helping your managers understand their responsibilities concerning policy enforcement. Managers and supervisors will be able to reference company policies at a glance and fairly and accurately enforce policies if they’re following them to the letter, which is also critical to your organization’s survival and success. 

Handbook Basics

How do we deliver these policies to employees? Well, we, of course, utilize a formal employee handbook. But a handbook can do a lot more than deliver policies. In addition to outlining obvious guidelines like “Don’t be on social media all day,” a good employee handbook does many other important things.

If you decide to put in the effort, you can communicate your company’s individual history, values, vision, mission, goals, whatever it is that you want new employees to get excited about. 

But what isn’t a handbook? A handbook is not an employment contract but rather a way to provide your employees’ guidelines and expectations. It should include at-will employment provisions that we’ll discuss a bit more later, which further impress that it does not guarantee employment and is not a contract. 

Additionally, a handbook should not function as an operations manual. We encourage you to have an operations manual that will probably include guidelines specific to your business’s running, like food safety, the best way to mop the floor, what information needs to go into shredder bins or your preference for when you use FedEx or UPS.

While these procedures are an important part of running your business, we think they’re best communicated to employees in an operations manual. At the same time, employment guidelines are kept in your handbook. At the most practical level, this helps employees narrow down where they should be looking for a piece of information instead of sifting through a combined handbook/operations manual that could be ridiculously long. 


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What's In A Good Handbook?

What is all in a good employee handbook? Without any state-specific guidance, a standard handbook has 71 policies and is 41 pages long in 12-point font. So we’re definitely not going to be talking about every policy that we’d hope to see in there. For more detailed information on how to write an employee handbook, see our two-part post on employee handbooks

Your handbook contents are dependent on several factors, the size of your company, the state or locality of the company, and whether or not the company has government contracts. 

Additionally, the handbook should include a welcome message, a nice place to give a little bit of background information on the organization, and set the entire handbook tone. “What will it be like to work there? What philosophies are important to the organization?” 

This is a great place to make a first impression on a new hire and help them feel like they should really have a sense of pride and belonging in your organization, which, by the way, studies show will help them become more productive in less time.

Lastly, as you are likely aware, the law is frequently changing, and sometimes a new ordinance or Department of Labor rule ends up conflicting with your policies before you’re even aware of it. That’s where a savings clause comes in. 

We want to state something like, should any provisions in this employee handbook be unenforceable or invalid, such a finding does not invalidate the entire employee handbook but only the subject provision. This way, if it turns out that one of your policies is a problem, we don’t have to throw out the baby with the bathwater. 

Handbooks Are for Employees

The handbook audience is your employees only, and we want all employees to receive a copy of the handbook. We also want to be sure that the policies are written so that employees can clearly understand each of them, so we recommend leaving the legalese speak out of the document.

Employee handbooks are not applicable for independent contractors, volunteers, or unpaid interns as none of these are categories of employees. 

We regularly speak with clients who have workers improperly classified as independent contractors. And there are some serious monetary implications for wrongly classifying someone as an IC when they should be an employee, such as back taxes and back wages.

How To Update Your Handbook

Generally, you want to have an introduction or handbook purpose section that lets employees know that you could change the handbook policies at any time. But you do want to point out in that very same section that the at-will provision cannot be changed unless by an owner/executive, and even then, it must be done so in writing. 

As per reviewing and updating the rest of the handbook, you can do this at your discretion, but we generally recommend that the handbook be reviewed annually to ensure compliance with any new laws. 

Of course, if you’ve got operational structure changes, changes to company benefits, the dress code, or maybe you’ve put a supervisor’s name in the handbook, and they’re no longer with you, you may need to update the handbook more frequently. 

In terms of keeping up with the law, you can expect to see most changes taking effect during January or July of each year. Some states are much busier than others when it comes to creating new employment laws. At the same time, it’s a good idea to keep your ear to the ground regardless of where your organization operates. To find out what your company might be missing, use our free HR Department Scorecard.

Lastly, employment provisions are dependent on company size. Therefore, if your organization is increasing or decreasing in size, keep a close eye on employee count. As employment levels fluctuate, new employment laws will apply to your company. Common thresholds here for employment laws are 10, 25, 50, and 100 employees. 

How To Enforce Your Policies

Unenforced policies can cause doubt on all of the company’s policies. For instance, let’s say that you have a three-strike attendance policy, which we don’t generally recommend in the first place as it’s very inflexible. And you have no history of enforcing it in the two years that it’s been in the handbook. Meaning that you’re not actually keeping track, putting notes in personnel files, or counseling employees for failure to comply.

Ultimately, you realize that you’ve got a problem, and you should’ve been doing this. So you say, “Starting today, we’re going to follow our own policy.”  we can almost guarantee you that the first handful of employees who are disciplined for this policy are going to feel they’re being picked on or singled out, or even discriminated against. 

And if they think that that could be a result of being part of a protected class, you could end up with a discrimination claim on your hands. 

Similarly, if you offer everyone three days of bereavement leave but tell the receptionist that he can’t take three days because he’s absolutely vital to operations, you could be staring down another claim.

Whatever your policies may be, make sure that they are enforced regularly and consistently and that you’re treating all employees the same. While each situation should be approached individually, if two employees in a similar situation are treated differently, this can be seen as discrimination, especially if one employee receives preferential treatment. 


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How To Implement New Policies

If you need to make changes to your policies, you’ll want to have an established procedure for internal policy changes, specifically those that aren’t governed by federal, state, or local employment law changes, as there’s very little flexibility when adapting those changes. 

For an internal policy change, you may already know what management thinks about the change. It may have even been their idea. But if not, or if you need buy-in for more than one department, do the leg work and make sure that the new policy will be met with open arms and that you’ll have management’s help in enforcing it.

Then articulate the policy, making sure that it’s in line with the rest of your policies, consider an effective date or for the change or edition, and create an implementation plan.

For example, you’ll want to communicate with all employees, distribute the policy to employees, and obtain their signature on an acknowledgment form for safekeeping in their personnel file. 

Please keep in mind that this can be completed for an individual policy when needed, separate from the handbook revision. For example, you’re making changes to the company’s vacation policy. You’ll simply want to include an effective date for the change, note that the policy overrides the current version in the employee handbook, and distribute the new policy to each employee. Then when you’re ready to review and revise the entire company handbook, you’ll want to be sure to include the updated policy in it. 

If you’re issuing several amended policies at once, we recommend considering issuing a fully updated handbook, as the more amendments you have, the more confusion this creates among current employees and newly hired employees. 

How To Maintain Records Properly

Maintaining clear and accurate employee records is necessary for a variety of reasons. Employees may request to review these records, and in many states, the employer must allow this. 

Additionally, records may be requested in the event of an audit, such as an I-9 audit request, or the event that a claim is brought against the employer, for example, a wage and hour claim. In all honesty, one of the greatest keys to HR success is maintaining clear documentation, whether it relates to a hiring or promotion decision, an employee’s pay records, or accurate I-9 recordkeeping.

Each employee should have four basic files: personnel files, medical or benefits file, a payroll file, and a worker’s compensation or injury file for each accident or illness.

These records should be maintained in a secure location and accessible only to those with a need-to-know basis, which typically includes the HR and payroll staff, the employee themselves, and managers when applicable. 

The third file is the payroll file, which is important to keep tabs on even if payroll responsibilities do not live in HR.  we recommend maintaining a separate payroll-related file from the others we’ve discussed. And it’s important to consider the payroll duties for your company and who’s responsible for them within the organization. 

For example, if the payroll duties are not held in HR, the employee responsible likely does not require full access to the full HR personnel file information. In this case, the payroll employees are not on a need-to-know basis for the employee’s basic personnel file but rather only their payroll-related information. 

This file can be quite robust as it includes a W-4, timesheets, pay increase or decrease status change forms, time-off and leave records, vacation and sick time records, along with wage arrangement documentation.

The fourth employee file you’ll want to maintain is for any injured employees while on the job. This file should contain worker’s compensation claim records and injury reports and any additional medical records on the injury, such as the doctor’s work release.

We recommend maintaining a separate file for each injury for the organization and ease of annual OSHA reporting if applicable for your company. 

Lastly is the I-9 file, which is a combined file, not a per employee file. It’s recommended that you keep all I-9’s in a separate master file or even a three-ring binder since they have unique retention requirements. 

In an audit, these documents must be removed from all of their identifying and confidential information before review. Hence, it’s best to maintain them like that for the duration of employment. 

These documents must be available upon request by an authorized government officer with as little as three days’ notice before an inspection. This is an additional reason to maintain the I-9’s in an, especially organized manner.

I-9’s should be retained for as long as the employee is working for you and for three years after the hire date or one year after termination, whichever date is later. 

Lastly, we recommend that you pull an employee’s I-9 at their termination, add a sticky note with the destroy date, and move it to a separate terminated I-9 file for safe storage until the destruction date. 

Requirements For Document Retention

Now that you know where to store these documents, let’s briefly discuss how long you should store them.  Applications resume and any other records related to the refusal to hire an applicant must be maintained for one year following the decision’s date, not to be confused with the application submission date. This is also two years if you’re a federal contractor.

My preference is to maintain a file for each company position opening along with the date of the final hiring decision was made for easy organization and proper retention.

When it comes to files for your current and former employees, the general best practice is maintaining employee files for the length of employment plus seven years following termination. But again, there are specific guidelines for each type of employment record. If you need help with document retention at your company, contact one of our HR partners for help. Please note that these requirements are minimum requirements. If there’s a pending claim or litigation, the relevant records must be kept until the claim is closed. 

Why would we recommend seven years? We do so for two reasons. For state and federal purposes retaining a personnel file for seven years after termination generally satisfies all retention requirements except one OSHA requirement. 

In the event of exposure to toxic substances that result in the medical exam or treatment, OSHA requires that the material safety data sheets and related records be retained for the employee’s job tenure, plus 30 years, so be sure to mark those records well. 

Second, a good practice is to keep the full personnel file for the length of time of a state’s statute of limitations on tort, fraud, and contract claims. For most states, that’s 7 years. However, some states are longer. 


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Employee Confidentiality

Confidentiality related to all files is important. And as we mentioned earlier, file access should really be on the need to know basis only.

Additionally, medical and benefits files require more stringent levels of confidentiality to be aware of. Various privacy laws on the Americans with Disabilities Act require that you keep confidential employee medical records separate from basic personnel files. Besides, you can’t legally base personnel decisions such as who gets promoted and who doesn’t work on the employees’ medical histories, so these documents must remain separate from the basic personnel file.

In other words, employee medical and health records should be accessible only to those who need to know. This means typically the office administrator or human resources department and not a supervisor or manager.

File Storage

Let’s review some important things to consider for paper file storage. For security purposes, where are the files located?  We recommend a locked office and a locked file cabinet. Ideally, this locked cabinet would be in the HR office or in another safe and accessible place where it’s stored in such a manner that it can be readily inspected or examined. 

It’s easy to consider file storage and security for your current employees as you’re likely accessing these files regularly, right? But we encourage you also to consider file storage for your terminated employees. 

Disaster recovery is another consideration. We strongly recommend fire-proof cabinets for storage. They are a bit more expensive, but there’s really no other way to secure these paper files in a disaster. And we know for certain that we don’t ever want to try to recreate an employee’s file.

As we already stated a few times, file access must be on a need to know basis. When an employee or manager requests a review of an employment file, it should be completed in the HR office. You really don’t want files of this sort wandering around the company premises. This concerns the confidential information inside and simply regarding the file’s whereabouts and safe return to the HR office. 

Files should also be reviewed in your presence as the HR professional, and nothing in the file should be altered or modified. If you determine something is incorrect or want to change something themselves, we recommend adding a memo or statement to document this.

Files should be organized in a good manner and maintained in a reasonable order. We prefer clear file labels, including the employee’s first and last name, and you may also elect to include the employee’s hire date so that they are easily identifiable.

Within the file, we recommend organizing them by placing the most recent documents on top. For example, when we open an employee’s file, we want to see their current position and pay rate on top, versus the position and pay they begin employment with. 

Lastly, many HR employees have a two-file box or an inbox that contains employee documents.  If this is the case for you, meaning that you don’t file all employee documents immediately when you receive them, make an effort to file these documents promptly, and remember that they must be kept secure and confidential even before they enter the employee file as well. 

We strongly recommend using an HRIS or other Human Resources software to manage employee documents because of these complex rules around paper file storage.

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