Nonprofit Resources
Personnel File Best Practices
When new employees join your organization, the transition from hiring to onboarding might feel like a race to the finish line so they can join your team and begin contributing to your mission. Following best practices for personnel files and record retention can help you streamline the process and meet federal and state government expectations and requirements, which are the same for in-office and remote employees.
Below, we share suggested common practices. Requirements vary by state, so please check with your legal counsel regarding the requirements applicable to your organization.
Onboarding Paperwork
The following forms are generally necessary. Please check the specific requirements in your state.
| Form(s) | Completed By |
|---|---|
| Form I-9, Employment Eligibility Verification, along with identity and employment authorization documents | • Employee completes Section 1 • Human Resources (HR) reviews the employee’s documentation and completes Section 2 • HR should ensure that the employee’s current address is listed on the documentation for tax purposes |
| Form W-4, Employee’s Withholding Certificate | Employee |
| State tax withholding form | Employee |
| State new hire reporting form | HR |
| Form W-2, Wage and Tax Statement | Must be prepared annually by the employer, either through the organization’s payroll system or manually, and submitted to the IRS and the employee |
Your organization can determine what additional documentation to collect, but the most common documents are:
- Employment application
- Resume or cover letter, or both
- Offer letter
- Employment agreement or contract
- Nondisclosure or non-compete agreement
- Drug test (if applicable) and background check
- Policy or handbook acknowledgment forms
- Completion of training that provides an overview of the company’s most essential policies and procedures
- Benefits enrollment forms (medical, dental, vision, 401(k))
- Direct deposit form
- Emergency contact form
Since Form I-9 must be completed and submitted within three business days of the employee’s start date, we recommend scheduling time for the employee to complete all the necessary forms during their first or second day of employment. Consider using the Social Security Administration’s E-Verify system to maintain compliance efficiently. This free tool provides real-time verification of the status of new hires.
Maintaining Records
Consider the following best practices for maintaining personnel records:
- Create and implement a system for processing new hire paperwork to ensure everything is completed promptly and stored in the correct location. While there is no “right” way to structure personnel files, we recommend establishing a consistent structure and content requirements for all HR staff to follow.
- Store Form I-9 and the supporting documentation in a digital or physical file that is separate from the rest of the employee’s personnel file. In the event of an audit*, you can then easily provide the I-9 without disclosing other personal information about the employee.
- Secure physical and electronic personnel and I-9 files so that access is restricted to only those who need it.
- Remove all documents containing sensitive information, such as Social Security numbers or medical information, from personnel files and store them securely.
- Managers, supervisors, and employees should not have access to personnel files but should be able to request necessary documents from the HR team as appropriate.
- Although federal and state governing bodies do not require internal reviews of personnel files, we recommend that you perform periodic reviews to ensure that:
- All necessary documentation is saved in the correct personnel file and nothing is missing.
- Approved pay rates, job title or description changes, and updated benefit elections are clearly documented according to your organization’s internal policies and retained in the employee’s file with each change.
- Terminated employees’ files are securely stored in alignment with your record retention policy.
Record Retention
Federal and state regulations have different retention requirements for different types of documentation, so many organizations choose to keep records for the entire length of employment and up to seven years after separation. Dispose of electronic and physical records securely when they are no longer needed.
The Evangelical Council for Financial Accountability has a sample file retention and document destruction policy available for download here.
Establishing consistent policies and procedures for collecting, storing, and maintaining personnel files can benefit your HR department while helping to ensure compliance with various regulations. Please feel free to contact us with any questions or if you’d like help evaluating your current processes.
Authors: Courtney B. Gregory, Partner, and Kelsey Helmick, Executive Compensation Program Consultant
Additional Resources:
Determining Worker Classifications
Frequently Asked Questions About Managing Employee Time