Employee Files: Basic Training for Small Business Owners

You have your employee’s I-9 Forms over on the cabinet and their W-2′s in a manila envelope marked “Tax Stuff” near your printer and in between the new ink cartridges and paper stock. Yesterday, Sandra, your office administrator stapled her fingers together, and went home “sick”. You’re sure that she has used up all of her medical leave by now, but you cannot find the records. Sound familiar? The value of properly maintained Employee Files can be easily measured by the cost of not doing so which can range from as little as a day’s pay all the way up to tens of thousands of dollars in government fines.

An Employee File is a living document that records a history of a person’s work experience, and is constructed of 6 folders, which are labelled as follows and include the noted information:

    1. Personnel – employment application, date of hire, salary and position/promotion history, performance reviews, emergency contact information, and a Jury Duty log.
    2. I-9 Form (or Employment Eligibility) - only the Form, which should be reviewed once a year to update expiring documentation and changes in marital status.
    3. Payroll - copy of the I-9, State & Federal tax forms, date of hire, salary and position/promotion history, insurance forms, and a business travel log.
    4. Medical – insurance forms, emergency contact information, and a medical leave log.
    5. Attendance - individual logs for Jury Duty, medical leave, business travel and vacation.
    6. Disciplinary – performance reviews, and disciplinary action records.

This is pretty straight forward stuff. However, the Personnel Folder should be considered a stand-alone document, which could be shared. Therefore, there are certain documents which the small business employer should keep in the Employee File but specifically NOT in the Personnel Folder. These include:

  1. Medical information such as doctor notes or correspondence and disability paperwork. These should only be kept in the Medical Folder.
  2. Personal and/or informal notes or thoughts on an employee’s performance. These should only be kept in the Disciplinary Folder.
  3. Historical insurance information such as claims, claims adjustments, and/or disputes. These should only be kept in the Medical Folder.

You just saved yourself some money! Sandra has used up all of her medical leave, so you dock her one day’s wages. You also have found out that she got divorced a few months ago, and you amend the marital status section of her I-9 Form. That easy mistake could have cost you $1,000 during a routine HR audit.

HRInsights FACT: Properly maintained Employee Files reinforce compliance and adherence to company policies which help you avoid costly mistakes and errors.

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