What Are Payroll Records and How to Manage Them Properly

Payroll records contain the detailed information regarding each element of how employees are to be paid. These documents act as the proof of the wages paid to each employee as well as the time they logged for the employer.

This guide was created for the busy HR and payroll manager with easy-to-follow steps to effectively manage payroll records. The information contained within this guide will provide HR and payroll managers with the knowledge necessary to effectively manage payroll records for their organizations.

1.0 What are payroll records?

Payroll records include all the information that an employer keeps about the employees that they have. This information includes records of the wages that are paid, the hours that they worked, any taxes that are withheld, and any bonuses or deductions from their wages.

Companies use payroll records to meet legal standards and internal reviews. These can be in any format, as long as the information in the files is complete. Also, having these files organized can save the HR department time and reduce any errors in compensation work.

1.1 Why are payroll records important for HR and compensation teams?

Payroll registers assist the HR department in running smooth operations as per the legal requirements and pay policies for employees.

• Payroll registers assist in quickly determining the number of hours worked and the total earnings of employees to avoid payroll mistakes.

• They act as proof in the event of audits or employee questions about their pay.

• The payroll register can aid in better budgeting and financial forecasting for the company.

• Maintaining payroll register builds trust with employees as it shows how their pay is determined.

2.0 What are the key legal requirements for payroll records?

Federal laws detail what information goes into the payroll registers and for how long the information must be kept to avoid fines.

• The information that must be maintained includes the names, addresses, SSNs, and dates of birth of employees, especially minors.

• The hours that employees work, the rate at which they are paid, and the total wages paid to them must be recorded.

• Any additions or deductions from the wages that are paid to employees must be documented, as must the dates and amounts of wage payments.

• Payroll, contract, and sales records must be maintained for at least three years, whereas wage calculation records only need to be kept for two years.

Classification tools such as Job Range Wizard help standardize job levels and support consistent job and pay documentation.

2.1 FLSA recordkeeping requirements

The Fair Labor Standards Act requires certain records to be maintained by non-exempt employees.

• Employers are required to keep the employee’s name, social security number, address (with zip code), and their occupation.

• The number of hours the employees work each day and each week must be recorded.

• The rate of pay that the employees are to be paid for each pay period must be recorded.

• These records do not have to be maintained on a specific form, but must otherwise be kept up to date by the employer.

2.2 IRS employment tax record requirements

The IRS pays attention to the tax-related details within payroll registers for employers to properly report and deposit taxes.

• Details that must be included within payroll registers are the Employer Identification Number for the company, the amount and dates of wage payments to the employee, and any tips that the employee received.

• Copies of forms W-4, employment start dates, and copies of tax deposit records with deposit numbers must be kept by the employer.

• Any non-cash wages paid to the employee and records for sick or family leave must also be on file by the employer.

• All employment tax records and documents must be kept for at least four years after the required date to deposit taxes with the IRS.

2.3 Other federal considerations

Beyond FLSA and IRS rules, there are other federal laws that add to the required payroll register for equal pay and benefits tracking.

• The Equal Pay Act would require records to justify pay differences between men and women doing the same work in the same area.

• The Family and Medical Leave Act would require tracking of paid leave to ensure that employees have the appropriate time off to care for themselves or their loved ones while maintaining their benefits.

• Government contractors would have specific requirements for compensation for these records under Executive Order rules.

• These records would help to ensure that federal agencies and contractors are treating all employees fairly under these laws.

3.0 How to manage payroll records properly

Effective payroll registers management involves a few key steps to ensure accuracy and ease of access.

1. Choose a user-friendly payroll software program that automatically creates employee payroll registers and reports.

2. Establish a routine to review the payroll registers on a regular basis, such as every two weeks to identify any issues and correct them promptly.

3. Ensure that digital and printed payroll registers are stored securely with limited access and backups to guard against data loss.

4. Ensure that all team members are trained and up to date on the current payroll rules and any new changes to those rules.

Platforms like HR Technology Integration automate payroll data flow between systems, reducing manual work and improving efficiency.

4.0 Common challenges and solutions in payroll records management

Many HR teams face issues with payroll registers' accuracy and storage, but simple fixes can keep things running smoothly.

• Missing or incomplete time entries can cause overtime errors, so use automated clocks or mobile apps that employees fill out each day.

• Keeping time records for too long or for too short a timeframe can result in legal issues, so follow the federal laws regarding how long to keep these records.

• With remote work comes data security concerns, so only allow authorized personnel to have access to the time and payroll data.

• Manual processes can make payroll audits take longer than they need to be, so use software to automatically pull data from time to payroll files.

Solutions like Job Matching ensure roles and pay rates are aligned, reducing entry errors and minimizing payroll discrepancies.

5.0 FAQs

Here are some FAQs for better understanding.

5.1 How long do I need to keep a payroll register under federal law?

FLSA requires most payroll registers to be kept for at least three years, but records used to calculate wages must be kept for two years. The IRS requires that employment tax records be kept for at least four years after the date upon which the tax is first due or paid, whichever comes later.

5.2 What employee information must be included in payroll registers?

Federal rules require the employee’s full name, Social Security number, address with zip code, birthday if the employee is under the age of 19, sex, and occupation. Records must also be made of the number of hours the employee works each day and each week, the employee’s regular pay rate, overtime pay rate, total wages, and any additions or deductions from the employee’s paycheck.

5.3 What happens if I don't keep payroll registers properly?

If payroll registers are not properly maintained, the DOL can investigate your business to recover the owed wages from employees, and you can be fined for doubling the damages calculated under the FLSA.

Additionally, the IRS may also fine and assess interest on any employment taxes that were paid to employees but not sent to the IRS, as well as conduct an audit on your business to investigate the situation.