How Long Should Companies Keep Records of Former Employees? Let's Discuss!

Record Retention Duration for Former Employees

For how long does a company need to store employee records once the employee leaves the organization?

We have to maintain all employees' records in a separate file until their presence in the company. Once he/she is relieved or retired from the company, we have to close that file and keep it in the relieved employees' yearly file. The file must contain all the personal information from his/her application, appointment letter, resignation letter originals, experience letter copies, PF closure document copies, and all settlement documents.

Beginning with your name, you could have provided a little more information, such as why you are asking this query. Are you the custodian of employee records, or are you from HR, and so on? These are the basics of business etiquette.

Correct Heading for Queries

Secondly, you need to use the correct heading when raising a query. It is not "Employee Record Storage Time" but "Retention period for the documents of the ex-employees."

If the separation of the employee was under normal circumstances, many companies preserve the employee file for at least five years. However, if the separation is due to disciplinary reasons, it may be ten years or more.

Categories of Employee Separation

In some companies, the records of past employees are divided into three categories: green, yellow, and red.

- Green signifies separation under normal circumstances.
- Yellow denotes separation due to some issue, and the employee was asked to resign. However, in such cases, a note is kept on why the employee was asked to resign.
- Red indicates termination or dismissal on disciplinary grounds. The retention period for the documents of these employees is obviously longer. In some companies, it is at least 15 years. Modern HRIS systems provide the provision to categorize past employees accordingly.

There is no specific rule on the retention of employee documents. You have to establish your own rule and retain the records.

Thanks,

Regards,
Dinesh V Divekar [Phone Number Removed For Privacy Reasons]

If the company uses an automated HRMS, ex-employees' information can be kept as historical data for any length of time, along with scanned copies of important personal documents. Otherwise, Mr. Dinesh has given a very comprehensive reply to the query raised. His statement, "There is no specific rule. You have to devise your own rule and retain the records," is important. In government departments, to the best of my knowledge, retention of financial records of an employee (such as payroll data) for a period of 10 years after retirement is mandatory.

Employee Record Maintenance Duration

In certain contexts, the employee record is to be maintained for many years, such as the PF record. Employees may need to access details of their PF account even after 10 years.

Thank you.

I would welcome the question put forward by Nick Love. How long do we need to retain the record of ex-employees, or what is the retention schedule for such records? The replies posted above shed some light on the subject, which is apparently an experience-based response. Although it may be agreeable to many that there is no specific rule on this subject, I would like to record my opinion with reference to certain provisions of the law of the land.

Retention Requirements According to Law

The Income Tax Act requires that a company should maintain its records for ten years. From this, an inference can be drawn that all records, financial or otherwise, should be retained for a minimum period of 10 years.

Secondly, I would like to refer to the Law of Limitation. After an employee leaves the job, retires upon reaching the retirement age, or is terminated/dismissed, their full and final account is to be settled. After the date of the settlement of final accounts, it is necessary to keep the records for a minimum period of three years.

Regards.

Check the acts that apply to you. The Payment of Wages Act requires registers to be kept for 3 years after the last entry. PF can raise a query for 8 years, as can income tax (e.g., for TDS purposes). So, you need to keep records accordingly.

Nowadays, lots of companies have started to digitalize their records by converting them into scanned copies. We recently completed the same process for a client. By doing this, you can keep records for a very long time as the storage cost is negligible.

My above reply has been posted incomplete. Please read further as under:

Secondly, I would like to draw a reference to the Law of Limitation. After an employee leaves the job, retires upon reaching the age of retirement, or is terminated/dismissed, their full and final account must be settled. After the date of settlement of final accounts, it is necessary to keep the record for a minimum period of three years. However, regarding PF liabilities, it is assumed that the company is remitting all subscriptions and contributions to the EPF Account with the concerned RPFC. Therefore, the employee has to contact the EPF Department for transfer/withdrawal/settlement of their EPF claims. The company must forward claim forms of such employees to the EPF Department. In the case of an exempted establishment, the company has to settle the EPF Account within thirty days of the employee's resignation/termination/retirement/superannuation.

And it has been correctly posted by Mr. Bhatia that where a company uses HRMS or any other ERP Software System...

Normally, any employees who have left their service records should be kept for a minimum of 5 years. In the case of any employee(s) with pending issues such as PF and Gratuity, you can keep their records safe until these issues are resolved. Additionally, you should retain all files/records of departed employees for at least 5 years before considering their destruction.

Regards,
Venkat
Bangalore

I've also heard that companies keep records of ex-employees for 5-6 years only. I'm wondering how they could verify the employment history of employees who left more than 5 years ago.

Record Retention Guidelines

Generally, any company records are to be maintained for 10 years as per the law. Old records should be archived either in electronic or physical form and stored in a safe location that is easily retrievable.

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Please let me know if you need any further assistance with this matter.

I am attaching an article that talks about retaining employee data. This will provide a brief overview of Asia-Pacific countries.

Regards.

Read the part for India (page 55). It does not mention any law requiring records to be kept for 10 years. It clearly states the requirement is for 3 years, and that companies should keep records for 8 years for income tax purposes.

Incidentally, income tax rules require keeping accounts and supporting documents, such as vouchers, bills, and salary sheets. Other documents are not required to be kept beyond 3 years.

Regards,

Personnel Records Retention

The following retention periods are recommended for specific personnel documents:

- Applications/Resumes (employed): 6 years after the last action
- Applications/Resumes (not hired): 6 years after the selection process completion
- Status/Change of Status Forms: 6 years after being updated
- Job Descriptions: 6 years after being updated
- Employee Performance Appraisals/Evaluations: 6 years after termination
- Retirement Correspondence: 6 years after the last action
- Insurance Enrollment Notices: 6 years after the last action
- Position Information Questionnaires & Reclassification Requests: 6 years after being updated
- Leave Reports: 6 years
- Request for Leave Records: 6 years
- Time Cards: 6 years
- Payroll Records: 5 years
- Job Announcements: 6 years after the selection process completion
- Medical Records Related to or Required by the Employer: 6 years after the last action
- I-9 Employment Eligibility Verification: 3 years after hire or 1 year after termination, whichever is later
- Lawsuits or Actions for Recovery of Overtime, Damages, Fees, or Penalties: 2 years after the accrual of such claims for relief

Recommendations

If there is any legal action regarding an employee or former employee initiated by anyone, all records regarding the employee or former employee should be retained until the completion of the legal action or the end of the retention period, whichever is later.

The use of personnel records may extend the retention period for those records. To allow for the possibility of a defamation case regarding any personnel files, the retention periods for those records should be changed to six years after the last action. This retention period would prevent the agency from disposing of the records until six years after the last action; for example, a reference for an ex-employee or an ex-employee requesting information from his/her file or termination of employment.

Always check with legal counsel before destroying documents regarding employees who have been involved in legal action.

I would like to know where you got this 6 years cut off and what is the basis of it.