How Long Must a Company Keep Payroll Records?

As an employer you will need to keep employee records, but you need to understand how long you can keep them for. We’ve put together a guide with everything you need to know about keeping payroll records. 

What records should a company keep?

When it comes to keeping employee records there are some things you need to hold and some things that are just beneficial for your company to keep.

Examples of must-keep employee records include:

●       Basic information

●       Payroll records

●       Other records like employees’ National Insurance numbers

Beneficial records can include:

●       Records of training sessions

●       Records of lateness

●       Any disciplinary action you have had to take

●       Terms and conditions of employment

Basic information

When employees start at your company you need to take their basic personal information. This can include:

●       Name

●       Address

●       Gender

●       Date of birth

●       National Insurance number

Payroll records 

Keeping the correct payroll records ensures HMRC taxes you and your employees correctly along with them paying the right National Insurance.

Using outsourced payroll will help ensure your payroll information is kept up to date, avoiding any mistakes being made. You will also be able to automate processes, freeing up time for your HR and payroll teams to undertake more critical tasks.

However, if you carry on using manual processes you must keep information like:

●       Your employee’s gross pay before deductions

●       Employee’s National Insurance Contributions

●       The amount of tax you deduct under Pay As You Earn (PAYE)

●       Student Loan Deductions

●       Tax codes

●       Any statutory payments made like Statutory Sick Pay or Statutory Maternity, Paternity or Adoption Pay

●       Details of any taxable benefits and expenses

When completing payroll manually you will not only need to keep hold of employee details, but will also need to keep hold of proof of tax calculations. 

Other records

Keeping other records allows you to prove that you’re complying with things like minimum wage and auto-enrolment.

To prove your compliance with minimum wage you can keep hold of pay rates, hours worked and any overtime and bonuses.

When it comes to auto-enrolment there are two different types of records you can keep:

●       Records about workers - This includes information like National Insurance numbers and the date they joined the company

●       Records about the pension scheme - This includes employer pension scheme references, as well as the scheme name and address

Other records you can keep, include:

●       Any accidents, incidents or dangerous occurrences - This will help meet health and safety requirements

●       Any holidays or other types of leave - This can include sickness days, maternity/paternity pay

●       Records on daily and weekly working time limits and night time working limits - This ensures working time regulations are being met

●       Evidence of employees right to work 

How long should a company keep records for?

Usually when it comes to keeping records you should keep them from the current tax year and the previous three years. This means documents from the 2022/23 tax year should be kept until the 5th of April 2026.

As of the 1st of April 2021, minimum wage records must be kept for at least 6 years, along with auto-enrolment records. However, this doesn’t include documents relating to opting-out as these must be kept for 4 years.

Due to various documents having different holding requirements, it’s important to regularly check how old your records are and whether the holding requirements have changed.

A great way of doing this is by investing in outsourced payroll as you can keep all your records in one place, with the payroll software staying on top of the latest rules and regulations helping you stay compliant. 

What are the consequences for not keeping accurate records?

Not keeping accurate records can lead to various consequences like penalties, fines and sometimes business closures. As a result you want to be able to do everything you can to stay compliant.

For example if PAYE tax and National Insurance isn’t paid on time you can face a penalty of up to £3,000. 

Other things to consider

When handling personal or data sensitive documents there are a few other things you need to consider on top of paying tax and National Insurance on time. 

Data protection

When it comes to holding personal records you have a duty both by law and to your staff to protect their personal data.

Personal data is any information relating to an identifiable or identified individual. Personal data can cover things like:

●       Gender

●       Sexual orientation

●       Date of birth

Furthermore, according to general principles any personal data kept should be relevant, adequate and not excessive. It should also be accurate and not kept for any longer than you need it for. When you no longer need any documents these should be shredded to avoid tampering and data leaks.

Employers should also remember that employees have the right to view their personal records and they must ask employees whether they can share their data with third parties before doing so. 

Adding on to this, personal records need to be stored correctly and safely either behind a password protected online application or locked files and cupboards etc. A great way to reduce the risk of data breaches and leaks is through investing in a strong outsourced payroll software. Here at Payescape our payroll software helps you stay compliant with data protections laws and helps keep everything you need in one place. 

GDPR

GDPR (General Data Protection Regulations) came into force in 2018 through the Data Protection Act.

When it comes to ensuring you’re staying compliant to GDPR processes you should think about what personal data you hold and why. You will also need to follow these key aspects of GDPR:

●       Provide information to employees in plain English when they start their role - This should include in documents  like employee contracts and privacy notices

●       Notify people on data breaches - This must be completed within 72 hours of being aware of the breach and employers must have adequate response procedures if this happens

●       Gain consent for holding any personal data - Employers must have proof of consent before storing any personal data

GDPR is in place to help you keep your employees safe and happy, making it extremely important that you stay compliant to all regulations.

Get in touch with Payescape today to see how our payroll and HR software can help you stay compliant and store data securely and correctly.