Maintaining employee records is a critical aspect of managing a department or owning a small business. In some cases, businesses are mandated by law to maintain certain records like annual salaries, withholding, and other tax-related information.

Even small businesses must keep accurate, up-to-date personnel records. It may be the law, but maintaining a personnel filing system that’s helpful and secure takes planning.

What information does your business need? And how do you protect that highly sensitive data from falling into the wrong hands?

The Two Types of Employee Files
When planning and designing a personnel filing system, don’t simply consider one file per employee. In fact, there are two types of employee files.

A general overview file should be created for all existing employees and new hires. This file includes general information, including each employee’s résumé, records of promotions or demotions, educational records, letters of recognition, and other information that provides an overview of the employee.

The general overview file should, of course, be protected and accessible on a permission-only basis. This data is sometimes required by an employee’s manager to manage more effectively.

What documents should you keep in an employee’s overview file?
• job descriptions
• employment records
• compensation information
• policy acceptances and agreements, including contracts and statements of work (SOW)
• references
• copies of warnings and reprimands
• regular work evaluations
• termination records

A confidential employee file should also be created to include all highly-sensitive information like Social Security numbers, bank account numbers, salary, and other “eyes only” information that is accessible to the smallest number of employees needed. A department manager doesn’t need an employee’s Social Security number to assign the next project, but your payroll clerk needs it to maintain records for the IRS.

What documents get put into the confidential employee file? Ask yourself if the information has value to a hacker or disgruntled employee. If so, it should be kept confidential.

Place in the employee’s confidential file:
• background security check results
• drug test results
• immigration (I-9) forms
• complete, detailed medical and insurance records
• wage garnishments
• litigation documents
• Workers’ Compensation records
• requests for payroll verification
• Social Security information

Tighten Up Data Security
Keep employee data secure by storing sensitive information in a separate location, or in the cloud. That way, if your business experiences catastrophic damage like a fire, or if data thieves break into your network, you have all employee data backed up so you can open for business the next day without concern for business interruption.

Talk to an IT specialist about setting up a secure employee data system and ensure that the security software on your office server is properly synched with the security provided by your web host.

Local, state or federal regulations and/or laws may regulate what types of information you retain from employees. Setting up an employee filing system and protecting your employees’ data from outside and in-house attacks is also just smart business.


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.