You can select the retention system that best suits you, and most employers are gradually moving toward digitized records. Some in the industry see it as a potentially positive development as well. Digitally storing documents has its benefits:

• By storing payroll information electronically, it is easy to have everything related to a particular payroll period easily and quickly accessible in a format that is useful for audits.
• Being paperless also eliminates the risk of losing a paper document or misfiling a file folder. The use of a standardized naming convention for entries allows for easy and convenient saving of documents.
• Depending on your own circumstances, opting for an electronic storage system versus paper filing may also save you storage costs for documents that don’t need to be stored .
• If you’ve been keeping hard copies of your payroll documents and wish to convert to electronic records, you can scan all documentation and save them electronically. Alternatively, you can transition to an online system and retain your paper files for 4 years (or as indicated above). After the required retention period, you can trust that your digital records will be there when you need them.
• If you are just starting your business – or taking a fresh approach to how you want to set up your recordkeeping – it doesn’t have to be complicated. As for some examples to consider:
• Folders for each employee can be created to house documents – in alphabetical order – by employee last name. Instead of having one folder to file all 401(k) paperwork, or one folder which contains all performance reviews, keep these documents in the respective employee folders.

It is effective regardless of whether you file on computer or on a safe server. Or if you would rather have physical documentation and folders for each employee in a filing cabinet, or some other storage container.

I-9s should be submitted separately. The I-9 is a form that verifies a worker’s eligibility to work in the US, and should only be accessible to authorized personnel. Keeping each employee’s I-9 documentation in a single independent folder can be beneficial.

It can also help your employees if all files are kept in one place. They can point to things like new hire packets, policy documents, or even if they have to prove when their insurance kicked in.