What You Need to Know About Employee Documentation

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As a business owner, if you have employees, you have a legal and ethical responsibility to document everything and keep accurate records. Employee documentation covers various types of records and is essential for maintaining a transparent and compliant workplace. This includes first-day paperwork to the day that they leave.

Employee documentation should span the entire employee lifecycle, from pre-hiring to post-employment, ensuring that all stages are properly documented for compliance, performance management, and recordkeeping.

If you are unsure of exactly what you need to have on file and the actions you need to take, this article will walk you through each standard step. Keep in mind that there may be other requirements based on specific situations and the state in which you do business.

First-Day Paperwork

On the first day of employment, employees should be hit with a lot of paperwork. This is very routine and you normally will not get any question from the new employee about why they need to do it. Employees are used to this type of process when starting a new job. However, if you are unsure of exactly what you need, this list of paperwork and the role they serve will help you develop your first-day packet for new employees.

Tax Forms – No matter what state you do business in, your employees must fill out a W-4 form, which is the IRS federal tax form. It is also known as the Employee’s Withholding Allowance Certificate. This is the form that will tell you the employee’s filing status so you can ensure that the right amount of taxes are taken out every pay period. In addition to this tax form, many states also require a tax form to be filled out to determine their state filing status. You should check with your state laws to determine if this should be included in your packet.
USCIS Form I-9 – Form I-9 is a federally required employment eligibility verification form. Employees must fill out the first section of the form on their first day. The purpose of this form is to ensure that the employee is legally authorized to work in the United States, as well as a way to prove that they are who they say they are. After they have filled out section one of this form, they must provide you with original documentation. You will make copies of this documentation for support of the paperwork and will return the originals to the employee. This documentation is also what you will use to complete the rest of the form. The documentation they can legally provide to show proof is listed on the I-9 paperwork. This form should be kept in a separate folder from the other employee documents as required by law.
New Hire Reporting Form – Some states require that you have the new employee fill out this form. This is a form that the state government will use to determine if the employee owes child support that will need to come out of their check. This form includes basic identifying information that the employee should have available on day one.
Benefits Forms – If you offer benefits to your employees, you will need to provide them with the enrollment forms that they can fill out for you. Even if they do not have to have these completed on day one, which is often the case, you should still make it a practice to provide them the information and forms ahead of time. This information should include what benefits are available, the cost of these benefits both for the individual employee as well as their family (for things such as health and dental insurance), and plan options, if any.
Job Descriptions – Include job descriptions as part of your onboarding paperwork. Job descriptions outline the roles and responsibilities for each position and are essential for maintaining accurate records and managing employee performance.
Miscellaneous Forms – You may have several other forms that you need to have filled out by the employee. These are not required by law, but you may want to make it best practice. For example, you may want to have forms that ask for emergency contact information, vehicle information, address, and direct deposit and banking information. Again, while these are not required, it may be a good idea to offer things such as a direct deposit and provide your employees with the forms.
At-Will Agreement – This is a form that you will develop for your business. It serves as a legal document that the employee signs. This document typically contains a statement that the employee acknowledges that the employment is at-will for both parties. This means that they can be let go at any time and for any reason, and they can do the same thing. Some businesses choose to do this as part of the application process, but others have it as part of the first-day paperwork. Some states are considered to be at-will states and some are not. You should check with local laws before adding this to your packet.

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Non-Compete Agreement – Another legal document that you may want to have your employees sign is a non-compete agreement. With this type of agreement, the employee is essentially promising, legally, that they will not compete against the business. This extends to a certain period after employment ceases as well and stops them from going to work for a competitor. One thing to keep in mind is that this type of agreement is not legal in all states, so you should check with your local and state laws to ensure that you are not making employees sign something that is illegal. Beyond that, they must be reasonable in the sense that the time period and geographic area you refer to in the agreement is not beyond expectation. You should ensure that what you are expecting is reasonable both for the business and the individual employee.

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Non-Disclosure Agreement – You may want to consider adding a non-disclosure agreement to your packet as well. This is another legal contract that essentially asks the employee to promise not to reveal or share private company information, confidential information, or trade secrets. This is the type of documentation you will want to have in place if you have confidential customer lists, specific formulas for your products, or other confidential information. If there is any chance that this information will be provided to the employee, you will want to ensure that they sign this non-disclosure agreement to better protect your business. Included in this document should be an explanation of possible confidential information, the terms, how to handle the information, and what the penalties may be for breaching the agreement.

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Non-Solicitation Agreement – If you have a list of customers that you want to protect, another legal document to consider is a non-solicitation agreement. This type of agreement requires the employee to agree to not solicit the customers of your business and even the employees of the business for anything other than business purposes. It should also outline that if they are no longer working with the company, they should not be contacting them at all. If the employee is responsible for bringing new clients to your business, you may want to add into the agreement a clause that excludes some people, such as their friends or family members. Additionally, it should also only prohibit contact to take them away from the company, but should not include those who leave on their own if an employee leaves the company.
Arbitration Agreement – An arbitration agreement is something you may want to consider if you want to try to avoid any potential lawsuits. This is an agreement that requires employees to give up their rights to an employment-related lawsuit against your business. Instead, it requires that all of these potential issues be brought to arbitration. This helps the business because it is a private proceeding that is faster and easier for both parties.

This is just a sample list of some documents to include in your employee packet. While some are legally required, others are not; you can decide if you want to include them, if possible. Keep in mind that some states may still require additional forms, so you should check your local and state laws to ensure that you are covering all required documentation in your area when it comes to the employee’s first day.

An employee file typically contains comprehensive details such as basic demographic information (including address), hiring documents, job descriptions, employment-related agreements, performance and development records, and payroll and compensation information. Common types of employee documents include onboarding paperwork, performance documents, medical information, and termination records, all of which are essential for maintaining accurate employee files.

Documenting Employee Performance

Beyond maintaining the employee file based on documents needed on day one, you should also document employee performance. This is important for a variety of reasons including:

having proof to support a promotion or recognition of an employee;
providing evidence of performance issues and that they were discussed in a timely manner;
providing a history of employee improvement or issues over time to show events as they occurred and how they were managed;
providing documentation to support the firing of an employee, providing a raise, lowering pay, or even why pay showed no increase or decrease;
showing proof that any performance issues were discussed with the employee and that they were given enough time to improve;
maintaining attendance records to track employee presence and punctuality;
documenting performance improvement plans to monitor progress and corrective actions;
recording pay raises and salary changes as part of the employee's employment history;
noting important events such as promotions, disciplinary actions, or other significant workplace occurrences; and
including incident reports to document workplace events and ensure transparency.

Effective documentation of these items supports fair and objective decision-making and can lead to better outcomes for both employees and the organization. Incident reports are a key part of documenting workplace events and should be included in employee files.

Performance management records allow for tracking of performance issues over time, including appraisals and training records. Details on performance management may include annual reviews and self-assessments. Documentation of employee performance issues over time facilitates better employee development. Thorough documentation can serve as a solid defense in the event of litigation, providing clear, objective, written evidence that can protect organizations from potential legal challenges or disputes.

What and When to Document

When it comes to documenting employee performance, it is important to understand what to document. Documentation in HR and employee relations refers to the records of various employment activities and events, including employee history, incident reports, attendance records, and performance evaluations. You should always document employee performance whether it is positive or negative. Documentation should include all relevant information and comprehensive details, such as performance evaluations, disciplinary actions, attendance logs, and compensation records, to ensure clarity, legal protection, and ease of access for management. It is also essential that documentation remains objective and fact-based to ensure legal compliance, credibility, and fairness in decision-making processes. You need to document what was said in the conversation or meeting with the employee to discuss these things. Additionally, if any agreements are made during the conversation such as a goal, required improvements, or a timeline, this should be documented. This goes for both sides and should include things that the manager said or agreed to as well. Any time there is a meeting to discuss performance, you need to ensure that this is documented.

As a rule of thumb, there should be at least two performance reviews every year for every employee. Many businesses choose to do this during the middle of the year and at the end of the year. This is a good practice because you can let the employee know of any problem areas during the middle of the year so they can work on them before the review at the end of the year. However, if you are dealing with an employee who is having performance issues, you may want to meet with them more often to discuss improvement, the plan put in place, and more. While twice a year is the minimum recommended, you can always do more if you wish to do so.

How to Ensure Proper Documentation

Beyond knowing what to document, you should also know the best way to document. The best practice is writing down information during the course of the meeting or right after the meeting is over. This is because the information is still very fresh and if you wait a day or more to document, you may forget some of the key parts of the agreement. Maintaining a written record is essential for accuracy and legal compliance, as it provides official, tangible proof of employee-related data. This will impact the quality of the documentation because it is based on memory instead of being based on what actually happened in the meeting. You should not attempt to reconstruct the documentation information later because this can bring unwanted risk to the company. Instead, the documentation should be kept clean, organized, neat, and factual at all times. Additionally, you should avoid opinions because it is not always factual. You should not try to interpret the employee’s behavior but instead outline their behavior, so that anyone who reads the documentation at a later time can come to their own educated conclusions.

Maintaining Files

Once you have all of the files put together for an employee, you should also do your best to keep them up to date. As an employer, it is your responsibility to stay compliant with labor laws and company policies by maintaining organized and accurate employee documentation. For example, if your employee changes their taxes or their direct deposit information, you should put new copies of the forms in their file. Additionally, every time you provide feedback on employee performance, you should include that in the file. You should be able to go to the employee file and find the most up-to-date information every time. To do this, you have to ensure that you maintain the files every time there is a change. You should make it a habit to file away new documents and forms on a regular basis so you know that your employee files are accurately maintained. This is also important in the case that you are audited at any time and you need to pull these files to show your documentation.

Doctor's notes and other medical documentation should be kept in separate, confidential files, as required by the Americans with Disabilities Act (ADA) and other laws, to protect employee privacy.

Certain documents, such as medical records, background check reports, and I-9 forms, must be stored in specialized, isolated files to protect sensitive information and comply with federal, state, and local laws. Separate, confidential files should be maintained for these documents to ensure legal compliance and safeguard employee privacy.

Maintaining organized employee files is essential for compliance with local labor laws, tax regulations, and industry-specific requirements. Missing documents can lead to legal risks or penalties. Employee file management also involves filing, retaining, and destroying company records in accordance with various state and federal laws that dictate what records need to be maintained. It is recommended to keep employee records for specific periods, such as retaining personnel records for one year after termination, as mandated by the Equal Employment Opportunity Commission (EEOC).

Retaining and Destroying Files

Establishing clear policies for retaining and destroying employee records is a key part of ensuring compliance with regulations and protecting sensitive information. Personnel records, including employee files and performance evaluations, should be kept for a minimum period — typically at least three years after an employee leaves the company, though specific requirements may vary depending on the type of record and local regulations.

To manage this process effectively, companies should store all employee records in a secure and accessible location, such as a cloud-based HR system, which allows for easy retrieval and ongoing maintenance. When it’s time to dispose of records, it’s essential to use secure methods like shredding paper files or permanently deleting electronic records to prevent unauthorized access to sensitive information. By following these best practices, companies can ensure compliance, protect employee privacy, and reduce the risk of data breaches.

Staying Compliant

Staying compliant with ever-changing regulations is critical for companies that want to avoid litigation and protect their reputation. To ensure compliance, it’s important to regularly review your documentation efforts and update your policies and procedures as needed. This includes keeping up with new regulations related to employee leaves, job applications, and other employment actions, as well as conducting regular audits to verify that your documentation practices are consistent and effective.

Maintaining comprehensive records and following best practices not only demonstrates your commitment to compliance but also provides essential support in the event of an audit or legal challenge. Companies should also provide training to employees on the importance of proper documentation, making sure everyone is aware of their responsibilities in maintaining accurate and timely records. By fostering a culture of compliance and awareness, you can protect your business and ensure that your documentation processes remain up-to-date and effective.

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