Best Practices for Building an Employee File

Some countries in Asia Pacific abide by standard General Data Protection Regulation (GDPR) obligations, while others add their own touch. Ideally, you should comply with such regulations when developing and managing your employee data storage systems.

Another regulation to abide by is the Personal Data Protection Act (PDPA). In Malaysia, “a person who fails to register, and process personal data without a certificate of registration, commits an offense and shall on conviction, be liable to a fine not exceeding RM 500,000 or to imprisonment for a term not exceeding three years or to both.”

To avoid such hefty penalties, it’s best to maintain confidentiality and safety in your employee file right from the start. In this guide, we’ll share the importance of employee file management and best practices for building it.

Read next: Employee Data Management: How HRIS Can Help Achieve Accuracy and Security

What are employee files?

An employee personal file or employee record is a digital or physical folder composed of documents about an employee’s tenure at your company. It’s a record of their employment history from beginning to end.

Typically, an employee file includes legal documents, employee documents, and company documents. To illustrate, you’ll find the following documents in an employee file:

  • Offer letter
  • Job description
  • Signed employee handbook
  • Signed PTO policy
  • Signed non-disclosure agreement
  • Tax forms
  • Payroll forms
  • Employee contracts
  • Workers’ compensation
  • Employee benefits forms
  • Termination documents
  • Resume
  • References
  • Performance evaluations
  • Disciplinary transcripts

Why do employee files matter?

One of the main goals of keeping employee files is legal compliance. You need to comply with local, state, and federal labor laws by keeping certain employee files for the necessary period.

On top of that, employees might request for these documents, so you should keep them easily accessible. In case of legal disputes, these documents can serve as crucial evidence.

Additionally, an employee file is useful for HR and internal operation purposes. You can monitor attendance, manage performance, and productivity levels with employee files as it contains the details such as training history, past performance reviews, and payroll documents. 

Accordingly, you can make informed decisions about their future in your company, including employee promotions, pay raises, or terminations. Plus, these files keep you informed about which training and certificates your employees have, enabling you to create customized employee development plans for them.

What are the types of employee files?

employee file

It’s crucial to categorize employee files into the following two sections so that you can manage them properly and manage your access permissions accordingly.

Personnel files

Personnel employee files include the core biographical information and documents related to the employee’s job history and are easily accessible by the employee.. They should be based on facts, not opinions. 

Typical personnel files include basic information, such as an employee’s full name, address, education and qualifications, and date of birth. Employment documents such as job descriptions, job applications, resumes, and employment agreements should be stored here as well.

Confidential employee files

In contrast, confidential employee files hold sensitive employee information with limited access controls.

Think confidential performance reviews and medical files, such as health insurance forms, medical leave requests, family and medical leave paperwork, doctor’s notes, accident reports, beneficiary information, worker’s compensation claims, and other documents with medical information.

Other confidential files relate to payroll. Examples include attendance records, pay authorization forms, payroll deduction forms, timesheets, reimbursement receipts, advance pay request forms, award or bonus paperwork, and employee raise paperwork.

If an employee leaves the company, relevant files such as employee termination or resignation letters, exit interview forms, reasons for dismissal, unemployment compensation forms, and a copy of their final paycheck should be filed appropriately. You’ll need them as evidence in the event of a legal dispute.

What to avoid when building an employee file?

Avoid adding the following information or documents to an employee file if you want to protect their privacy, comply with labor laws, and ensure fairness.

Unnecessary information

You shouldn’t include unnecessary information related to your employees, such as what they post on Facebook or how active they are on TikTok, for example. Avoid personal opinions about your employees, only hold factual and objective documents.

Privacy violations

You might accidentally breach privacy regulations by storing excessive medical information, financial information, and family information in an employee file. Examples of such information include:

  • Bank account details
  • Social Security numbers
  • Immigration documents
  • Documents protected by relevant local regulations

Security risks

As an employer, you’ll have access to an employee’s private and sensitive information. It’s your duty to protect your employee data by restricting access and storing it securely. Your privacy policy should also include who has access to what information and why.

Also, use the proper disposal methods for documents you no longer need so they’re impossible to reconstruct. Refer to state and federal law for that. For example, you might need to shred physical files. As for electronic ones, ensure sensitive information is completely wiped from your database and establish strong data security measures to prevent data leaks.

Compliance issues

Under many jurisdictions, you must store certain employee data, such as basic employee and compensation information, for at least six years. Missing or inaccurate data may cause compliance issues

For that reason, you should go through your employee files every year to update and organize the relevant ones, and dispose of irrelevant data. Always refer to the labor laws that apply to your jurisdiction, and ensure you comply with them.

On another note, compliance issues can occur due to unequal treatment. Your confidential files might include data that could fuel this. That’s why it’s important to train managers to safely and objectively manage this data.

Best Practices for Building an Employee File

Here are some best practices to help you avoid any of the mistakes we’ve discussed above when it comes to building your employee file.

1. Categorize and organize all your employee information

You need a standardized system with logical categories that you can store employee information and documents under to maintain consistency across your HR system. This way, you can easily locate and manage any employee file later.

To explain, you’ll want to create a folder for each employee. Inside of each, you can create sub-folders for various categories (like payroll and training). Emulate the same system for each employee in your company.

Be consistent in everything down to the document naming, so it should look like this: [employee last name] [employee first name]-[document name]-[name]. If it gets overwhelming, you can use an electronic document management system (EDMS), also known as an HR electronic filing system for an automated process.

2. Include and retain necessary documents required by regulations

Write a checklist or index the types of documents you need for each employee file. This way, you can easily spot incomplete files and request them from your employees.

Omni tip: Label files with the duration you are required to keep them as per regulations. This way, you can easily identify which files to keep and which to dispose of during your yearly employee file review.

3. Establish security and access controls

Identify who can legally view each document in an employee file, and train your HR team to understand these confidentiality requirements.

Usually, HR individuals and benefits managers get access to all data. Only your legal team should view files about ongoing litigations. Managers have access in some cases, and employees can typically view their own employee files.

You can adjust the control settings or access permissions for each document accordingly, ensuring that information is only available to those who need it.

4. Regularly review and update employee files

Review your employee files annually. Do this before any audits (like payroll). With that, you’ll keep up with form renewals and certificate expirations, and you’ll know that the employee information on hand is accurate and updated. Don’t forget to update employee files with any additions or updates, such as training records, promotions, and raises.

5. Develop a disaster recovery plan

What will you do if a cyberattack compromises your digital employee files? What about physical copies? In case of a fire, what will happen to them? To counter this, prepare a disaster recovery plan by making digital or physical backup copies of your employee records, and store them in an appropriate and safe location.

6. Implement user-friendly HR software

Invest in employee record management softwares such as Omni that’s easy to use and compliant with privacy and security measures.

This way, you can increase HR productivity, comply with labor laws, access metrics and analytics, and centralize your documents. Not to mention, you can avoid any errors, streamline data filing, and extract, save, share, and update your documents easily.

Read next: 5 Reasons to Switch to an All-In-One HR Software

7. Provide training to HR personnel and managers

Now that your employee filing system is in place, the next step is to train HR personnel and managers on how to use it. They should learn about proper data storage, indexing, monitoring, and disposal.

Benefits of an Effective Employee File

When you create an effective employee file management system, here’s some benefits you can expect:

Simplified HR processes

HR processes thrive on data, so imagine what your HR personnel could do with centralized employee files.

Simply, they can skip the haphazardness of combining and sorting through scattered employee files. Instead, they can retrieve information from a central location and get a chronological overview of the employee’s behavior, including disciplinary actions and training. With the data on hand, HR teams can effectively assess employees’ productivity and create employee development plans accordingly.

Compliance with regulations

When you set a standardized system for data filing that takes federal, state, and local regulations into consideration, you can be sure that your business practices are compliant, reducing the risk for legal action and penalties.

Improved decision making

When you have easy access to your employees’ data, informed decisions can be made for situations such as promotions for outstanding performances to implementing employee development programs for closing performance gaps

Unlock the Benefits of Effective Employee File Management

employee file

Adoption of an all-in-one HR software would be advantageous for all stakeholders in the organization, especially when it comes to employee file management. Businesses across various industries and scales are increasingly embracing automation and digitization to maximize productivity. HR software stands out as a pivotal avenue through which corporations are undergoing digital transformation.

Powering Asia’s fastest-growing, modern companies, Omni’s employee database software scales alongside your company so you can customize and leverage the system to meet your evolving employee file management needs while ensuring compliance with regulations within your jurisdiction. 

If you’d like to learn more about how Omni’s all-in-one HR software automates the entire end-to-end employee lifecycle,

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