How Long to Keep Payroll Records: US & Globally

Payroll recordkeeping isn’t just a routine administrative task; it’s a legal obligation with serious implications for businesses. Federal and state agencies require employers to retain payroll documents to verify compliance with tax, wage, and labor laws. Failing to maintain accurate records can result in penalties, audits, or legal disputes, making proper retention a critical component of risk management.

In the U.S., employers must navigate overlapping requirements from the IRS, the Department of Labor (DOL), and the Equal Employment Opportunity Commission (EEOC). The IRS mandates retaining payroll tax records for four years, while the DOL requires three years for wage/hour documentation and two years for supporting calculations. State rules add complexity: California extends retention to four years, while Montana requires five.

For global employers, compliance grows even more nuanced. Countries like Canada mandate six-year retention, and EU nations under GDPR often require six years or longer. Some jurisdictions even demand permanent archiving for specific records.

This guide outlines U.S. retention timelines and highlights key considerations for multinational teams, helping ensure organizations meet local obligations while streamlining global operations.

Why payroll record retention matters

Payroll record retention is a crucial safeguard against financial, legal, and operational risks. Properly maintained records provide clarity during disputes, ensure accountability to regulators, and protect businesses from costly penalties.

Supports compliance with federal and state laws. Retaining payroll records helps employers adhere to the Fair Labor Standards Act (FLSA), IRS tax rules, and state labor laws.
Legal protection during audits or disputes. Detailed records serve as evidence in wage claims, audits, or employee lawsuits. For example, timesheets and pay stubs can resolve disputes regarding overtime pay or benefits.
Ensures payroll tax accuracy and benefit management. Accurate records prevent errors in tax filings and benefits administration, such as 401(k) contributions or health insurance deductions.
Avoids fines, back pay, and litigation. Noncompliance can lead to penalties from the DOL or IRS, back pay demands, and lawsuits. Proper retention minimizes these risks.
Streamlines audits and operational efficiency. Organized records simplify payroll audits and reduce the time spent retrieving documents, allowing HR teams to focus on strategic priorities.
Builds employee trust and transparency. Secure, accessible records reassure employees that their compensation is accurate and confidential data is protected, fostering workplace confidence.

Federal record retention requirements (U.S.)

Federal payroll record retention in the U.S. involves navigating overlapping mandates from multiple agencies, each with distinct timelines and documentation standards. Here’s how key federal requirements break down:

Fair Labor Standards Act (FLSA)

The FLSA requires employers to retain payroll records for at least three years, including details like hours worked daily, total weekly hours, wages paid, and deductions. Supporting documents such as time cards, wage rate tables, and work schedules must be kept for two years. These records must clearly show compliance with minimum wage and overtime rules, serving as critical evidence during DOL audits or wage disputes.

Internal Revenue Service (IRS)

The IRS mandates retaining employment tax records for four years after taxes are paid or due, whichever is later. This includes Forms W-4 (withholding certificates), W-2 (wage statements), 941 (quarterly tax filings), and 1099s for contractors. Exceptions apply: records tied to COVID-19 relief credits, like the Employee Retention Credit, require six years of retention due to extended audit windows.

Equal Employment Opportunity Commission (EEOC)

Employers must preserve personnel records, including applications, resumes, and hiring documents, for one year after an employee’s termination. If a discrimination charge is filed, records must be retained until the case concludes, even if this exceeds the standard timeline. Note that EEOC requirements overlap with FLSA rules, as payroll data (e.g., wage rates) often falls under both agencies’ three-year mandates.

In addition to how long records are kept, how they are kept also matters. “Records must be kept in a safe and accessible location either at the worksite or at a central record-keeping office,” said Lisa Nagele-Piazza, J.D., Lead Content Counsel at Fisher Phillips, in an SHRM article. “Either way, the information must be made available to U.S. Department of Labor (DOL) representatives within 72 hours of a request,” she adds.

State-specific record retention laws

While federal requirements set baseline standards, many states impose longer payroll record retention periods to address local labor laws and extended statutes of limitations. Employers operating across state lines must track these variations to avoid penalties.

California mandates retaining time records for four years due to wage claim risks under the Unfair Competition Law, while pay stubs must be kept for at least three years. Some employers extend this to four years for added legal protection.
New York labor law requires payroll records, including hours worked and wages paid, to be retained for six years, far exceeding the FLSA’s three-year rule.
Hawaii enforces a six-year retention period for payroll records, aligning with its extended statute of limitations for labor disputes.
Tennessee has the longest requirement at seven years, particularly for tax-related documentation, to accommodate audits or litigation.
Montana requires payroll records to be retained for five years, surpassing both federal and most state timelines.
Louisiana mandates five years for payroll records, emphasizing compliance with state wage and hour laws.
New Jersey employers must retain records for six years, reflecting stringent enforcement of wage theft prevention laws.

These examples highlight the importance of verifying local regulations. For instance, while the IRS requires four years, states like New York and Hawaii double that timeline. Employers should consult state labor departments or legal counsel to tailor retention policies to jurisdictional demands.

What payroll records should be retained?

Retaining the right documents ensures payroll compliance, resolves disputes, and simplifies audits. Below are key records employers should archive, aligned with federal and state mandates:

Employee personal information. Store names, addresses, Social Security numbers, birthdates (for minors), and occupation details. These verify employment eligibility and support tax reporting.
Hours worked (timesheets, timecards). Maintain daily and weekly hour logs, including overtime, to prove FLSA compliance. Timecards must show exact start/end times and total weekly hours.
Pay rate, gross and net wages, and overtime. Record hourly rates, salary details, bonuses, and overtime calculations. This data defends against wage claims and ensures accurate tax withholding.
Tax withholding and deductions. Preserve Forms W-4, W-2, and tax filings (e.g., 941, 940), along with records of garnishments, benefits deductions, and tip allocations. The IRS requires these for four years.
Pay stubs or wage statements. Keep digital or physical pay stubs detailing earnings, deductions, and net pay for at least three years under FLSA rules.
Direct deposit authorizations. Retain bank account details and signed authorization forms to validate payment methods and prevent disputes.
PTO, sick leave, or vacation accruals. Track balances and usage of paid time off, including FMLA or state-mandated leave, to resolve disputes and ensure accurate payout upon termination.
Employment agreements or contracts. Archive signed offer letters, non-compete agreements, and classification documents (exempt vs. non-exempt) to clarify terms and defend against misclassification claims.
Termination documents and final pay. Retain exit paperwork, final pay stubs, and severance agreements for at least one year post-termination (per EEOC) or longer if litigation arises.

For global teams, adapt retention policies to local laws (e.g., GDPR-compliant storage for EU employee data). Digital solutions streamline organization, but ensure backups and encryption to protect sensitive information.

Payroll record retention for international employees

Global employers face a patchwork of retention laws, with timelines varying significantly by country. Here’s how key jurisdictions compare:

Canada

Retain payroll and tax records for six years from the end of the tax year they relate to, per the Canada Revenue Agency (CRA). This includes timesheets, tax filings, and ROEs (Records of Employment). Extended retention is critical for audits or disputes over overtime, benefits, or tax credits.

United Kingdom

HMRC requires three years of retention for PAYE data, but employers often keep records for six years to align with the Limitation Act 1980, which governs wage disputes. GDPR mandates secure storage and deletion after the retention period ends.

Germany

Payroll records range from 6–10 years:

Salary accounts and tax documents. 6 years
Payslips and wage data. 10 years
Germany’s strict timelines under the Fiscal Code (Abgabenordnung) aim to resolve complex tax audits and labor claims.

Australia

The Fair Work Act mandates seven years for wage records, tax documents, and superannuation contributions. Employers must also retain signed employment contracts and termination details to address potential disputes.

Japan

Financial and payroll records, including tax documents and salary accounts, require 10-year retention for compliance with corporate law and audit readiness. Production-related records are kept for the duration of service plus one year.

Key considerations

GDPR compliance. EU nations require anonymization or deletion of personal data post-retention.
Penalties. Fines for noncompliance can reach 4% of global revenue under GDPR or per-violation charges in countries like Australia.
Digital solutions. Cloud-based systems with encryption and access controls streamline multi-jurisdictional compliance.

Employers with international teams should partner with local payroll providers or legal experts to navigate these complexities, ensuring adherence to both local laws and global data standards.

Best practices for payroll record management

Effective payroll record management balances compliance, security, and efficiency. Implementing proactive strategies minimizes risks and ensures seamless audits. Below are key practices to optimize your process:

Use a secure digital payroll platform

Centralized cloud-based systems streamline storage, reduce physical paperwork, and enhance accessibility. Invest in platforms that offer encryption, automated backups, and role-based access controls to protect sensitive data. Digital solutions also simplify GDPR compliance through features like automated data deletion.

“A fully integrated HRIS system should facilitate electronic access for employees to these documents, allowing administrators to export all signed notices and documentation,” advises Toni Braxton, an employment law attorney with decades of experience. “This approach ensures a seamless and compliant process during audits.”

Automate archiving and deletion workflows

Configure software to archive records based on jurisdictional timelines (e.g., three years for FLSA, six years for Canada) and auto-delete expired files. Tools like advanced data storage platforms apply retention policies and audit trails, reducing human error.

Limit access to authorized personnel

Restrict payroll data to HR managers, payroll administrators, and executives. Implement multi-factor authentication (MFA) and audit logs to monitor access. Revoke permissions immediately when employees leave or change roles.

Maintain encrypted backups

Store backups in multiple secure locations, such as encrypted cloud servers and offline drives. Use AES-256 encryption for data at rest and TLS for data in transit to prevent breaches.

Train HR and payroll teams

Conduct regular sessions on data retention laws, phishing scams, and audit protocols. Emphasize GDPR requirements for EU employees and state-specific rules like New York’s six-year mandate.

Additional tips

Color-code files. Use tabs to track retention periods (e.g., blue for 2025 records).
Retention schedules. Document timelines for tax forms, timesheets, and termination records to avoid premature disposal.

Adopting these practices ensures compliance while freeing HR teams to focus on strategic priorities.

How Velocity Global can help

Velocity Global simplifies multi-country payroll compliance by ensuring data retention aligns with local employment laws across 185+ countries. Their Employer of Record (EOR) solution and Global Work Platform™ automate recordkeeping standards. This eliminates the need for employers to track disparate timelines manually, reducing non-compliance risks like fines or litigation.

The platform centralizes U.S. and international payroll records into a unified system, offering real-time visibility while enforcing jurisdiction-specific policies. Automated workflows archive or delete records per regional deadlines, and encrypted storage secures sensitive data. With in-country HR and legal experts managing local nuances, employers can scale globally without sacrificing compliance or operational efficiency. Contact Velocity Global to learn more.

This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.

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Payroll, Compliance