Establishing Key Employee Records

For organizational and legal purposes, you should maintain and update an employment file on each employee.

A file allows you to keep credentials and reviews at your fingertips, and it also lets you present information to others quickly. Many firms need to share employee data between departments

— accounting and human resources, for example — and files are the ideal way to do that. Files also document the mutual understanding between the employee and employer concerning policies, performance expectations, goals, and opportunities.

In today's computer age, many companies choose to keep files electronically or in databases, but plain manila folders still work fine in many cases. Use whatever is most comfortable for you — and will most likely encourage you to keep your employment folders up-to-date.

When organizing your employee folders, try to keep the information in order by date, beginning with the worker's resume and references, along with an employment application. Also, keep the original job description for each new hire, and create room to note any changes in responsibilities over the coming months and years. That will make it easy for both you and the employee to track how the position and skill set required for the position have changed over time. This part of the employment file should also include the date set for the first performance evaluation. Once that takes place, a written review should be added. Keep all such reviews, just in case. You may be called upon someday to justify a firing or a bad review.

Within a new employee's first week on the job, you should have the new employee fill out a Form W-4 for payroll withholding and tax purposes, and add it to the employment folder. In some cases, Immigration and Naturalization forms like I-9 are also needed.

If your company offers a 401(k) and health benefits, you'll need to keep copies of any paperwork on those plans that an employee has completed. Because health care paperwork contains especially sensitive information, it's smart to keep it separate from all other employee paperwork, in a folder with tighter access control.

To keep good records also means creating standard forms for things you'll do all the time — with every employee. You'll need a standard form for salary increases, another for performance reviews, and still another for disciplinary actions.

These forms should all include the following basic information:

• Name, start date, and job title;
• Date of the review or action, as well as what action is being taken;
• Names of any other coworkers involved in the action;
• Specific questions to answer during a review, with a good scale to judge progress;
• Additional space to set new goals and priorities;
• Room for signatures of everyone involved, to sign when the form is completed.

Also, be sure to make a copy of all forms that an employee signs for the employee's personal records. By law, employees are entitled to a copy of anything they sign, and they can ask to see anything that's in their personnel file.