Handling employment records may not be the most glamorous part of building a global business – but it’s critical to maintaining compliance. Employment records carry some weighty obligations for HR, and failure to handle them correctly can put a serious damper on your global expansion plans.
In this post, we’ll be unpacking the challenges that employment record retention poses for global businesses. We’ll also take a look at how the rules vary around the world, and outline some solutions for businesses who are tapping into global talent mobility.
What are employment records and why are they so important?
An employment record is any document or set of documents about a person’s work history. This includes their job title and their responsibilities. It also includes data about their start and end dates, and the wages they earned while in the position.
Employers usually keep these records for a specified time, both during and after the employment period, if it ends. These records can be used to verify employment history, or to establish facts in legal proceedings and satisfy inspectors. For small, local businesses, this might not be a significant challenge. But for a global (or globally minded) business seeking to leverage global talent mobility, it can become a serious HR headache, for a number of reasons.
Employment record retention: challenges for businesses
Compliance: Businesses must retain certain data for specified periods, and with adequate levels of security. Employees may have the right to request these records themselves, or government bodies may have the power to demand them. Businesses who can’t produce the goods, either because the data is lost, corrupt or improperly stored, can face heavy penalties.
Scale: As a business starts to expand beyond its own home country, these challenges grow, too. For HR teams tasked with overseeing employment record retention, a growing team adds volume, and each new country multiplies complexity. The statutory minimum retention period in one country may exceed the maximum in another. What passes for adequate data security in one region could be insufficient somewhere else. What began as simple filing and data capture can quickly become a time sink for internal HR teams.
Security: Employment records often contain sensitive personal information, such as social security numbers and salary information. Businesses have to be sure that they have proper security measures in place to protect this information from unauthorized access, breaches, or hacking.
Employment record retention rules by region: a brief overview
It may be relatively easy to solve these challenges when a business employs people within just one country. But a global business is exposed to a much wider range of risks. Here is a quick overview of employment record retention rules around the world.
The European Union
The General Data Protection Regulation (GDPR) classifies employers as “data controllers” and imposes the responsibility to erase or anonymize employee data once it is no longer needed. Companies who employ within the European Union may not hold onto personal data indefinitely, and may incur heavy penalties for failing to comply. Each country within the European Union can stipulate precise minimum or maximum retention periods.
In the United States, retention requirements vary according to the record type, and the laws relevant to each type. Here are some of the federal laws that govern data retention for businesses:
The Fair Labor Standards Act (FLSA)
This law requires employers to keep specific records for at least three years. The relevant records include:
- Payroll data: names, addresses, social security numbers
- Work-related data: the day when a work week starts, hours worked each day and week.
- Pay data: hourly pay rate, straight-time pay, overtime pay, all additions and deductions.
- Any exemptions for the employer, and the basis thereof.
The Occupational Safety and Health Administration (OSHA)
To comply with this legislation, employers must retain records of work-related injuries and illnesses at the worksite for a minimum of five years.
The Immigration and Customs Enforcement (ICE)
All I-9 forms must be stored for three years after initial hire, or a year after the date the employment ended.
In addition to these federal laws, there may be further regulations at the state level. Hiring workers in these states will trigger any additional requirements on the books.
In terms of Hong Kong’s Employment Ordinance, payroll records must be kept for 7 years after the termination of employment. Another piece of legislation, the Personal Data Privacy Ordinance, mandates that employers may not retain any personal employee data longer than necessary. They must also have adequate security measures to protect this data for as long as it’s in their possession.
Putting data retention on autopilot: how to simplify global records management with an Employer of Record
Thankfully, it’s not necessary to hire in-house legal counsel to stay on top of employment records and data retention rules in every country where you plan to hire. Employers of Record (EOR) specialize in streamlining HR functions for globally minded businesses who need to hire foreign talent quickly. That includes managing, updating and storing employment records in the right way.
Storage and data security
EORs take on the responsibility of maintaining and storing the employment records for their clients. This helps to keep the records out of the hands of unauthorized people. EORs typically have robust security measures in place to protect the confidentiality and integrity of the records they maintain. But, a word of caution: some EORs are better than others. When searching for one, business leaders should ask direct questions about critical issues, including data security.
It’s vital that employment records are kept up-to-date, and maintained in a form that meets local legal requirements. EORs have the legal expertise to ensure the right data is captured, in the right way.
Finally, EORs can help to mitigate the risk of data breaches or other security incidents by providing secure methods for accessing and managing the records, such as cloud-based software platforms.
Playroll: the EOR that ticks all the boxes
Through our technology-enabled platform, Playroll enables companies to hire in over 170 countries – all without establishing their own entities, and with employment records safely and accurately stored in the background. Schedule a demo to learn more about how you can use Playroll to recruit, onboard, pay and even relocate top talent from anywhere, with every “i” dotted and every “t” crossed, every step of the way.