Why it is Important to Have a Solid Document Retention PolicyTax Professionals' Resource
April 30, 2013 — 1,458 views
Increasing time and growing sales makes any business add documents to the already existing pile of documents. Many of these are important mainly because of the business' current dealings, but many could be unnecessary as well. A good document retention policy can help organizations save documents that are really important. Document retention can save the day especially during crucial junctures, like legal disputes, when plenty of time and money are at stake. On the other hand, saving and storing documents interminably can be a drain on resources. So when the question is whether to save or not to save, the answer lies in a reliable document retention policy.
A Solid Document Retention Policy – An Outline
To create the outline for a solid document retention policy, it is important to pay attention to the different categories your business documents belong to. The first category is all about the documents that your business hasto keep. Documents that fall into this category usually have to do with legalities. Documents that deal with regulations pertaining to the specific industry the business it is operating in, would also fall under this category. Records of such documents have to be maintained until the law requires you to do so.
The second category is made up of documents that your business would want to keep. These are documents that the business finds valuable in some way or the other. A reliable document retention policy will clearly state what to do with documents in this category and for how long to keep them. Reviews at regular intervals may be necessary to weed out documents that were once valuable but no longer so. The third category deals with documents that can be destroyed. These documents are neither needed by the law nor deemed valuable by your business.
Implementing the Retention Policy
Effective implementation of a retention policy is as important as its creation. One of the first steps to ensure that your retention policy is well-implemented is to educate all workers and employees about it. A clear outline about what the document retention policy is meant to do and how it can be achieved will give your employees the necessary information they need to deal with when handling documents. Once employees know better, the policy can gradually be put into place. To enforce it properly, you'd need to make sure everyone abides by the retention policy, whether it is about storing documents or destroying them.
If your business has at least 15 people, you'll have to retain documents about applications, hires and re-hires, promotions, demotions, transfers, layoffs, and terminations for one year. The same time period applies to the retention of compensation rates and demographic data. Supplementary basic records as well as records to do with shipping, billing, order, and deductions have to be maintained for two years. For documents like payroll records, agreements, notices, and plans, the time period is three years.
Records of an employee's leave have to be stored for three years. Anything to do with illnesses and job-related injuries needs a time period of five years. Records related to medical records would need 30 years. Even tax records need to be retained for a period of time – three years for additional tax to be paid on tax return, two or three years (whichever comes later) for refund claimed on tax return, six years for unreported income, seven years for claims for loss from bad debt deduction and four years for employment tax records.