The federal government requires employers to keep certain time and pay records for a specific number of years, and most states add their own requirements on top. Get it wrong and you have no paper trail when a wage claim arrives. Get it right and an audit becomes a fifteen-minute conversation. Here is what recordkeeping requirements for time and pay records actually look like, what you need to keep, and how long you need to keep it.
Why recordkeeping requirements for time and pay records matter
The FLSA’s statute of limitations for wage claims is two years for non-willful violations and three years for willful ones. If an employee files a claim two years after leaving, you need time records going back at least that far. Without them, you cannot defend yourself against inaccurate hours, alleged missed overtime, or disputed pay rates.
The burden of proof in FLSA wage cases also tilts against employers who cannot produce records. Courts have allowed employees to reconstruct their hours from memory when employers lacked records, and the employer ended up paying the employee’s estimate. Keeping good records is your cheapest legal insurance.
What the FLSA requires
Under 29 CFR Part 516, non-exempt employees’ records must include:
- Employee’s full name and Social Security number
- Address, including zip code
- Date of birth if under 19
- Sex and occupation
- Time and day the workweek begins
- Regular hourly rate of pay
- Hours worked each day and each workweek
- Total daily and weekly straight-time earnings
- Total overtime earnings for each workweek
- Total additions to or deductions from wages
- Total wages paid each pay period
- Date of payment and the pay period covered
Note: exempt employees are not required to have hours-worked records under federal law, though many employers keep them anyway for PTO and attendance purposes. See Salaried vs Hourly: When Does a Time Clock Still Matter? for when tracking exempt employees makes sense.
The two retention windows: 2 years vs 3 years
The FLSA separates records into two buckets with different retention requirements:
| Must keep for 2 years | Must keep for 3 years | |
|---|---|---|
| Time records | Time cards, time sheets, work schedules | |
| Payroll records | Wage computations, payroll registers | |
| Earnings records | Wage rate tables, piece-rate tables | |
| Pay stubs / earnings statements | Kept with payroll records | |
| Collective bargaining agreements | Full term plus 3 years |
In plain terms: keep time cards and schedules for 2 years, and keep anything involving dollar amounts (payroll registers, pay stubs, rate tables) for 3 years. Since most digital time-tracking systems store both in the same place, defaulting to 3 years for everything is the simplest policy.
IRS employment tax records
The IRS requires employers to keep employment tax records for at least 4 years after the due date of the return or after the tax was paid, whichever is later. The records the IRS cares about include:
- Amounts and dates of all wage payments
- Names, addresses, occupations, and SSNs of employees
- Total wages subject to income tax withholding
- Federal income tax withheld per period
- FICA (Social Security and Medicare) taxes withheld and the employer’s matching portion
- Copies of W-2s and W-4s
- Dates of employment and copies of Form I-9
The 4-year IRS window is longer than the FLSA’s 3-year window. Since payroll records satisfy both, default to keeping payroll records for 4 years so you cover both agencies in one policy.
State-specific retention rules
Most states match or exceed the FLSA’s retention periods. A few examples:
- California: Labor Code § 1174 requires employers to keep payroll records for at least 3 years and time records for at least 2 years at a California worksite or nearby. The state also requires keeping records in a manner that allows a third party to verify them. Wage statement copies must be kept for 3 years.
- New York: 6 years for payroll records under New York Labor Law § 195. This is the longest statutory retention period of any major state and is worth noting if you operate in New York.
- Illinois: 3 years for payroll records, consistent with the federal floor.
- Texas: Follows the federal FLSA retention floors.
For New York-specific requirements, see New York Wage Notice and Time Tracking Requirements. For California, see How to Track Break Compliance in California for an overview of that state’s additional obligations.
Paper vs digital: what formats are acceptable
The FLSA does not require paper records. Electronic records are acceptable as long as they are:
- Stored in a form that can be retrieved on demand
- Legible and capable of being converted to a readable copy if a regulator requests a printout
- Accurate and complete (not overwritten or altered)
A cloud-based time-tracking system that stores punch history, pay rates, and payroll exports in retrievable CSV or PDF form fully satisfies this requirement. Paper backups are not required.
What “the original format” means in practice
If you export timesheets to a CSV and then delete the underlying records, the CSV counts as the record. Keep the export and the underlying system records during the retention period. If you switch payroll software, export a full archive before decommissioning the old system.
Setting up a practical retention policy
Most small businesses do not need a formal records management program. A simple rule that covers the major obligations:
- Keep digital time records and payroll records for 4 years (covers FLSA and IRS in one window)
- If you operate in New York, keep them for 6 years
- Export payroll archives before switching software or closing an account
- Store W-2s and withholding records for 4 years (IRS requirement)
- Keep I-9 forms for 3 years from hire date or 1 year after termination, whichever is later
ClockOut’s Pro plan stores payroll history and lets you export PDF payroll reports for each period. Keep those exports in a folder named by year and you have a clean archive without any additional tools. For guidance on locking and exporting payroll, see How to Run Weekly Payroll in 30 Minutes or Less.