Employment Records for Small Businesses

If you employ staff and operate PAYE, HMRC requires you to keep the following payroll records for at least 3 years after the end of the tax year they relate to (though best practice is 6 years):

• The amount of each employee's pay, deductions, and employer NI contributions
• Details of any statutory payments made (SSP, SMP, SPP)
• Copies of payslips given to employees
• Details of any benefits in kind provided
• Employee starter and leaver information (P45, P46, starter checklist)
• P11D forms (benefits and expenses) and P60 end-of-year certificates

Real Time Information (RTI) requires you to submit payroll data to HMRC on or before each payday. Your PAYE software (or your payroll provider) will submit Full Payment Submissions (FPS) for every pay run. You should retain copies of all RTI submissions as part of your records.

Good HR records protect you in the event of an employment dispute. You should maintain a personnel file for each employee containing:

• Signed employment contract and any subsequent written variations
• Job description and offer letter
• Right to work documentation (see our right to work guide)
• Emergency contact details and next of kin
• Records of sickness absence, including fit notes and self-certification forms
• Performance reviews and appraisal records
• Training records and qualifications
• Records of any disciplinary or grievance proceedings, including warnings and outcomes
• Correspondence relating to resignation, termination, or redundancy

The Acas Code of Practice recommends keeping disciplinary and grievance records for 6 years after employment ends, to cover the limitation period for most civil claims.

Employment records contain personal data about individuals and are subject to UK GDPR and the Data Protection Act 2018. Key obligations include:

• Lawful basis: You must have a lawful basis for processing each category of employment data. Most routine employment data is processed under the "performance of a contract" or "legal obligation" bases.
• Special category data: Health information (including sickness records, disability status), racial or ethnic origin, and trade union membership are "special category" data requiring additional justification — usually "necessary for employment law obligations."
• Transparency: Employees must be told how their data is used — typically through a staff privacy notice.
• Retention limits: Do not keep personal data longer than necessary. Once the retention period expires and no legitimate purpose remains, data should be securely deleted or anonymised.
• Security: Personnel files (whether physical or digital) must be kept securely and accessible only to those with a legitimate need.

The following are general guidance retention periods for employment records. Legal advice should be sought for specific situations:

• Payroll records: 3 years minimum (HMRC), 6 years recommended
• Employment contracts: Duration of employment plus 6 years
• Right to work documents: Duration of employment plus 2 years (see our right to work guide)
• Disciplinary and grievance records: 6 years after employment ends
• Sickness/absence records: 6 years after employment ends
• Maternity/paternity leave records: 3 years after the relevant leave ends (statutory minimum), 6 years recommended
• P45 and leaver information: 6 years from date of leaving
• Pension records: 6 years from the end of the scheme year
• Unsuccessful job applications: 6 months to 1 year (to defend potential discrimination claims)