Keeping Payroll Records Secure and Compliant in the Digital Age

Running payroll is a lot more than just paying people on time. You should also be worrying about the accuracy and protecting information that’s sensitive enough to cause chaos if it falls into the wrong hands.

For small businesses, payroll records show you’re compliant, organized, and serious about doing things right for your employees.

As more companies move their payroll online, old filing cabinets are being replaced by cloud systems. It's great for efficiency, but it also raises a huge question: how safe is all that information?

Let’s jump into what we think (and how we can help!)

What Payroll Recordkeeping Really Means

Payroll recordkeeping really just comes down to keeping a clear trail of how and when your team gets paid. Every hour worked, every tax taken out, every bonus added… it all matters.

Under the Fair Labor Standards Act (FLSA), employers must maintain accurate payroll and time records for every non-exempt employee. There’s no required format, but the law states what information must be included for each employee:

• Your employee’s full name and social security number
• Address with zipcode
• Birth date, if younger than 19
• Sex and occupation
• Time and day when an employee's workweek begins
• Hours worked per day
• Total hours worked each workweek.
• How wages are paid (i.e. $15 per hour or $500 per week)
• Regular hourly pay rate
• Total daily or weekly straight-time earnings
• Total overtime earnings for the workweek
• All additions to or deductions from the employee's wages
• Total wages paid each pay period
• Date of payment and the pay period covered by the payment

These records need to be kept for at least three years and employee timecards and schedules need to be kept for two years.

Something to keep in mind is every agency has its own timeline for how long you need to hold onto those records.

The IRS suggests four years for payroll tax documents. As mentioned above, the DOL says at least 3 years. Each state has their own rules on top of this. New York and New Jersey recommend 6 years and Connecticut, seven. So it’s worth looking into your state specifically.

You can use any timekeeping method that you prefer. It can be a digital system, time clock, or manual log. The only thing that matters is that your records are complete and accurate.

Megapay makes time tracking easy with options that fit your team's needs. Employees can clock in using a touchscreen time clock with fingerprint verification, from their computer or phone through the mobile app with GPS tracking. Or they can even call in from any phone (with no internet required).

Why Secure Payroll Data Matters

Payroll data isn’t just another spreadsheet in your files. It’s full of Social Security numbers, bank details, and salary info. These are all the things hackers love.

Small businesses are often hit hardest because they don’t expect to be targeted. But a data breach can cost you more than just money, it can hurt your relationship and credibility with your employees. They trust you to keep their information safe and private. 

That’s why modern payroll systems use encryption, secure logins, and automatic backups. If your system doesn’t include these, it might be time to upgrade!

Cloud-Based Payroll

If you’re managing payroll from home or across multiple offices, cloud-based payroll software like Megapay is the way to go. You can log in from anywhere and reduce the risk of lost paperwork.

But even the best software can’t replace common sense! Make sure only authorized users have access, passwords stay private, and employees understand basic cybersecurity. You can even do phishing email training (and let your team know you’d never ask them to send private information via email).

Don't Forget to Check-in

Security isn’t something you set and forget. You should do a quick review every few months. Check who has access, make sure backups are running, and confirm your payroll data is stored in line with IRS and DOL requirements.

Say "Hello" to Stress-Free Payroll

Good recordkeeping keeps you compliant. Good security keeps you trusted. Together, they keep your business running smoothly.

At Megapay, we help business owners simplify both. Our cloud-based payroll keeps your data safe, your records organized, and your compliance on track.

If you’re ready to make payroll stress-free, get in touch with us!