Lessons · Accounting · what has to be kept, and for how long
What has to be kept, and why it is kept that long
Payroll records -- hours, rates, gross, each deduction, net, and what was handed over and when -- have to be kept for a period set by law. The retention exists because the questions that arrive about a payroll arrive years later, from a person or an authority, and they are answered from records or not at all.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
In beta. This lesson was written for Hone and has not yet been checked by a qualified accountant. Practice material, not professional advice. What that means.
What it is for
Every payroll dispute is resolved by whoever has the records. A worker who says they were not paid correctly three years ago is right by default if nothing can be produced, and no amount of certainty about how carefully the payroll was run substitutes for the evidence.
How to think about it
Keep the whole calculation, not only the payment. A bank statement shows what left; it does not show what was earned, what was withheld, or why. Keep them for the period the law requires where you operate, which varies.
Worked example
Hours and ratesWhat was earned, and how it was worked out.
Gross, each deduction, and netThe whole calculation, not just the result.
What was remitted, and on what dateThe proof that somebody else's money was handed over.
Kept for the period the law setsWhich is longer than anybody expects, and varies.
Your turn
Name what a bank statement alone fails to show about a pay run.
A bank statement shows what left, not what was
Solve one, graded on the server
The trap
Keeping the payments and discarding the calculations. The payment proves an amount moved; the dispute is almost always about whether that amount was the right one, and only the calculation answers it.