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How long should you hold on to your business records before destroying them securely?
When you have a solid records retention policy in place, the answer to that question is a relatively simple one. And when you develop that policy in conjunction with a professional who understands the nuances of your business, you can feel even more confident when following the schedule it dictates for what to destroy and what to keep—and for how long.
In general, when you put together your records retention policy, you want to think a little like Goldilocks. Just as she examined the three bears’ food, chairs, and beds for the fit that was “just right,” that’s exactly what you’re looking for in retention timelines. Keep a set of records too long, and you’ll cost your business money while creating inefficiencies that hamper your operations. However, destroy a document too soon and you could be facing liability and compliance issues that can negatively impact your business, your employees, and your customers.
In one of the more extreme examples of poor records retention policies, the financial company Morgan Stanley was fined $15 million by the Securities and Exchange Commission for failing to properly retain emails. In everyday terms, retaining records too long might result in doubling or tripling your staff’s time to prepare for a routine audit.
To help protect your business from liability, while creating efficiencies and locating potential cost savings, we’ll take a deeper look into how a records retention policy can positively impact your operations—and your bottom line.
But, first, let’s get clear on what a typical records retention policy might look like.
What Is a Records Retention Policy?
First of all, it’s important to understand that a records retention policy is one part of an overall comprehensive records management policy. Records management policies and procedures ensure that your organization and its employees understand how to handle sensitive data and protect private information from falling into the wrong hands, all of which minimizes your potential liability.
As a part of that records management policy, you’ll group your records into categories, each of which will have its own timeline for retention. Once that timeline expires, you’ll know it’s time to destroy that record securely.
Every business operates differently, so you want to make sure to create your schedule in consultation with a professional. However, to give you an idea of potential categories and retention timelines, take a look at the examples below:
As we mentioned, it’s important to get these timelines right. After all, there are downsides to both 1) destroying records too early and 2) holding on to them too long. To help you understand why, we’ll take a look at four ways your records retention policies can affect your business.
| Record Category | Retention Period |
|---|---|
| Employment tax records | Four years after the tax becomes due or is paid, whichever is later |
| Personnel records | Seven years after termination |
| Employee benefits | Six years |
| Safety-related documents | Five years |
| Records related to employee exposure to toxins or hazardous materials | 30 years |
As we mentioned, it’s important to get these timelines right. After all, there are downsides to both 1) destroying records too early and 2) holding on to them too long. To help you understand why, we’ll take a look at four ways your records retention policies can affect your business.
Records Retention: Examining the Business Impact
When you think about potential risks and challenges within your business, records retention and management may not immediately spring. However, your records retention policies can have four significant impacts on your business:
#1: Ensures Regulatory Compliance and Offers Legal Documentation
Federal and local privacy laws can get very specific about retention periods for certain types of documents. If your business is found to be in violation of these regulations, as in the Morgan Stanley example, you may face steep fines. Additionally, if there’s ever a legal dispute involving your business—a wrongful termination suit, for example—a strong records retention policy will ensure that you have all the documentation you need to defend yourself against allegations.
#2: Creates Efficiencies for Your Staff
It can be tempting to hang on to all of your records—you know, “just in case.” However, you’ll quickly find yourself (and your staff) bogged down by all the records you’ve chosen to keep. If, for example, you do get audited or drawn into a lawsuit, your staff may spend tons of extra hours going through outdated records to find the relevant ones they need. This is especially true if you haven’t established a system for organized storage and retrieval. However, if you’re following a retention schedule—and securely disposing of records that are past their timeline—your staff will have much less to wade through to find what they’re looking for.
#3: Saves You Money
With those efficiencies come cost savings. Not only will your staff save time combing through records, but you also won’t need such a large footprint to store them. This is also true of digital records. Although they don’t occupy physical space, they can fill hard drives or cloud storage, which does cost your business money. Additionally, when you’re disposing of records on their proper timelines, you’ll eliminate the need to pay staff to manage an overwhelming number of records that no longer serve a business purpose.
#4: Contributes to Overall Data Security
Lastly, when you keep records around too long (and without a proper records management policy in place), you’re opening your business up to the possibility of creating a data or privacy breach. In contrast, a carefully managed retention schedule cuts down the number of documents available, reducing the possibility of someone breaching old records that are either not carefully managed or, in the worst case, mostly forgotten.
Now that you can see how significantly your retention policies can impact your business, there’s one more piece we want to remind you of.
The Final Step: Secure Document Destruction
Once a record has met its retention period, best practices dictate that you destroy it securely. Ideally, you’ll get the assistance of a professional document destruction provider that can certify its secure destruction or disposal. This involves:
- Shredding on-site via a mobile vehicle, which offers you a high level of convenience, security and reassurance, or
- Shredding at the vendor location. In this scenario, your provider will place secure collection containers at your place of business and pick them up on a scheduled basis.
In both cases, most vendors will 1) offer you the opportunity to have a representative of your business witness the shredding and 2) provide a certificate of destruction once the shredding is complete.
By completing this final step, you’ll close the loop in ensuring that your organization’s sensitive data remains secure.
The Business Advantages of Managing Your Records Carefully
Every business deals with sensitive data at some point in its operations: employee social security numbers, customer credit card numbers and your company’s banking information, just to name a few. Your records retention policy will ensure that you have all this information at your fingertips—should you need it—while reducing the expense and liability that comes with holding on to records too long. By getting a solid records retention in place sooner rather than later, you’ll protect your business’s future—and its bottom line.
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Need help setting up a records management program? Reach out to us! With over 10 years of experience managing records on Guam, we can help you with a comprehensive records management solution—including secure document destruction services—that fits your company’s needs and budget.
