Managing Employee Records: A Modern Approach for SMEs

When you’re running a small or medium-sized business, there’s always a lot going on. From managing people to keeping an eye on the bottom line, it’s easy for admin tasks like employee records to slip down the list. But here’s the thing — how you manage those records can have a real impact on your business.

Whether it’s staying on the right side of the law, improving operational efficiency or just making life a bit easier for you and your team, having a modern, streamlined approach to employee record-keeping is more important than many realise.

Why record-keeping matters

At its core, employee record-keeping is about two things: compliance and clarity.

First, the legal bit. UK employment law requires businesses to hold specific information about their employees. That might include right-to-work checks, absence records, disciplinary notes or contract details. These aren’t just nice to have — they’re a legal requirement, and being caught without them could cause real trouble if you’re ever subject to an audit, data request or tribunal.

But beyond ticking legal boxes, well-managed records help you run a more organised, efficient business. Imagine being able to access key information in seconds, spot absence trends early, or quickly provide an employee with their latest contract details. It all adds up to better decision-making and smoother day-to-day operations.

What should be kept, and for how long?

One of the biggest challenges SMEs face is knowing what they need to keep — and for how long. It’s easy to overcompensate by holding onto everything just in case. But that can lead to its own issues, especially when it comes to data protection.

Every employee file will look a bit different, depending on the role and industry, but there are a few staples you’ll always need. These include personal information like contact details, a copy of the employment contract, right-to-work documentation, absence records, performance reviews and anything relating to pay, such as salary and pension contributions.

In terms of timeframes, it varies. Payroll data, for example, generally needs to be kept for six years. Most other employee records should be held for around six years after employment ends. Right-to-work checks are typically retained for two years post-employment. Holding on to things longer than necessary can be a data protection risk, so it’s worth setting clear policies to review and securely dispose of old records when the time’s right.

Moving away from paperwork: the benefits of digital

If you’re still dealing with paper files, ring binders or spreadsheets saved on someone’s desktop, you’re not alone — but it might be time for a rethink. Modern HR systems have made digital record-keeping more accessible than ever, even for smaller businesses.

Switching to a digital setup can make a world of difference. It keeps everything in one place, reduces the risk of lost or duplicate files, and allows you to access what you need quickly and securely. Many cloud-based systems also come with handy features like built-in reminders for probation reviews, automated data retention rules and self-service access for staff to update their own details.

Even a simple, secure cloud storage solution like Google Workspace or Microsoft 365 can be a step up from paper files — provided you set the right permissions and backup processes.

Staying compliant with data protection law

Managing employee records isn’t just about having the information. It’s also about protecting it. Under UK GDPR, you’re responsible for making sure any personal data is stored securely, only accessed by the right people and used for legitimate purposes.

That means limiting who can see sensitive information, keeping records accurate and up to date and having a clear policy on how long you keep things. It also helps to be upfront with your team. A simple privacy notice that outlines what data you hold and why you need it can go a long way towards building trust and transparency.

Where does The HR Dept come in?

Let’s face it — record-keeping isn’t the most glamorous part of running a business. But it’s one of the most important. And if you’re not quite sure whether your current process ticks all the right boxes, you’re certainly not alone.

That’s where we can help. At The HR Dept, we support small and growing businesses with practical, tailored HR solutions — including everything to do with employee records. Whether you need help organising what you’ve already got, introducing a digital solution, or simply making sure you’re meeting your legal obligations, we’re here to make it simpler.

We understand that every business is different, so we won’t push you towards a one-size-fits-all system. Instead, we’ll work with you to understand your needs, your team and your goals — and help you build a record-keeping approach that supports your business now and into the future.