Storing prior year history
Store prior year payroll history effectively to ensure compliance and support future audits.
Storing prior year history
When a payroll provider stores prior year pay history, it means that they retain records of the compensation and payment details for employees from previous years prior to their service. This information typically includes data such as wages, salaries, bonuses, taxes withheld, benefits, and other financial transactions related to employment.
Summary of employer requirements
The IRS recommends storing payroll data for four years. You can find more information on these recommendations here. This responsibility falls upon the employer, rather than the payroll provider. Below are typical scenarios where employers may be required to furnish payroll records:
- Compliance and Legal Requirements: Keeping accurate payroll history reports ensures compliance with tax and legal regulations and aids in audits or legal inquiries.
- Reference for Disputes: Payroll history reports serve as evidence in disputes or discrepancies regarding employee compensation, deductions, and benefits.
- Financial Analysis: These reports offer insights into labor costs, compensation trends, and benefits, aiding in budgeting and staffing decisions.
- Employee Records: They document changes in salary, promotions, bonuses, and other compensation, facilitating performance evaluations and succession planning.
What check supports
Check does not migrate prior year pay history from previous payroll providers. Our recommended approach is to guide the employer on which reports to pull from the previous provider and have the employer take responsibility for storage.
Alternatively, you can offer a feature to upload records directly into your product. Typically, this entails a dedicated storage area with an upload option, enabling employers to directly input this information if they prefer. Check operates well within industry standards, supporting tens of thousands of employers under this guidance.
While some payroll providers may offer to migrate prior payroll history, this service often comes with inaccuracies and high fees. Most advise employers to collect the last three years of payroll data and store it themselves. While some providers offer a general upload area for storage, it's rare for them to manage this data on behalf of the employer.
Employer interaction strategy
To best equip your team for conversations around pay history storage, we have prepared the template below that can be used for employer prospect communications. This template outlines what employers should collect and store from the previous provider:
Hi [Employer],
Occasionally, employers may require access to payroll information from previous years. To facilitate this, [Partner] recommends collecting and securely storing the following information in a cloud-based storage area spanning the previous four years.
This includes data necessary for audits and requests for historical pay records. It's crucial to bear in mind that these reports contain personally identifiable information, and it is important to safeguard their content. Consider enhancing security measures by encrypting or password-protecting this information.
- Payroll Registers or Summaries: These documents provide a summary of payroll activities for each pay period, including employee wages, hours worked, deductions, and taxes withheld.
- Employee W-2 Forms: W-2 forms are issued to employees each year, summarizing their annual earnings, taxes withheld, and other relevant information. Make sure you have copies of W-2 forms for each employee for the previous years.
- Tax Filings: Retain copies of payroll tax filings, including Form 941 (Employer's Quarterly Federal Tax Return) and Form 940 (Employer's Annual Federal Unemployment (FUTA) Tax Return), for each quarter and year as well as any applicable state payroll filings, for each quarter and year.
- Employee Demographic Records: Maintain records of employee information, such as names, addresses, Social Security numbers, and employment dates. This information may be needed for tax filings and employee inquiries.
We're committed to ensuring your success moving forward, and storing this data will provide peace of mind for any potential future requests. We're eager to get started!
Sincerely,
The [Partner] Team
FAQs
What if I didn’t keep my previous payroll records?
When switching providers, most payroll services can still provide this information even years after canceling the service. However, fees may apply. Therefore, it's advisable to collect this information to avoid potential costs or wasted time in the future.
How does the Partner address concerns regarding data security and accuracy?
Assure customers that their data privacy and security are top priorities for your company. Explain the measures in place to protect sensitive information and how storing additional data could potentially impact security measures.
Prior year history is very important to us. Why should we still choose Partner payroll product?
You’ve built a great product and your employers should see the benefits of what you have to offer first. Emphasize the advantages of your product to employers. With a thorough Needs Analysis and pain point extraction, your employers will be able to have a clear understanding of the ROI from moving to our Partner's payroll product from a time and dollar savings perspective. While being empathetic towards the employer needing to store previous payroll history, the time and dollars saved will be worth the storage concerns. Consider offering a demo and use this to your advantage. This allows them to experience the value it offers firsthand and may help alleviate concerns about missing features.
Last updated on April 24, 2025