Company documents ought to be appropriately maintained for auditing and reference purposes. However, these records tend to outlive their usefulness after some time. So, it is important to formulate protocols to dispose of documents and data of no use and retain important records. The protocols ought to be outlined in a document retention policy.
An effective policy ensures that the company protects sensitive data from unauthorized access and complies with any legal and regulatory requirements while also clearing its file cabinets. Every organization should invest in a clear and detailed policy regardless of their industry, whether it is a school, company, medical facility, etc.
This article will educate you on what a document retention policy entails by discussing the components and procedures of creating a template for recording such protocols.
What is a Document Retention Policy and Why it is Needed
A document retention policy is a set of guidelines on how physical and electronic documentation is managed (i.e., from creation, storage, and destruction) within an organization.
It should adopt company-specific best practices and applicable industry and government regulations. Such a policy achieves two primary things – it ensures company records are not retained longer than necessary, and important data is preserved for legal compliance. This reduces the cost of storing records, protects the company from litigation and fines, and increases the relevancy of existing data.
Company records comprise corporate records, purchase orders, employee files, and legal and regulatory files. So, each company will have varying documents.
Examples of records that need to be collated include:
- Tax returns
- Purchase orders
- Operating document
- Meeting notes
- Social media posts
The policies of document retention can be standalone documents or part of the employee handbook. Then, after approval, it should be shared with all departments to ensure the guidelines are followed diligently.
Benefits of Creating and Implementing a Document Retention Policy
An organization can benefit from having well-defined and written document retention practices in multiple ways. Primarily, such policies will guide staff members on what to do with different documents under different circumstances.
Other benefits include:
- A policy for document retention improves the efficiency of managing files within the company. This is because it streamlines file management processes, such as access to records, by reducing file congestion and enabling quick retrieval of vital files. Consequently, this saves time and boosts productivity while reducing the resources needed to manage company files.
- Well-written policies promote a company’s compliance with government and industry regulations by ensuring that legally required documents are retained. This, in turn, mitigates legal risks such as litigation, fines, penalties, etc., and increases the efficiency of audit and legal proceedings as relevant documents can be retrieved in a moment.
- Additionally, the policy can be used to enhance data privacy and security by outlining protocols for storing and accessing sensitive data such as employee and customer SSNs (social security numbers), medical files, bank account numbers, etc. Consequently, this reduces data breaches and associated data litigations. This also promotes brand reputation and trust from stakeholders and clients. Implementing a document handling policy indicates responsible data management and ethical practices within an organization.
Document Retention Policy Template & its Basic Components
A template is a fillable document with entries for all the basic information needed to create a policy on document retention within an organization. However, it can be personalized by adding or removing components to make an organization-specific policy document. It is pre-made with the standardized framework that needs to be observed in preparing the associated policy. The blank document should be used as a guide during the preparation process in order to save time and effort.
Therefore, two organizations can have distinct templates depending on their size, industry, practices, and uniqueness. With that in mind, below are the fundamental components that must be present in a template to generate a comprehensive document retention policy:
This section of the template is used to introduce the policy by stating its primary objective and benefits. Some of the objectives that can be achieved through a document retention policy include:
- Compliance with applicable laws, industry standards, and regulations related to the policy. This prevents potential legal consequences and penalties.
- Increased efficiency and organization in document management and how this promotes access and quick retrieval of vital files.
- Improved management of legal and financial risks associated with poor document management.
- Enhanced protection of sensitive and confidential data by clarifying storage, retention, and disposal protocols.
The scope section of the template records the target audience of the policy. A policy can be made for specific departments or parts of the organization.
Common organization areas a policy for document retention may be applied to include:
- Departments or functional areas – These are the different sections of the organization, which include human resources, finance, operations, security, IT department, etc.
- Geographical coverage – Some organizations will have offices or premises in different locations. So, a policy can be made for each location or all offices.
- Employee coverage – A policy can apply to all parties that create, modify or interact with company records, including internal (employees) and external (contractors and third-parties) associates.
- Exclusions – The scope section can also enlist any departments or areas exempt from the policy.
A section for the types of documents subject to the policy should be provided in the template. This section should specify the documentation categories, document types, and document format (physical and/or electronic). Different categories of documentation are financial, legal, employee files, contracts, customer data, operational reports, and intellectual property. Document types within the financial category include cash flow statements, profit/loss statements, balance sheets, invoices, receipts, etc.
Different documents have to be stored for varied durations depending on the legal requirements, business needs, and industry standards. The template must therefore have a separate section for indicating this information. For each category and type of document, indicate the retention period and any events that may impact the retention periods of different documents. This section must comply with any applicable laws and guidelines. Different jurisdictions will have varying retention periods.
For example, in the US, roughly the retention period will vary as follows for the following documents; Tax records (7 years), employee payment records (3 years), background checks (5 years), and corporate files (permanent).
Important Note: Specifying the retention period prevents premature disposal or overdue retention of data and documentation since employees will know how long each document is valuable to the organization.
After the retention period expires, a document should be disposed of. The policy must thus specify the protocol for document destruction to ensure records are safely disposed of in accordance with data privacy and protection laws.
A good disposal protocol will specify the following:
- Disposal method – This clarifies the “how” of destroying documentation. Examples of disposal methods include shredding, incineration, secure erasure (electronic files), etc.
- Disposal location – The location indicates where documents selected for destruction should be archived, for example, in locked bins, secure storage spaces, or with certified disposal services.
This section can also specify any industry-specific regulations applicable to disposable records. A proper disposal procedure should prevent unauthorized access and mitigate the risk of data breaches.
The template should have a section to indicate the security level and protection measures of each document subjected to the retention policy. This protects data from unauthorized personnel, safeguarding sensitive and confidential files.
This section should state three things:
- The document classification, for example, internal-use-only documents, confidential files, public documents, and highly sensitive files.
- Specific security measures for each classification include password protection, restricted access, encryption, firewalls, and storage in secure servers or cloud storage.
- The access authorization indicates the personnel permitted to access different document classifications. Access will typically be based on the personnel’s job roles and responsibilities.
A thorough policy on document retention should specify staff members responsible for approving any deviations or exceptions to the outlined protocols. This is because, in some cases, protocols may have to be bypassed or modified based on circumstances.
Therefore, a template should have entries to enlist the name of the approvers, job titles, and their responsibilities, such as review requests, decision-making, or ensuring legal and regulatory obligations are fulfilled. This information lets employees know who to contact under specific situations. Then, the approval process needed to implement deviations must be defined. This may entail submitting a request or justifying the deviation to the respective approver.
This section is meant to outline any additional information relevant to document retention but not covered in the other sections of the policy. It is needed so as to ensure employees understand and interpret the policy correctly and consistently.
To achieve this, the appendix will include the following:
- Definitions of terminology, acronyms, and concepts discussed within the policy should be provided to help readers clearly understand the stipulations of the policy.
- References of support materials such as external regulation laws and industry standards that influenced the policy.
Given below are document retention templates:
Creating a Document Retention Policy for a Non-Profit
Non-profit organizations must also retain their documents under the Sarbane-Oxley Act (SOX). This regulation was imposed on non-profits in 2002. Therefore, a well-defined policy can help such organizations manage all their documents, including tax statements, payroll records, etc., in accordance with SOX requirements. While there are no specified retention periods for these documents, non-profit organizations are implored to follow guidelines stipulated for for-profit organizations.
Document Retention Policy Vs. Data Retention Policy
A policy on document retention is a compilation of protocols for handling (including creation, storage, retention, and destruction) different documents within an organization to prevent mismanagement of such records. This includes physical and electronic records such as financial documents, contracts, employee files, etc. On the contrary, a policy on data retention focuses on how data (structured and unstructured information) should be managed. This includes data stored in company databases, file systems, applications, data backups, archives, etc. This policy can include guidelines on data disposal, response to data breaches, and backing up and accessing data.
The retention policy for documents is based on industry standards and legal and regulatory requirements. Conversely, a data retention policy is influenced by data governance and protection laws, privacy and security concerns, and industry regulations.
A document retention policy factors in operational efficiency, an organization’s best practices, and legal and regulatory compliance obligations. However, a data retention policy will consider the data’s purpose, sensitivity, business value/utility, and consent obtained for data processing.
Frequently Asked Questions
The template for making a policy on document retention can be updated every two years. However, management can review its usage regularly to determine if it aligns with the organization’s policy.
Various types of documents have different retention periods. So, always verify the retention period of each document through the legal team, HR, tax, and financial advisors.
Multiple authorities use templates to create document retention policies. Examples include:
· Internal Revenue Service (IRS)
· Family and Medical Leave Act (FMLA)
· Federal Insurance Contribution Act (FICA)
· Employee Retirement and Income Security Act (ERISA)
· Occupational Safety and Health Act (OSHA)
· Americans Disabilities Act (ADA)
· Health Insurance Portability and Accountability Act (HIPAA)
· Fair Labor Standards Act (FLSA)
· Age Discrimination in Employment Act (ADEA)
· Civil Rights Act of 1964
· Federal Unemployment Tax Act (FUTA)
· Equal Employment Opportunity Commission (EEOC)