Can an Electronic System Replace Paper Employee Files?

As we move closer and closer toward the goal of becoming paperless in the digital age, many HR managers wonder if this is even an attainable goal. Aren’t there just some employee files that must (or ought) to be kept as original paper documents?

There are a few facets to this question: convenience and efficiency, legality, and practical applications. Let’s take a look at each of these considerations and how they might affect your organization’s transition to electronic files.

Convenience and Efficiency Considerations of Electronic Employee Files

There’s little question that moving away from a paper-based filing system can result in greater convenience and efficiency. There are numerous benefits to electronic storage of employee files:

• The space savings alone can be significant. Paper-based filing systems take up a lot of room, especially when you factor in the files that must be kept even after an employee leaves. Additionally, some files should not be kept together, such as personnel records and medical files. (Medical files may be necessary if an employee has a medical condition necessitating leave, among other reasons.) This means that paper storage takes up even more space—requiring at least two separate spaces for files to be stored.
• Going paperless can be a sign of an organization’s dedication to sustainable practices.
• After the initial financial investment for new systems, electronic records cost less to maintain in the long term. This is due to reduced paper and ink usage as well as reduced storage fees and simpler document maintenance.
• There is less risk of electronic files being irreparably damaged—especially since electronic files can be backed up in multiple (virtual) locations.
• Electronic files can be easily stored together—even when created in different locations. This reduces redundancies and also makes it easier for managers to keep employee files in the same place that HR keeps them, when appropriate.

Legal Concerns of Electronic Employee Files

From a legal standpoint, there’s actually little concern. As long as necessary documents can be produced and printed when requested and/or required (such as during an audit), there’s typically no reason to keep the originals or use paper when digital means are available. That said, there are several important considerations from this perspective:

• It is important that some documents have time and date stamps that reflect the original creation date—and that the creation date remains visible and unchangeable even with future revisions. Employers will need to take this into account.
• It may be beneficial to document who has accessed a file over the entire time the file is kept.
• Employers need to consider the legal requirements for files and databases when creating any new electronic system.
• The format used should maintain the integrity and authenticity of the documentation. There should be no easy ways to falsify records.
• The printed versions should be legible and contain all information in an easy-to-read format.
• The documents need to be easily searchable in order to be immediately accessible when needed.
• In some cases, the employer may still need to have paper copies of documents, such as notices that are required for employees who do not have access to the electronic versions.

Practical Considerations When Using Electronic Employee Files

From a practical standpoint, many employers are finding that switching to a primarily electronic filing system is beneficial. It’s not always without hiccups, but such a system can be implemented and maintained effectively when it’s well thought-out in advance. Some organizations have opted to still use paper documents, but then scan those documents into an electronic employee file and tag them (or otherwise make them searchable).

Here are some other practical considerations when implementing an electronic or digital employee file system:

• There should be multiple backup systems in place so that files can be accessed at any time—even during an emergency or power outage. (This might mean having server access from multiple locations and having more than one form of backup in case of a system crash.) There should also be backups in different locations in case the original documents/initial scans are destroyed.
• The system will need ample safeguards to ensure employee privacy and data security.
• The system needs to have limited access, such as via password protection. It must be clear who has access to which files. This includes ensuring that certain files are kept separate for privacy purposes. (For example, even if a manager should be able to see some personnel records, it does not mean he or she should be able to see all records for an employee. Records that contain private information and records that contain information that pertains to protected class inclusion should have additional safeguards or further limited access.)
• Document retention rules still apply, and companies may need to implement new procedures to safely purge unnecessary records without affecting current records. This also goes for procedures when there is pending litigation—companies need to modify procedures for electronic document retention/destruction during these situations as well.

Has your organization made the move to go paperless with the majority of employee files? What concerns have you encountered, and how did you manage them?

**This article does not constitute legal advice. Always consult legal counsel with questions or concerns.**

About Bridget Miller:

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.