Maintaining records may not be the most glamorous part of running a business, but it is undeniably one of the most important. Without an effective records management system, businesses risk costly consequences, such as non-compliance fines, operational inefficiencies, or lost time spent tracking down essential documents. As regulatory requirements evolve and compliance becomes increasingly complex, adopting modern, efficient record-keeping solutions is more critical than ever.
The Regulatory Landscape
Businesses today face a patchwork of record-keeping requirements at the federal, state, and local levels. Here’s a quick overview of just how much employers need to juggle:
- Fair Labor Standards Act (FLSA) violations remain a significant source of fines. In FY2023, the U.S. Department of Labor recovered $274 million in back wages, with compliance efforts intensifying into 2025.
- IRS penalties for late payroll tax deposits can reach 10% of unpaid taxes if overdue by more than 15 days. Misclassification of workers as independent contractors are also a growing compliance issue, potentially leading to significant fines.
- OSHA mandates the retention of certain medical and safety-related records. Employers must keep records of work-related injuries and illnesses for at least five years following the end of the calendar year that the records cover.
- IRS guidelines call for tax records to be preserved for a minimum of seven years, depending on the document type.
Recordkeeping errors and omissions pose an additional challenge, especially with the Department of Labor and IRS implementing stricter audit protocols. Companies face fines or even litigation for noncompliance with federal and state regulations. Failing to meet these standards can result in hefty penalties, lawsuits, or even reputational damage. For example, in 2023, multiple businesses were fined tens of thousands of dollars for incomplete or missing employee records during routine Department of Labor audits.
Employers are increasingly turning to comprehensive HR and payroll software to streamline compliance. Such tools help businesses stay updated on state-specific regulations, automate records retention, and ensure timely reporting during audits.
Why Records Management Matters
Improved compliance and risk reduction
Inadequate record-keeping leaves employers vulnerable to regulatory audits and legal disputes. Proper systems ensure businesses have the right documentation readily available to demonstrate compliance with laws like the FLSA, the Affordable Care Act, and tax regulations.
Operational efficiency
According to Gartner, on average, four weeks are lost each year, waiting on misfiled, mislabeled, untracked, or lost documents. That’s time businesses can’t afford to waste, especially in small and midsize companies where resources are limited. Digital systems streamline retrieval, reduce filing errors, and automate data organization.
Data security
Safeguarding sensitive employee and financial information is non-negotiable in 2025. With the rise in cybersecurity threats, digital records management platforms with encryption and secure access protocols offer peace of mind and ensure that sensitive data doesn’t fall into the wrong hands.
The Shift To Digitization
Recognizing the inefficiencies of paper-based systems, organizations are moving towards digitization. The federal government has already embraced this transformation, with agencies like the National Archives and Records Administration (NARA) transitioning to fully electronic records management. For businesses, digitization means:
- Automation of record retention and disposal: Tools that automatically schedule records for deletion after their retention period reduce clutter and ensure compliance with laws requiring timely disposal.
- Centralized data management: Instead of searching through scattered filing cabinets or fragmented software systems, digital platforms allow businesses to consolidate records in one secure, accessible location.
- Cost savings: While transitioning to a digital system may involve upfront costs, businesses save significantly in the long run through reduced storage, retrieval, and administrative expenses.
Why This Matters For Employees
Employees also benefit from proper records management. Accurate payroll records ensure timely and accurate paychecks. Access to well-maintained personnel files can help resolve disputes, verify employment for loans or housing, and provide clear records of benefits and leave balances. Efficient systems create a smoother, more transparent workplace for everyone.
How GMS Can Help
At Group Management Services (GMS), we understand how challenging it is to navigate the complexities of record-keeping. Our technology simplifies record management by consolidating all your data into one secure platform. Our systems keep you updated on state and federal compliance requirements, automate document retention schedules, and make accessing critical records effortless.
With GMS, you’ll save time, reduce risk, and protect your bottom line—so you can focus on growing your business instead of worrying about audits or misplaced files. Contact us today to learn how our solutions can transform your records management strategy.