H&M was fined €35.2 million for illegally recording details about employees’ private lives and using that data when making employment decisions. This is an extreme example, but it highlights the risks you face if you don’t follow data protection regulations when storing employee data.
Dozens of other companies have faced smaller, but still significant, fines for mismanaging employee data and ignoring retention rules.
But compliance doesn’t need to be hard. In this guide, you’ll learn how to stay compliant, protect employee data, and structure your files and folders. You’ll also learn about a purpose-built tool that will do all the hard work for you.
What is a Digital Personnel File?
A digital personnel file is a secure, organized way to store employee documents and information. It includes everything from contracts and payslips to performance reviews and leave records. It is basically the modern, electronic version of the traditional paper-based employee file.
Which Documents are Found in a Digital Personnel File?
The required documents to keep depend on the country. Keep these items in personnel files if you operate under German law:
- Personal master data (name, DOB, contact info)
- Employment contract and amendments
- Payslips
- Vacation and sick leave records
- Performance reviews
- Training and certifications
- Warnings and disciplinary notes
Legal references:
For more details about this, read the EU’s General Data Protection Regulation and the German Federal Data Protection Act Section 26.
How Long Do You Need to Keep Digital Personnel Files in Germany?
How long you need to keep hold of data depends on the type of information it contains. According to the Handelsgesetzbuch (HGB) — the German Commercial Code — section 257, payroll and commercial records must be kept for 10 years. And employment contracts, timesheets, or similar HR documents must be kept for six years.
Which Documents are Found in a Digital Personnel File in the USA?
Keep these items in personnel files if you operate under US law:
- Job application/resume
- Signed offer letter or contract
- Form I‑9
- W-4 tax form
- Performance reviews
- Disciplinary records
- Compensation/pay history
- Termination documentation
Legal references:
For more details about this, check out the US Citizenship and Immigration Service’s retention and storage guidelines, IRS Publication 15, and 29 CFR Part 1602.
How Long Should You Keep Digital Personnel Files in the U.S?
Here are the retention periods for personnel data under US law.
- You need to keep Form I‑9 for three years after hiring or one year after termination (whichever is later).
- Keep payroll and wage records for three years.
- Store W-4 forms for at least four years after tax is paid or due (whichever is later).
- Finally, if you’re an employer with more than 15 employees, keep all hiring, promotion, and termination records for at least one year, or longer if under an Equal Employment Opportunity Commission investigation.
Which Documents are Exempt from Digital Personnel Files?
Not all employee-related information belongs in a personnel file. Avoid storing any data that isn’t directly relevant to the employment relationship. Storing excessive, sensitive, or informal data can expose your company to non-compliance with data protection and anti-discrimination laws.
Here’s what you shouldn’t include and why.
- Medical data should be stored separately in a secure, confidential file, as required by laws like the Americans with Disabilities Act (ADA) in the US and the GDPR in the EU.
- Political, religious, or personal beliefs aren’t relevant to job performance and are considered sensitive personal data.
- Informal manager notes, opinions, or gossip are unverified, potentially false, and biased. They should never be used in employment decisions.
- Non-role-related information / unrelated personal data (like marital status, sexuality, etc.) is irrelevant to job performance.
- Race/ethnicity information is only required for EEO-1 reporting in the USA, but must be stored separately from the main personnel file to avoid discrimination claims.
How to Organize Digital Personnel Files for Compliance
Now you know what to retain, let’s look at how to structure it so you can always find the information you need.
1. Use One Folder Per Employee
There’s an audit coming up, and you need a recently-terminated employee’s performance reviews. You find it, eventually, under someone else’s name.
Mistakes like this are stressful and annoying. But when it comes to employee data and audits, the stakes are higher than that. They’re a compliance risk. That’s why each employee should have their own master folder. It’s a simple way to stay organized, reduce access errors, and prevent data from being stored in the wrong place.
If you’re using a platform like Timebutler, you can automatically generate individual folders for each employee — every contract and document lands in the right place without manual effort. That saves HR teams hours of sorting and filing.
But you don’t need specialized HR software to stay organized. Even with general tools like Google Drive, OneDrive, or Dropbox, you can set up a consistent folder structure for every employee. For example, each employee’s folder could have subfolders for contracts, payroll, performance reviews, and training certificates.
2. Create Standardized Subfolders
Once you have a folder for each employee, the next step is standardization. Because when everyone’s file looks the same, the onboarding process for new employees is repeatable. You’re not relying on that one HR person who “knows where everything lives.”
Everyone can understand the structure at a glance. This means you can prepare for audits or hand over HR responsibilities without trying to read the mind of the person who organized the files before you.
Here’s a simple structure that should work for most companies:
- /Onboarding/ (offer letters, signed contracts, Form I-9)
- /Payroll/ (payslips, W-4 forms, compensation history)
- /Performance/ (reviews, promotions, disciplinary actions)
- /TimeOff/ (vacation, sick leave, absence notes)
- /Certifications/ (training records, professional licenses)
- /Legal/ (warnings, termination letters, sensitive correspondence)
With consistent subfolders like these, you always know where to file and find the right doc.
3. Use a Consistent File Naming Convention
Think about this: you need to pull up a termination letter from six months ago. You open the folder and see a jumble of files like Final_Notes_v2_FINAL_(USE THIS ONE).pdf. Which one is the real document? You’ll probably waste time opening several files before landing on the right one.
Now flip that scenario. Every file in your system follows the same clear, predictable pattern. Instead of detective work, you just type the employee’s name into the search box, and the exact file you need pops up instantly.
That’s the power of a consistent naming convention. It transforms a chaotic system into a searchable, scalable, and stress-free one.
A simple but effective file naming structure could look like this:
Lastname_Firstname-DocumentType-YYYYMMDD.pdf
For example:
- Smith_Anna-Contract-20240115.pdf
- Garcia_Juan-PerformanceReview-20240630.pdf
When combined with your standardized subfolders, this approach ensures:
- Clarity: Anyone on the HR team can recognize what a file is without opening it.
- Searchability: Files appear in logical order when sorted by name or date.
- Compliance: Documents are easy to retrieve during audits or legal checks.
It’s a small habit that pays off enormously. Your future self (and anyone else who needs to navigate the system) will thank you.
4. Add Metadata Where Possible
Metadata is data about your files (like document type, employee ID, or department). It helps tag files with descriptive and searchable terms, so you can quickly filter, search for, and find documents.
Here are some helpful tags to include:
- Employee ID
- Department
- Start date
- Document type
- Retention length (e.g., “3Y-Payroll” or “6Y-HR”)
As your team (and their stored data) grows, metadata helps you and your team find what you need in seconds.
Example employee folder
Employee: Marvyn Miller – Marketing Specialist
Folder: /Employees/Marvyn_Miller/
Subfolders and contents:
/Onboarding
Marvyn_Miller-EmploymentContract-20240110.pdf
Marvyn_Miller-W4-20240110.pdf
/Performance/
Marvyn_Miller-Review-Q2-2024.pdf
/Payroll/
Marvyn_Miller-Payslip-202404.pdf
/Certifications/
Marvyn_Miller-SEO-Certificate-2022.pdf
How to Protect Your Digital Personnel Files
Organizing employee data is only one part of the job. The other is making sure that the data stays safe and sensitive information doesn’t fall into the wrong hands. Here’s how to do that:
1. Control Access
Not everyone needs to see everything. Only give data access to the people who actually need it.
- HR has full access to the system (because they run it).
- Managers can see documents tied to their direct reports. Not everyone in the organisation.
- Employees get view-only access to their own records.
2. Separate and Protect Sensitive Files
Some documents require extra care because they contain legally protected or highly sensitive information. You should:
- Keep Form I‑9s, medical documents, and accommodation requests in clearly labeled and separate folders.
- Limit access strictly to HR administrators and legal counsel. No exceptions.
- Avoid storing sensitive data in shared folders.
3. Secure Your Digital Personnel Files and run regular audits
Even the most organized system can be vulnerable if security and oversight are neglected. Accidents, breaches, and errors happen. What matters is how well you’re prepared. To protect your digital personnel files, focus on these essentials:
- Use encrypted cloud storage so files remain both accessible and secure.
- Require multifactor authentication (MFA) for admin-level users. Passwords are easily —a nd often — compromised. MFAs stop one weak login from putting your entire system at risk.
- Maintain access logs and audit trails to track who accessed, changed, or deleted files.
- Schedule quarterly audits to spot missing or expired documents before they become compliance issues.
- Run quarterly audits. Use compliance audit templates or built-in platform checklists to save time and keep reviews consistent.
- Enable cloud backups with version control so you can roll back to earlier versions if something goes wrong.
- Confirm off-site redundancy if you’re not fully cloud-based, ensuring files aren’t lost to local disasters.
- Test your recovery process regularly to guarantee you can actually retrieve files when needed.
Organize Digital Personnel Files for Compliance in Timebutler
Managing employee records doesn’t have to be a headache. With Timebutler, you get a secure, centralized system built to handle the entire lifecycle of digital personnel files. It’s fully customizable to match your business needs, compliant with GDPR and BDSG, and designed to make HR recordkeeping effortless.
From quick data import to granular permission controls, Timebutler ensures the right people have access to the right files. Filtered views and real-time overviews mean you can instantly see what’s complete, what’s missing, and what needs attention, without digging through endless folders.
Ready to take the pain out of personnel file management? Start your free Timebutler trial to implement a secure and compliant HR file management system.
