The determination of the length of the period while employers were required to retain and store employment-related documents was a problem issue for years.
The generally accepted retention period used to be 50 to 60 years for documents created during, and in connection with the termination of, the employment of an employee, although this was not a specific requirement stated in any statute, including social security regulations and the Labour Code.
This unsettled issue was finally regulated in an amendment to the Act LXXXI of 1997 on Pension Coverage, which took effect on 23 December 2018. Under the amendment, an employer is required to retain all employment and social security documents associated with each current and former employee for a period ending five years after the employee reaches retirement age. For example, the documents pertaining to an employee who was born in 1990 will have to be retained until 2060, provided that the employee retires at the age of 65.
It is important to clarify what qualifies as an employment and social security document. The relevant provision states that all documents that are associated with the service time and the income that will be used in the calculation of the pension of an employee must be retained, and therefore such documents include, without limitation, the employment contract and all of its modifications, payroll records, and certificates issued to the employee annually and upon the termination of the employment. Additionally, it also advisable to retain a copy of the form entitled “certification of social security insurance and health care services” (social security booklet).
The Act on Pension Coverage also addresses the situation where an employer is dissolved without a legal successor (e.g. in a voluntary or compulsory liquidation). In that case, the obligation to retain the documents will still apply, and the location where the relevant employment and social security documents are stored must be reported by the employer to the pension administration authority that has jurisdiction in the area where the employer’s registered office or branch office is located.
An employer may be fined if it fails to comply with its obligation to report the above information or to retain the relevant documents.
It is important to note that the tax returns filed by employers electronically every month do not mean that the employer has complied with its document retention obligation.
Unfortunately, the regulations do not state whether the new rule should also be applied to documents created before 23 December 2018, and therefore, in the absence of transitional provisions, such documents continue to be subject to the previous rules, which were not clear about the obligation to retain these employment and social security documents.
In connection with the retention of the documents, special attention must be paid to the General Data Protection Regulation (GDPR), which has been in effect since 25 May 2018. Under the relevant rules of the GDPR, documents that include personal data may only be retained for as long as it is required under law. In practice, this means that employers must keep separate records of when the mandatory retention period for each employee expires, and when it does expire, they will not only have the option but the obligation to destroy the documents without delay.