W2 Issues/Concerns


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Conquer that Mountain of Paperwork with an HR Expert

One of the main chores any small business owner faces is the mountain of paperwork that goes with human resources functions. From payroll and compliance reporting, the benefits selection process, timekeeping and workplace safety.

We are adding a section to our A-Z guide about HR forms, including what they are, why they are important, and why they need to be filled out properly (and filed that way too!)

Drug Testing Consent Form

If you have a drug-testing policy at your business, you’ll also need a drug testing consent form to make it happen. Check with your state about workplace drug laws – and make sure that your company’s policies and procedures with regard to drug use is clearly outlined in your employee handbook.

Employee Grievance Form

Sadly, a suggestions box isn’t going to do it when it comes to collecting data on where you’re missing the mark as a business. You need to have a formal process (and one that is outlined in your employee handbook) for reporting AND documenting grievances between employees and other workers, customers, or anyone else they interact with as a result of conducting business. Further, you’ll need to be able to demonstrate that the situation was addressed, what steps were taken, and agreement that a resolution was reached, and then you’ll also want to hang on to all of that for up to six years.

Employee Handbook Receipt Form

We’ve told you a billion times that having an employee handbook is key to avoiding all kinds of lawsuits, but you’ll also need to go ahead and gather proof that you’re employees have actually received it and that they agree to the terms outlined within its pages. You’ll need to hang onto those receipts for the duration that the employee is at your company and for a period thereafter, and can only replace it as and when a new employee handbook is circulated that changes some of those policies.

Employee Performance Appraisal

You should have a standardized system – and related forms – to evaluate employees. Granted, the performance metrics for a manager will likely be very different to that of the executive assistant, but there still needs to be documentation that folks received a performance assessment and acknowledged the receipt of said review (even if they don’t necessarily agree with it). Once again, these should be kept on file for the duration of the employee’s time at the company or for up to six years following their departure to avoid any litigation down the line.

Employment Records

While this can typically be covered by last year’s W-2 or even payroll stubs, you do need to keep a record somewhere of how long an employee has worked for you, how much they have made, their hours, and their benefits. This data is used by state agencies to determine unemployment benefits and must be furnished upon request.

Employee Separation/Termination Document

So, you’ve decided to part ways. Regardless of who’s decision it was, there needs to be something to document the decision for that employee to fly the coop, including proof that both parties are on the same page about the departure, including what the company will be paying for (if anything) following the separation and for how long. Since these separations can be tenuous, we recommend keeping these documents for at least 5 years following the termination just to err on the side of caution.


All employees must have proof that they are authorized to work in this country. The form has two parts – one that they fill out on their own and provides documentation for, and a second part that you as the employer must sign to acknowledge that the information that they provided is appropriate and adequate. You don’t file this report with any one agency, but rather keep it in your possession should an immigration official ever request proof of your employee’s I-9 status. As expected, failure to appropriately complete this process can result in financial penalties, as well as potential jail time for higher-ups.

Job Application

You must collect an application for every employee that puts themselves up for a position at your company and you must keep it. Even if they don’t sit down for an interview, you have to have everyone fill out a formal application that complies with all federal and state laws to avoid any kind of discrimination lawsuit and keep it on file for a minimum of two years. Failure to keep these records could see you embroiled in a pretty miserable “he said, she said” lawsuit regarding your hiring decisions that could really bog down your business and your bank account.

Non-Compete Agreement

If you don’t want your employees bouncing over to competitors, consider making them sign a non-compete agreement as part of a condition of employment. Typically, these kinds of agreements go hand-in-hand with NDAs (outlined below) and can be in effect for a term of your choosing. Just be sure to hold onto these for the duration of the agreement to ensure that you are covered.

Non-Disclosure Agreement

If you have proprietary information or simply don’t want the details of your business shared outside of company staff, you’ll want to have employees sign a non-disclosure agreement. This legally binding document can protect against slip-ups or purposeful data sharing, as well as give you the rights to any products or ideas that said employees contribute during their time at your company.

State Withholding Form

This is a form that must be filed with the state in which the employee resides and is used to collect state income tax and/or allow the state to collect child support payments and other withholdings. For states that do have an income tax, you will also need to be sure to collect those taxes and send them to the appropriate state agency.


When you hire someone new, they must fill out Form W-4 before receiving their first paycheck. This form – which includes information on their marital status, number of dependents, and additional withholding amounts – is used to calculate withholdings for federal income taxes. Since this data can change, employees should update on an as-needed basis. In terms of how long you keep them, you need only retain the most recent one and can shred the old.

Workplace Safety Checklist/Inspection Reports

Keeping a safe work environment isn’t just a “nice” thing to do – it’s the law! Your business should have a workplace safety checklist and associated documentation to prove that your facility is up to code with the relevant federal, state, county and even industry standards. Failure to do so can leave you wide open to lawsuits should any employee – or visitor – be injured at your business.

Once you understand all the types of paperwork, be sure to develop a system to keep track of it all. A Professional Employer Organization can help set up a system tailored to your business. Learn how you can eliminate human resource headaches with one call.

HR Managers: Discover how to effectively tackle business challenges with a PEO
Small Business: Discover how Abel HR can help your business.

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