This does not imply that employers can keep information about employees in India only as long as it is a legally justified specific, lawful purpose. The Indian law does not allow storing of employee data indefinitely with or without consent after the completion of the reason why the data was being collected.
The law that regulates the retention time of the employee data in India is intentional and supported by law. It mandates employers to strike a balance between the requirement of maintaining records as mandated by the labour and tax laws and the requirement of minimising and deleting data as mandated by the current data protection law.
How long can employers legally store employee data in India?
The storing of employee data in India by employers can only be undertaken within a time limit of the period of such data is in circulation to serve a lawful and detailed purpose or in order to address a statutory retention requirement. As long as that purpose no longer exists, further storage would be against the Indian data protection rules.
In India, there is no single law that specifies the employee data retention period. Rather, Indian law uses a purpose-limitation and necessity-based strategy that dictates the duration of time that employers could retain employee information in accordance with the purpose of data collection and the law.
Retention of employee data is legally supported
The storage of employee data should be done only when it is directly associated with a legitimate legal or operational need such as:
- Adherence to labour, tax and social security regulations, which are the part of the legal retention of employee records in India.
- It can be performance, administration or legal termination of employment contract.
- Audit, inspection or control verification requirement.
- Defence of claims of law or the administration of existing litigation.
All of the said obligations influence HR data retention requirements in India and establish the external limits of the legal storage.
Retention would be illegal when it is illegal
Retention is not in compliance when:
- The initial reason data were collected has been achieved.
- There is no legal or regulatory requirement of further retention.
Information is stored only in case it is convenient or required in the future.
At this phase, the employers must initiate the retention and deletion of employee data in India to ensure compliance in the storage of employee data in India.
What are the Indian laws regulating the duration within which employers can maintain employee data in India?
No specific statute can give a general retention period. Rather, compliance of data storage of employees in India is controlled by conflicting laws.
The most important legal tools are:
- Act Of 2023 Digital Personal Data Protection (DPDP Act).
- ITA, 2000 and SPDI Rules, 2011.
- Labour legislations like the Code on Wages, EPF legislations, ESI legislations.
- Taxation Income tax and company accounting.
These laws, when combined, will construe legal retention of employee records in India through integration of purpose based retention and the compulsory timelines required by law.
What kind of employee information can employers retain in India?
Employers may retain employees information in India as far as the information is essential, legal and as it relates to a purpose in employment. In Indian law, it is prohibited to collect employee information in blanket or excess amounts than it is necessary to collect to comply, administer or defend against legal claims.
The extent of data allowed has a direct influence on the employee data retention period in India, as the Indian law of employee personal data retention only allows data obtained within the law to be legitimately retained.
Fundamental rule on acceptable employee information
The Indian data protection and labour laws are based on necessity. Employers can gather and store only that data of employees that is:
- Closely related to employment relationship.
- Stipulated in statute or contract.
- Required to be compliant, administered or disputed.
This principle forms the basis of the retention of employee records in India as well as the rest of employee data storage compliance in India.
Types of employee information that employers are allowed to store
Employers are permitted to retain the following types of employee information subject to purpose limitation and retention controls;
- Contact details such as name, address, date of birth and identification provided by the government, which must be used to verify the identity.
- Documents on employment, including appointment letters, contracts, role descriptions and history of service.
- Payroll and compensation records, including wage information, bonus records, and reimbursement information, which comprise of statutory requirements in the retention of HR data in India.
- Tax and social security documents, such as provident fund, ESIC, gratuity and income tax related documents.
- Attendance, leave and discipline records, which are kept as required by regulation and internal governance.
- Records of performance, appraisal and compliance where the same relate to employment administration or statutory obligation.
The categories have to be evaluated separately to establish the duration on which the employer can hold employee data associated with the same.
More stringent control categories of data
Some types of data about employees are of a sensitive nature and require increased attention:
- Health and medical records
- Data on biometric or surveillance.
- Other financial accounts information other than the payroll requirement.
The storage of the same data should be highly limited in terms of time and plain deletion cues must be included in the retention policies and deletion of employee data in India.
What does the DPDP Act, 2023 mean to the maximum length of time employee data can be stored in India?
The main consequence of the DPDP Act, 2023 in India is that the retention period of employee data has been restructured with rigorous purpose and deletion requirements.
Under the DPDP Act:
- The information to be kept about employees can only last as long as the reason persists.
- Allowing others to save it indefinitely is not allowed by consent.
- Fiduciaries of data have to destroy or anonymize data after it is no longer legal to retain.
This renders the employment of employee data in India as a legal requirement as opposed to a policy decision.
Does the Indian law provide a prescribed period of statutory retention of employee data?
No. There is no set duration of retention that is prescribed by the Indian law with regard to all the employee data.
Instead:
- There are minimum statutory retention periods of some records.
- The other records have purpose-based retention principles.
- Retention can be furthered where investigations, audits or litigation are pending.
As such, the Indian employee data retention duration depends on the legal requirement and type of data.
What needed duration of storing employee data after termination or resignation by the employer?
When the employment ends, employers can only keep employee data in India when they have relatively justifiable reasons to do so.
The post-employment retention would be allowed in cases where:
- Record keeping requirements remain statutory.
- There is a threat of the employment confrontations.
- The pending audit is tax, social security or regulatory audit.
Retention should end when these purposes become exhausted. The further storage, which is only for reference, is apparently a violation of compliance of employee data storage in India.
How long should HR and payroll records be retained under Indian labour laws?
Even when employment relationship is terminated, Hr and payroll records should be kept so that the minimum time required by the relevant labour, tax and other social security laws. These books are a legal exemption to instantaneous deletion and directly decide on the duration the employee information will be kept in India.
Legal retention of employee records in India under this respect is not by practice, but by the obligatory compliance regulations that employers have to follow.
Why HR and payroll records require longer retention
Regulatory inspections, audits, and dispute resolution are all part and parcel of HR and payroll records. The Indian labour laws insist that employers keep such records in order to prove their adherence to wage, social security and employment standards.
Consequently, the duration of retention of employee records in HR and payroll systems is a statutory and is formed of the essence of the HR data retention regulations in India.
What is the duration required to keep the payroll and wage records in India?
Payroll and wage records should be as a rule stored between three and ten years, based on the legislating law and the type of record.
Retention obligations are found in statute under:
- Minimum wage, payment of wages and wage frameworks wage and payroll legislation.
- Regulations of Provident fund and Employees State Insurance.
- Audit and income tax regulations.
These archives are core to the compliance of the Indian employee data storage since the deletion could be premature, and thus, it could be a statutory offense.
How many years should attendance, leaves and disciplinary records be kept?
The attendance and leaves records are usually supposed to be kept at least 3 years in line with the inspection and enforcement schedules of the labour laws.
Disciplinary and misconduct records can be held:
- During the whole period of employment, and
- To a reasonable time after the termination, where required to defend against legal claims or regulatory action.
This retention should not go against employee retention of personal data as provided by the Indian law and should not be either indefinite or excessive.
Deletion requirements and retention requirements
Where statutory retention is applicable, the employers shall:
- Keep only records which have been expressly demanded by law.
- Duplicate/ unnecessary storage should be avoided.
- Institute organized retention and deletion of employee records in India after the statutory period has been met.
In India, the compliance of employee data storage in India is compromised by the failure to delete the HR and payroll data after the legal retention period and presents the employers with regulatory risk.
How can employee data retention be illegal in the Indian law?
Retention will be illegal where:
- The initial reason as to why it was collected is no longer there.
- No law stipulates the retention.
- The information is not recorded with any justifications.
Further storage at this point is not only against the compliance with employee data storage in India, but also the requirements of DPDP Act.
What can employers do to develop lawful employee data retention policy in India?
Only mapping of employee data to statutory requirements, restrictions in retention to legal purposes, and implementation of deletion controls based on time will help employers to establish a legally compliant policy. A policy not specifying the retention boundaries or deletion conditions does not comply with the requirements of employee data retention period in India.
A compliant policy is a legal retention of employee records in India, which is one of the fundamental requirements of the continued compliance of data storage of employees in India.
Fundamental goal of employee retention policy
The main objective of employee data retention policy is to make sure that:
- The data of the employees is stored up until the time it is legally necessary.
- Retention is justifiable in cases of audits, inspection or review by regulators.
- The deletion automatically occurs when the legal retention is terminated.
This framework directly regulates the retention period of employee data by the employers as per the Indian law.
What should a retention policy that is compliant entail?
An acceptable policy should be auditable, purpose-fulfilled and statute-mapped. At the least, it must include the following components:
- Classification of the employee data according to its purpose e.g. payroll, tax, social security, disciplinary and performance records.
- Retention of each category has legal basis, which is in line with labour laws, taxation or contractual need.
- Specified retention periods, which are unambiguously pegged to statutory time limits and regulatory guidelines.
- Deleting and anonymising after the lawful retention period has expired.
- Control and access controls to eliminate illegal or over storage.
All these are the elements that take care of HR data retention needs in India.
What are the timelines to be used in retention?
The retention schedules cannot be arbitrary. They must be determined by:
- Relevant labour laws and employment laws.
- Tax and social security laws
- Time constraints on claims concerning employment.
Retention after such limits is against employee personal data retention in the Indian law and puts employers at the risk of regulatory intervention.
What is the way deletion and review should be against?
The policy should contain a requirement that:
- Data audits periodically to determine expired records.
- Moving or deleted documents or anonymised documents recorded.
- Enforcement of internal accountability.
This guarantees legal retention and deletion of employee data in India and elimination of untidy legacy data.
Frequently Asked Questions on Storing Employee Data in India
May the employers keep the data about employees indefinitely due to legal or audit reasons?
No. Employers cannot keep employee data indefinitely just to be ready to comply with the laws or audit. Only the time required by law or reasonably calculated to defend or to abide with an identifiable legal duty is allowed to be retained. Storing employee personal data after the statutory limitation periods or audit requirements have expired is a violation of Indian law employee personal data retention and contradicts compliance with the law of retaining employee data in India.
Is the consent of the employees sufficient to keep data past the statutory time?
No. Consent by employees does not exclude legal restrictions on retention. Information should be destroyed after the legal reason or required time of retention expires, despite consent. Consent cannot under Indian law justify excessive, purposeless or otherwise contrary retention of employee records in India.
Is it possible to save the data of former employees in order to use it at litigation or dispute?
Yes. The former employee information can be stored up to a reasonable period to defend or prosecute any legal actions, regulatory investigations or any dispute over employment. This should occur in proportion and to a limited extent to the pertinent records and in accordance with the duration within which employers are allowed to hold employee records to enforceable legal rights.
Are physical and digital employee records treated differently in the Indian law?
No. Indian law does not make a difference between digital and physical forms of retention obligations. The same things can be said about the two. Regardless of whether the records are in electronic or hardcopy format, it should be in line with the employee data retention time in India and deletion requests upon the lawful termination of retention.
Should multinational companies have dissimilar retention regulations to the employees based in India?
Yes. The multinational firms should implement India-specific employee retention regulations to the Indian-based employees. The policy of global data retention cannot prevail over the Indian labour laws and HR data retention laws in India and the local standards of compliance should regulate the retention and deletion policies of the India-based employee data.
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