What is the purpose of keeping payroll records?

The purpose of keeping payroll records primarily serves to comply with legal requirements. Various laws and regulations at both the federal and state levels mandate that employers maintain accurate payroll documentation. This includes records of hours worked, wages paid, and tax withholding. These records are crucial during audits and can also protect the business from legal disputes or claims regarding wage discrepancies or labor violations.

Although tracking employee performance, monitoring overall business expenses, and enhancing employee satisfaction may be beneficial outcomes of maintaining payroll records, they do not represent the primary obligation or purpose. The legal framework necessitating accurate payroll records establishes compliance as the foremost reason for maintaining them, ensuring that businesses adhere to employment laws and regulations.