Retention period: Overview, definition and example
What is a retention period?
A retention period is the amount of time a business or organization keeps certain records, documents, or data before destroying or archiving them. This timeframe is often determined by legal, regulatory, or business requirements and varies depending on the type of information.
Why is a retention period important?
Retention periods are important because they ensure compliance with laws and regulations, help businesses manage data efficiently, and reduce liability. Keeping records too long can create unnecessary storage costs or legal risks, while destroying them too soon might violate legal obligations or harm business operations. A clear retention period balances these concerns, ensuring that documents and data are retained only for as long as they are useful or required.
Understanding retention periods through an example
Imagine a small accounting firm that handles tax returns for clients. Regulations require the firm to retain client tax records for seven years to comply with tax authority rules. Once the retention period ends, the firm can securely shred the documents or delete the digital files to protect client confidentiality and reduce storage costs.
In another case, a healthcare provider must retain patient records for at least 10 years to comply with medical recordkeeping laws. After this period, the records can be securely archived or destroyed unless other laws or circumstances require their preservation.
An example of a retention period clause
“The Company agrees to retain all customer transaction records for a period of five (5) years from the date of the transaction, after which the records shall be securely destroyed in compliance with applicable data protection regulations.”
Conclusion
A retention period establishes how long records, documents, or data should be kept before disposal. It ensures compliance with legal and regulatory requirements, supports efficient data management, and protects businesses from unnecessary risks. Defining and following retention periods is essential for maintaining organized and secure operations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.