May 7, 2025
Digital personnel files help HR departments streamline their document management. However, transitioning from analog to digital record-keeping comes with its own set of challenges. In this article, you will learn the steps necessary for a successful implementation of electronic personnel files.
Advancing digitalization is fundamentally changing HR processes. Modern software solutions make it possible to reduce manual tasks and optimize workflows. Personnel administration is one of the areas that benefits significantly from this development, as it involves many standardized processes that are particularly well-suited for digital tools. It is therefore no surprise that, according to the 2024 benchmarking study on the degree of digitalization in HR by *Personalmagazin*, personnel administration had the highest level of digitalization among all HR functions. This was driven in part by the growing relevance of digital personnel files: with a 73 percent adoption rate in 2024, they were the most widely used HR technology, representing an eleven percent increase compared to 2022.
These figures show that more and more companies are opting for electronic personnel files. However, simply using digital solutions does not guarantee efficiency gains. To fully realize their potential, you must choose software that meets your company's specific requirements. Equally important is a carefully planned implementation, where the system is introduced in a structured manner and employees are actively involved in the change process. In this article, we will show you how to achieve this.
A digital personnel file is an electronic alternative to the traditional paper-based personnel file. It allows for the centralized storage of all information and documents relevant to an employee's employment relationship. This includes general personal data, contracts, payroll statements, references, and application documents. The exact scope of the content may vary depending on the company.
Under Section 83 of the Works Constitution Act (BetrVG), employees have the right to view their personnel file at any time. Therefore, only documents that the respective employee has the right to view may be included in the personnel file.
There is no general obligation to digitize personnel files. However, according to Section 8 of the Contribution Procedure Ordinance (*Beitragsverfahrensverordnung*), certain documents that are typically contained in personnel files have had to be kept digitally since 2022. These include, among others, certificates from health insurance funds regarding the determination of compulsory insurance, as well as proof of nationality or parental status.
Until the end of 2026, companies have the option to apply for an exemption from this requirement from their responsible German Pension Insurance audit service. From January 2027, the aforementioned documents must be available in digital form for all employers.
Even though there is currently no legal requirement to digitize personnel files, switching to a digital solution offers companies many advantages.
As mentioned earlier, one key benefit is the gain in efficiency. Unlike paper files, where employees often spend a long time flipping through pages to find the information they need, digital files can be searched for specific content. HR staff can then use the time saved for more strategic tasks.
Then there is the benefit of flexible access. Unlike physical documents, digital personnel files can be accessed anytime and from anywhere. Multiple people can access a file simultaneously, which facilitates collaboration within the HR team as well as across departments.
Furthermore, using modern digital solutions can positively impact your employer brand, which is a key factor in attracting new talent. Existing employees also benefit from the implementation: they can easily view and update their personal data themselves, which improves their overall employee experience.
Another advantage is improved data protection. While printed personnel files carry the risk of being left out accidentally and viewed by unauthorized persons, digital solutions offer significantly more security. Through encryption technologies and customizable access rights, you can precisely control who has access to which information. This ensures data confidentiality and makes it easier for companies to meet data protection requirements.
Last but not least, switching to digital personnel files contributes to sustainability by reducing paper consumption. Fewer printed documents also mean less physical storage space is required, and the effort involved in archiving is reduced.
If a company decides to introduce digital personnel files, it should be checked at an early stage whether and to what extent the works council, if one exists, needs to be involved in the process. In principle, under Section 87 (1) No. 6 of the Works Constitution Act (BetrVG), there is a right of codetermination when technical devices are introduced that are capable of monitoring the behavior or performance of employees.
Whether this condition applies to the implementation of digital personnel files depends on the functional scope of the software chosen. While monitoring is generally not the goal, many digital personnel file programs offer evaluation features, such as absence analysis. Theoretically, these could be used for performance or behavioral monitoring.
To avoid legal risks, it is advisable to involve the works council and jointly develop a works agreement. This written agreement between the employer and the works council establishes a binding framework for the use of the digital personnel file. For example, it includes specifications for necessary security measures.
There are a multitude of digital personnel file solutions on the market, each meeting different requirements. Therefore, the selection process should begin with a needs analysis. This determines how many employees the system will be used for, which functional areas it must cover, and the volume of data to be managed.
The selection is made based on the results of this analysis. In addition to the company's individual requirements, several fundamental criteria should also be considered:
User-friendliness: The user interface should be intuitive so that all users can operate the system without difficulty. High usability not only increases efficiency in day-to-day work but also promotes employee acceptance of the new solution.
Compatibility: The software should integrate seamlessly into the existing IT infrastructure. This enables smooth workflows and avoids additional steps, such as duplicate data entry.
Scalability: To ensure the system continues to meet company requirements in the long term, it should grow alongside the business. This applies to the number of users and personnel files as well as the range of functions. Having the flexibility to make adjustments helps avoid costly and time-consuming system migrations.
Data security: Digital personnel files must meet high security standards to effectively protect sensitive personal data. This is the only way to maintain confidentiality and ensure compliance with legal requirements.
Before you can begin implementing digital personnel files, you must define responsibilities. Typically, employees from both the IT department and the HR department are involved in the process.
In addition, you should check whether the company's existing hardware meets the technical requirements of the chosen software. If adjustments are necessary, these should be made before implementation.
Once all requirements are met, the transition from paper-based to digital personnel files takes place in five steps:
1. Defining the folder structure: First, you define how the digital personnel files should be organized. You determine which categories are included in every file by default and which documents are assigned to them. It is important that the structure is consistent and easy for everyone involved to understand.
For example, a "Contracts" folder can contain all employment contracts and supplementary agreements, while a "Job Application Documents" folder can store resumes, certificates, or case studies.
A clear structure facilitates subsequent data migration and prevents the extra effort of having to sort files later.
2. Digitizing data: Next, all paper-based documents must be digitized. To do this, gather documents from all relevant areas and review them for relevance. Discard any redundant or outdated documents. Scan the remaining documents. Content from handwritten or poorly legible documents can be read using text recognition software. This step is particularly time-consuming when dealing with large volumes of data. To speed up the process, you can outsource the digitization to specialized scanning service providers. Some software vendors include this
service as part of their offering.
3. Data migration: Once digitized, the files are transferred into the new system. The scanned documents are assigned to the respective individuals and folders according to the previously defined structure. Data already stored digitally in other systems can be transferred via appropriate interfaces, if available.
4. Employee training: To ensure all employees can use the system efficiently after its introduction, training must be provided. HR staff working with digital files require an introduction to the structure, maintenance, and data-compliant use of the software. All other employees will be informed about how to access their personnel records and update their data.
5. Defining future processes: Finally, it must be ensured that all subsequent documents are also fully transferred into the digital files. To this end, it will be determined who is responsible for the digitization and filing of incoming paper documents in the future and the timeframe in which this should occur. This ensures that the personnel file remains up to date.
The introduction of digital personnel files can involve several challenges.
A common issue is compliance with data protection regulations. As mentioned during the selection process, a system should be chosen that meets high security requirements. Nevertheless, the responsibility for its data-compliant use lies with the company itself. Employers must ensure that only authorized persons have access to the files. Misconfigurations, unclear responsibilities, or insufficient training can lead to individuals accidentally gaining access to information not intended for them. Such breaches can not only damage employee trust but also lead to legal consequences.
Another risk lies in disregarding retention obligations for analog documents. To save space, it is tempting to destroy all original documents after digitization. However, some documents are subject to the written form requirement under Section 126 of the German Civil Code (BGB). Although digital documents are also considered to comply with the written form requirement under Section 126 (3) BGB, unless otherwise provided by law, original documents may offer greater legal certainty in the event of a dispute. Companies should therefore establish guidelines on which documents must be archived in paper form.
Technical issues can also arise, especially if companies lack the necessary equipment or expertise for digitization. Poor scan quality, for example, can result in important information being illegible or not correctly captured by text recognition software. This not only complicates the subsequent search for information but can also impair the evidentiary value of the documents. To prevent such problems, the technical equipment must be carefully checked and optimized if necessary in advance.
Furthermore, unclear processes and responsibilities often create challenges. They can lead to inconsistencies that require additional coordination effort and delay the entire process. This can be avoided through careful planning.
If a company lacks the necessary internal resources or expertise to counter these risks, it may be useful to bring in external support. HR software consultants can accompany the entire transformation process if required. Thanks to their experience with a variety of systems, they can find the solution that best fits a company's individual requirements. They are familiar with all the challenges that can arise during the transition and know how to correctly implement both technical and legal requirements. This allows them to ensure an efficient and legally compliant transition from analog to digital.
Many personnel documents are subject to statutory retention periods, regardless of whether they are in paper or digital form. Their duration depends on the type of document, potential limitation periods, and company-specific factors. Therefore, the deadlines for each document category should be checked individually.
For example, application documents must be kept for at least three months, as claims for potential discrimination under the General Equal Treatment Act can be asserted during this period. In the event of legal proceedings, the period is extended accordingly. If employees leave a company, their personnel files should be kept for at least three years. This period corresponds to the standard limitation period within which former employees can still assert claims. Many tax-relevant documents, such as payroll statements, must be archived for six years in accordance with the requirements of the Fiscal Code and the Commercial Code. For some documents, there is even a period of up to ten years.
In principle, personal data may only be stored for as long as is necessary for legitimate and required purposes. To meet this requirement, it is advisable to create a deletion concept. This specifies when, how, and by whom personal data is deleted after the respective periods have expired. To be able to prove compliance with statutory deadlines, all deletion processes should be carefully documented.
Transitioning from paper-based to digital personnel files offers companies many advantages, but it also comes with a few challenges. Careful planning and the involvement of external service providers can help you navigate these successfully.
As mentioned earlier, the majority of companies are already using digital personnel files, and this number is expected to grow. One reason for this is the legal requirements mandating the digital transmission of certain personnel data by 2027. Even if this initially only applies to specific documents, it could serve as a catalyst for many companies to accelerate the digitization of their personnel files as a whole. Especially since, as digitization progresses, it is likely that further regulations will be introduced that may eventually make the digital storage of all remaining documents necessary anyway.
Another factor driving the increased use of digital personnel files is the changing nature of work, particularly the trend toward remote work. This has created a growing need for secure, location-independent access to personnel data, which digital files provide.
Continuous technological progress is also helping electronic solutions become increasingly standard. New technologies like Artificial Intelligence (AI) are taking over tasks such as the automatic sorting of personnel documents, further reducing manual effort. By switching to digital personnel files, companies can use their human resources more efficiently and maintain their competitive edge, even in times of labor shortages.
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Florian Klages | Managing Partner
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