Whenever I go to a new clients, one of the first things I do is take a look at their employee files as it tells me A LOT about how they've been running their HR function. One thing I often find is the paperwork upon paperwork that has nothing to do with the employees actual job.
All it takes is being burned once to make employer want to keep every piece of paper that has an employees name on it but that mentality will ensure the important stuff gets lost in their file.
When determining what's important to keep and what's important to shred, ask yourself the following questions.
Is it relevant to their employment status or performance?
If the document reflects some type of change in employment such as a rate of pay change of maybe a promotion from part time to full time, keep it. Also anything related to performance (i.e. performance eval, write up, award) you definitely want to keep that. It will help tell the story of employee's performance.
Is it medical information?
HIPPA is the lovely regulation that protects individuals or in this case, your employees medical information. Anything medical information about your employees such as Return to Work Notes, FMLA paperwork and pre-employment physical notes should all be kept in a separate medical file.
Is it potentially discriminatory?
My rule of thumb is that if the information aligns with any of the protected classes (race, religion, disability, etc), it should be kept out of the employee file unless it is relevant to their employment. For example, photo copies of ID's relevant to the I9 process should be kept separate from the employee file because an ID identifies someones race, gender, potentially their disability and even their place of origin.
Essentially as the employer you want to ensure that if a Manager was to be making a decision about an employee (performance, termination, etc.) that they can only reference employment related information. Everything else should be kept in a separate file.
I'm a big fan of only keeping what you need and I find immense joy out of shredding shit. Keep your employee files organized and clean so you don't end up looking like this trying to shred everything.