It's a good idea for an employer to maintain a personnel file and confidential file for each employee. Documentation of employment history, records of contribution and achievement, disciplinary notices, promotions, performance development plans, and much more, belong in a personnel file. Responsible, careful employers keep more than one personnel file, too, as each type of file has content that is appropriate for their purpose.
The employer has good reasons to keep several personnel files—some legal and some for employment best practices purposes. Documentation is needed so the employer has an accurate view of an employee's employment history. Documentation supports the employer's decisions and may protect the employer in a lawsuit—preserved correctly.