Workers Compensation Audits

You may or may not be aware, that your workers compensation premium is just an estimate. Sure, you faithfully paid your bills all year, even renewed your policy. Months after your policy expires, the insurance company can send you a bill for thousands of dollars. And can even send your business to collections, because you owe. So how does this happen?

Workers compensation policies are issued on payroll forecasts, but payment is due on actual payroll. And if you admit you can't document one of your subcontractors workers compensation polices, you could owe for them as well. So how do you avoid this? Be informed and document! First - be honest with your broker and help them write an accurate policy. Give them accurate payrolls based on history and expectation. Break out payroll by job duties and help your broker assign good class codes. This helps a good estimate be used for your policy and minimize audit premiums. If you over estimate, you can earn a refund - you will get your money back.

So what happens at the end of the year? You will either get a paper audit form or a "physical audit" where someone comes to examine your records. Do not staff out the audit. Call your broker first for advice. The auditor is looking for ways to grab your money - keep it! If you have employees with split responsibilities - you need to keep payroll records by job duty. In the office 4 days answering the phone and one day making deliveries? Document! There is no form for this, make your own. It will pay off.

Second, the auditor wants to see source documents. Quarterly and annual payroll tax records, payroll records. Know what you have - and know what can be verified. Most payroll reports are generated by employer internal reports. What you can document is the truth. Don't contradict yourself, and you will come out with a no surprises audit. Let your broker be your advocate, and they will tell you what your options are. Don't trust your broker that much? Call me.