Workers Compensation Audits: What You Need to Know
Preparing for a workers’ compensation audit can seem overwhelming. If your business insurance provider requires an audit, you’ll need to prepare.
Fortunately, workers’ compensation audits usually aren’t too difficult to manage. Below, we’ll cover the important facts about them.
What is a Workers’ Compensation Audit?
Also called a premium audit, a workers’ comp audit is your company’s verification of its period payroll. Specifically, it’s the examination of the payroll period for your plan’s coverage. The overall amount paid out to your employees is one of the bases of your workers’ comp premium. During the audit, the payroll’s amount must receive verification.
What’s the Audit’s Purpose?
Audits help assure that the premiums employers pay for their workers comp coverage match their risks. Your insurance company will make sure you’re properly classified. It’ll also make sure your payrolls, used for rating purposes, have correct values.
If you have the wrong payroll classification, you might be spending the wrong amount on your workers’ comp. Insurers usually audit policies that have premiums greater than a specific value. $10,000 is the usual standard.
How Can You Conduct an Audit?
The auditing process can be fast and convenient. Normally, audits fall under three types. The type of audit you’ll need to do depends on three factors:
On-Site Physical Audits
Many audits can occur on-site at the business. If this is the case, an auditor will schedule an appointment with the owner. Then, the auditor will visit your location. The auditing process happens completely on the premises. It normally doesn’t need a follow-up.
Remote Physical Audits
You might get a letter asking for your company’s payroll records. These records can include your payroll journals, unemployment forms and federal tax returns. Once you’ve gathered them, send them to the audit department.
Telephone audits aren’t entirely conducted on the phone. First, you’ll receive an audit form to complete. Then, you send it to the audit department. Then, the audit department will contact you to talk about your operations and payroll.
Make sure you check the categorization for subcontractor employees before the auditing process. Otherwise, you might face overcharges. Review your audit work papers, and collect your payroll summaries. If you have your information on hand, your business insurance policy will be ready for anything.