Workers Compensation Audit Checklist

Your insurer can conduct a workers’ comp audit either onsite or remotely, with an auditor analyzing payroll and employee classification data to make sure your risk estimates correspond with actual operations.

Make life easy for auditors by being prepared with accurate records for review. Achieve this task easily by gathering all of the needed data throughout your policy term.

1. Employee Information

Workers’ comp audits are intended to validate your payroll estimates and verify that every job function in your business is accurately represented. Being as transparent with your insurer during this process will make the experience smoother; keeping detailed, organized records throughout the year and gathering pertinent data will assist with this effort.

Be it voluntary mail audit or in-person visit with your agent, it’s always wiser to be prepared. Downloading the workers’ comp audit checklist will help keep your organized and make sure you have all the documentation needed for an accurate premium estimate. Doing this will prevent your company from over or underpaying their workers’ comp coverage costs as well as avoid penalties due to overestimating.

2. Payroll Information

Workers’ comp premiums are determined based on payroll and risk employees face on the job, so during an audit your insurance provider wants to verify whether your estimated payroll class codes cited on the policy are accurate as well as make sure any subcontractors hired have proper coverage in place.

Your insurance provider will send a workers’ comp audit worksheet. Fill it out completely and return it promptly – any incomplete audit worksheets could delay premium adjustments or increase policy costs. Also be ready to provide the auditor with any accounting records such as cash receipt journals, general ledgers or checkbooks along with tax reports such as employee W-2’s and 1099’s as well as state unemployment wage reports.

3. Job Descriptions

In the audit process, an insurance premium auditor will review your business’s job descriptions to make sure each employee is appropriately classified – this helps assess their risks, which in turn impacts your premium rate.

Therefore, it’s vitally important that payroll records remain up-to-date throughout the year and that changes are documented as they occur – this helps the auditing process run more smoothly while eliminating surprises for auditors.

Once your insurance audit is complete, they will send a Final Audit Statement outlining any adjustments (additional premiums due) or credits (refunds received). Your agent should have informed you how your workers’ compensation policy operates at its inception – but if not, ask now about what this entails.

4. Subcontractor Information

At any audit, it’s essential that you provide certificates for subcontractors or 1099 independent contractors you pay. Most insurance providers require proof that these non-employees were insured during your policy period.

Workers’ comp premiums are calculated based on payroll, class codes and risk; therefore, your insurance company estimates how many employees will work throughout the year to determine an accurate premium estimate, which they then compare against actual payroll during an audit.

Failure to comply with a premium audit could result in surcharges to your workers’ comp rate that increase total cost of ownership. Working closely with your agent helps ensure an efficient, accurate audit process.

5. Certificate Verification

Workers’ comp premium audits (also referred to as payroll verification) can take place either onsite or online and the more prepared your business is, the smoother this process will go. While noncompliance can be stressful, remember that noncompliance violates your insurance policy.

Make the auditor’s job simpler by maintaining clear and organized company records. Carefully review any worksheets your auditor prepares, and don’t approve those which appear incomplete. Also, if your business employs subcontractors or independent contractors, ensure you obtain Certificates of Insurance covering their work periods; this will prevent being charged for uninsured work performed by these individuals, which could quickly add up and drive up workers’ comp premiums.