Workers Compensation Payroll Audit Checklist Primex

An audit of workers’ compensation premiums is an intricate and time-consuming process, but to speed it up it helps to gather all payroll and subcontractor payment details together so it’s easy to locate.

An audit allows your insurance provider to check that the payroll and job classifications specified at the outset of the policy match up with actual job duties performed, leading to an adjustment in premium costs as a result of this verification.

1. Policy Summary
Your business insurance provider conducts a workers’ comp audit to review payroll records that were used to calculate its original premium quote and also to check that employees’ job responsibilities match up with those listed, assess non-insured subcontractors, and if any non-insured subcontractors have their own coverage in place. Therefore, it’s beneficial for everyone involved to have a spreadsheet outlining all job responsibilities as well as daily tasks they perform ready.

If your actual payroll and risk exposure matches up with estimates, a final audit statement from your insurance provider will detail any credits or refunds due to you from them. They may either mail this statement directly to your office, or arrange to visit personally to do an audit themselves.

2. Employee Information
Purchasers of workers’ compensation insurance agree to undergo a payroll audit at the conclusion of their policy period; your insurer then uses estimates to calculate premiums.

An audit involves an insurance company reviewing all of the wages paid to employees and how closely their actual payroll matches its estimate payroll; often times this leads to either higher or lower premiums than expected.

Make sure your payroll records include all the information required by an audit by an insurance provider, such as specific job duties of each employee and having current job descriptions written or updated as appropriate. In many cases, reviewing existing job descriptions or creating new ones may also be necessary for audits to take place smoothly.

3. Payroll Information
Your insurance policy outlines that to comply with payroll audits, you must provide your insurer with all of the appropriate records. These may include cash receipt journals, checkbooks, payroll and disbursement journals, profit and loss statements, profit and loss returns filed annually with the IRS (Form 941), state unemployment wage reports as well as individual earnings records at reduced rates as required for compliance audits.

Your workers’ comp premium audit auditor will want access to these records upon scheduling. Furthermore, they may ask if any classes that were incorrectly classified are corrected and what measures have been implemented as part of these corrections.

An annual workers’ comp premium audit should provide invaluable insights that improve payroll processes, reducing future errors while saving both time and money in the long run. It will also prevent major penalties being assessed by insurance providers such as higher premiums or noncompliance charges from becoming necessary penalties.

4. Certificates of Insurance
As a policyholder, you are required to submit information about your payroll during a workers’ comp audit. This verification serves to assess actual payroll exposures and establish whether premium adjustments need to be made. Furthermore, accurate time tracking and payroll documents must remain on file throughout your policy term; doing so allows your company to avoid penalties due to noncompliance when going through an audit.

Accurate payroll estimates will ensure a seamless premium auditing process and help prevent an unpleasant bill from your experience mod. Inaccurate estimates could result in adjustments which cause additional premium payments due or refunds owed, so insurance companies typically send out worksheets to sign with any necessary changes indicated on them.

5. Job Descriptions
Your workers’ comp premium is calculated based on payroll and risks encountered at work. An audit by your insurance provider will allow them to examine your business operations and everyone’s responsibilities to verify whether or not your estimates match reality. They may review job descriptions or request that you fill out a form detailing what everyone does; having up-to-date and comprehensive job descriptions makes the audit more efficient, so be ready for questions about them when conducting it.

Engage with the auditor in an amicable yet direct manner when responding to their inquiries. Be sure to read any audit worksheets they prepare and only sign them if you agree with their contents. For physical audits, meeting with their representative on site will be necessary.