The form usually shows the classifications as shown on your policy and asks for your actual payroll exposures for each class. These forms are basic but can be seriously confusing for someone who has not complete one before. If you have any questions about these forms it is in your best interest to contact the insurance company and ask them how to complete the form. Remember, the information you send back is what they will use for your audited payroll.

With this option, businesses report wages and pay premiums monthly, quarterly or semiannually rather than annually. This cuts down on discrepancies between the estimated payroll and actual payroll, increasing the accuracy of the premium. Before we hired Advanced Insurance Management, we were facing almost $40,000 of workers compensation premiums for my company that supposedly had one employee. I was facing the very real possibility of having to close my doors because of these bills. Not everything on your payroll is considered when calculating workers’ comp premiums. For example, you can deduct severance pay and portions of overtime pay .

#2: Uncover possible risks

Not reporting Workers Comp Audit to lower your workers’ compensation premium. Make sure you check your state’s laws to see if you need to report independent contractors. There’s no travel needed for these workers’ compensation audits. Once you send us your information, we’ll schedule the phone audit. Finally, if there are some missing certificates of insurance or other documentation is not available, it’s not the end of the world.

• If you don’t have certificates of insurance from them, but they did carry their own Workers’ Compensation insurance, make sure to get certificates before the audit.
• If not, you will likely be charged an extra insurance premium for the subcontractors that don’t have coverage.
• This document details who receive the benefits under the insurance policy.
• It is always a good idea to engage the auditor during the audit process and review any worksheets they prepare.
• Audits also ensure that sub-contractors had their own coverage in place.

The number of hours spent in each kind of work must be documented to correctly reflect the employee’s actual exposure to injury. Failure to keep payroll records that allocate the employee’s wages among the different classes will result in the employee being placed in the most expensive classification. Workers’ compensation insurance coverage provides benefits for workers who suffer injuries or illnesses in their workplace. These policies protect workers financially by paying for medical expenses incurred due to traumatic injuries, occupational diseases, or qualifying mental damages. Sometimes, a company may receive an audit bill that exceeds its capacity. Alternatively, an organization may overpay its audit dues, making it entitled to recover premiums.

The Workers Compensation Audit: What It Is & How to Prepare

Refers to a percentage discount based on the size of the total insurance premium volume or amount. Larger premiums will receive a greater percentage discount. This concept recognizes relatively less insurer expense in issuing and servicing larger policies. The premium discount is designed to distribute the cost of workers’ compensation insurance equitably among risks of all sizes. It ensures that larger businesses pay no more than their fair share of loss costs and insurance company overhead expenses.

For field audits, we generally complete them in around six weeks to three months. Small businesses with employees have the distinct honor once per year of being part of a worker’s compensation audit. Worker’s compensation is an insurance program that covers employees in the event they get hurt on the job. In North Carolina, worker’s compensation insurance is mandatory if a business has one or more employees.

The Fundamentals of a Workers’ Compensation Insurance Audit

You have a right to question an insurance company’s classifications and policy structure, or at minimum search their findings for abnormalities and errors. In the state of Minnesota, employers purchase workman’s compensation insurance from their chosen provider. As such, it’s only fitting that such policies protect both the employers and employees.

• For statement or phone audits of expired policies, we’ll typically notify you a week or two after your policy expires.
• Even if all the steps above are completed successfully, mistakes can still happen!
• Audits can be performed annually, quarterly or sometimes even monthly.
• A year-end final audit is really a verification of the payroll and subcontractor exposure to determine the final premium to be charged since the original quote was based on estimated payroll only.
• Remember, the insurance company wants to ensure their estimates match your actual payroll, which is why they’re requesting all these documents.
• A workers’ compensation audit is a checkup to ensure your insurance company has the most up-to-date information on you and your employees.