• July 15, 2020

How to Prepare for Workers’ Compensation Audits

How to Prepare for Workers’ Compensation Audits

How to Prepare for Workers’ Compensation Audits 1024 602 Patrick J. Thomas Agency

Workers’ compensation is a valuable piece of commercial insurance that nearly every business can benefit from holding. It protects the wages of employees in the event one of them is unable to work due to a workplace incident. It also helps businesses provide more value to their employees while protecting their financial assets. 

Most businesses who obtain workers’ compensation simply obtain the policy and don’t think about it until they use it, and many businesses forget about one crucial part of carrying the policy: the workers’ compensation audit. 

What is a Workers’ Compensation Audit?

A workers’ compensation audit is a mandatory audit that is performed by insurers. Businesses must reply to these audits, and their purpose is to ensure that the business is not overpaying or underpaying when it comes to their premiums. This is determined by verifying the company’s payroll and ensuring that the business is properly classified. 

These audits are generally written into the policy and are contractually obligated. 

What Happens During a Workers’ Compensation Audit?

Audits are usually scheduled by the insurance company and can be conducted in person, by mail, or over the phone. During the audit, the insurance company will generally ask for a series of information that the business must provide. This information can include: 

  • Accounting documents 
  • Tax forms (W2s, 1099, the Employers Federal Tax Return, etc.) 
  • A description of the business 
  • Employee job descriptions 
  • Payroll records 
  • Cash disbursement records 
  • Payment records to subcontractors or independent contractors 

The insurance company will do most of the work during the audit, the business should just be prepared to provide all the applicable information as completely and honestly as possible. 

Mistakes that Can Be Made During an Audit

Even if you’re trying to be as honest as possible, there are several mistakes that you should avoid making when it comes to a workers’ compensation audit: 

  • Failure to include deductions (pay that is not subject to workers’ compensation premiumsthis can include severance pay, double time, overtime, etc.) 
  • Forgetting to include all necessary paperwork. Double check with your auditor to see what they require 
  • Improperly classifying employees 
  • Not reporting subcontractors or independent contractors 

The Results of the Audit

Auditors will provide you with the results of an audit, which you can contest if you feel that they do not accurately reflect your business and employees. If you want to contest the audit, you can contact your insurer with documentation to prove your claims. These disagreements can include classification of employees, incorrect payroll figures and many other things. 

 

Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.

 

Need assistance with workers’ compensation insurance? Contact the commercial insurance experts at The Patrick J. Thomas Agency.