Workers’ Compensation – How to Manage an Audit
Workers’ compensation is a required coverage for most businesses operating with 2 or more employees. The coverage was implemented in an effort to reduce the risk placed on the employer in the event of an employee loss resulting from employment. Premiums are derived from the amount of annual payroll paid for each class of work within the business (i.e. a clerical, hands on, etc.). In order to confirm that businesses are not over or under paying for coverage the carriers conduct audits that help them confirm the account is accurate.
The best way to prepare for a workers’ compensation audit is to practice good record keeping skills and correspond to company requests. Whether the audit is conducted by the actual insurance carrier or an independent auditor, it is always recommended to provide them any requested information in a reasonable time frame. An audit may require: descriptions of employee duties, payroll figures, contracted employment data or other tax information (Form 1099’s, IRS Form 941, or Employers annual tax return Form 944) be submitted for review.
The company then uses this information to match the numbers with the workers compensation application that was filed prior to the policy effective date. If these numbers correlate with one another then the audit is complete and the insured is clear. In the event of a discrepancy between payroll information provided and the audited data, a refund or request for excess premium will be issued. To keep from being charged additional premium, keep all employee and tax information current and organized and notify your insurance carrier of any fluctuations in your annual payroll figure.