Preparing for an Annual Worker’s Compensation Audit

Your company’s actual workers’ compensation insurance premium is determined from the annual workers’ compensation audit conducted by the insurance company. This premium can change drastically from the estimated premium used to create the original policy.

These changes can be positive, but a lot of times they are negative and may not be accurate. For this reason, it is important to be prepared for the annual audit.

To streamline the process, assign one person as the sole contact for the auditor. This will eliminate mis-communication. Choose someone who is intimately familiar with all departments and employees, as well as the payroll records.

Have information about the specific job duties performed by a certain department or by individual employees handy. Anticipate all questions to gain advantage and ensure that you can provide accurate details to the auditor.

You do not want the auditor to make any assumptions because he or she will always choose the workers’ compensation codes that are more favorable to the workers’ compensation insurance company.

Request the work papers for the previous year’s audit for the contact person to review with your previous year’s audit billing statements. This will refresh his memory from the previous audit or show him the types of things the auditor is looking for (if this is his first time going through an audit). Either way, it is a good preparation tool, kind of like studying for a test.

Ensure that your payroll records clearly specify which hours were paid as overtime so that he does not confuse that pay with straight hourly wages. If your company uses subcontractors or independent contractors, make sure you have proof that they have their own workers’ compensation insurance. Without that proof, your premiums may go up, as you may be liable for their risk exposure.

If you use a staffing agency, those workers are employed by that agency and should be covered by the agencies workers’ compensation policy. Make sure your records clearly differentiate between workers, contracted temp workers, and independent contractors.

If you are in the construction industry, or similar, remember that you may use multiple workers’ compensation classification codes and assign one employee multiple codes. Documentation must show the actual hours employees spent in each of the different workplace exposures. Otherwise every employee will be put into the highest classification code possible.

It’s a lot to remember! Consider hiring a private auditing company to help prepare for your annual worker’s compensation audit.

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