Workers’ Compensation Checklist
Posted October 31, 2017
Unlike the estimated premium originally used to calculate your workers’ compensation insurance premium, an annual premium audit determines the accurate costs for the policy period. There can be vast differences between the estimated and actual premiums, so the audit process is extremely important. To bypass audit errors that tend to inflate workers’ compensation premiums, utilize this checklist.
You can also download a copy of this resource here.
Before the Auditor Arrives |
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Set up an appointment with the auditor and obtain a name and phone number in case you need to change your appointment. If you do need to cancel and reschedule, do so promptly. | xa0Ο |
Assign an employee as the auditor’s primary contact person.
oxa0xa0xa0 This individual should be familiar with all of the company’s departments and employees. oxa0xa0xa0 This individual should have knowledge of the payroll records that the auditor will be examining. |
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The contact person should review the prior year’s billing statements and auditor’s worksheets (if requested in the past) to understand the issues that may arise again. | xa0Ο |
Make sure that your records document the actual gross payroll spent by each employee in different workplace exposures if employees are involved in a variety of operations.
oxa0xa0xa0 Do not estimate payroll. Gross payroll should be provided with monthly and quarterly or year-to-date totals by employee and department. The type of work performed and the job duties by each person must be shown. This includes officers, members, sole proprietors and partners. oxa0xa0xa0 If your records do not break down payroll by different workplace exposures, the auditor will classify it under the most expensive classification applicable. |
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Have workers’ compensation documentation including certificates of insurance for 1099 independent or subcontractors showing that they have their own insurance (if applicable).
oxa0xa0xa0 If you do not have this information, get it before the auditor arrives. Otherwise, the auditor will charge your company the premium charge for this exposure. |
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Review payroll documents to highlight overtime pay for the auditor so he/she can discount it back to normal pay (allowed in most states’ workers’ compensation rules).
oxa0xa0xa0 The auditor does not have the time to perform the premium portion of your overtime pay, so records should be easily readable so he/she can do their job efficiently. |
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Review the classification codes assigned to your job contacts. Some individual jobs may be subject to different codes. If the auditor cannot locate this information, he/she will need to review your invoices. | Ο |
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When the Auditor Arrives |
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Give the auditor a well-lit, comfortable place to do his/her work, preferably onsite. If you must conduct the audit offsite, make sure your contact person is available for questions. | Ο |
Provide payroll records (as mentioned previously), which include payroll tax records (state and federal), your cash disbursement journal/checkbook, job contacts and general ledger. | Ο |
Once the audit is complete, ask for a copy of the auditor’s worksheets.
oxa0xa0xa0 This document is not normally provided but will be upon request. oxa0xa0xa0 These documents provide you with information concerning how the audit was conducted, how payroll numbers were derived and what codes were used. |
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Designate someone from the company to receive the audit worksheets, as the worksheets contain confidential payroll information. | Ο |
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After the Audit Process |
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Review the audit billing statement carefully and compare that document to your original policy.
oxa0xa0xa0 Balance the total audited payroll figures to the documentation provided. Check for any significant changes between the total payroll shown on the policy and the actual figures provided. oxa0xa0xa0 Compare the payroll by classification code on the policy to that on the audit. The payroll by classification codes shown on the audit should not contain any significant fluctuations in comparison to the policy. oxa0xa0xa0 Compare the experience modification factor on the original policy to the one shown on the audit. Make sure the auditor applied the factor for the audited period. oxa0xa0xa0 Review the rates charged for each classification code. There should be no significant changes between the rates on the audit versus the original rates on the policy. oxa0xa0xa0 There should be no changes to the Schedule Credit or Debit from the original policy. |
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Contact the auditor to discuss any questions that arise or make any necessary revisions. | Ο |