Tips to a Smooth Workers’ Compensation Audit

Workers' Compensation AuditAudits.  Nothing invokes beads of sweat on the foreheads of company owners faster than an audit.  It keeps hard working managers up at night with worry even if everything is in order.  “It won’t happen to me” they say, but then it does.  When it does, it is always a good idea to be prepared.  If you haven’t taken the time to proactively prepare for an audit throughout the year there are steps you can take once you are notified of your audit date.

Protecting yourself against paying any additional premiums after the expiration of your policy year is one major motivational reason to do your due diligence beforehand.  You might ask yourself why you are being audited.  You could possibly incur large unexpected audit premiums if you don’t take time to prepare throughout the year.  Three of the most common reasons why you might incur these charges are:

  • You didn’t properly project payroll for the upcoming year
  • You didn’t think it was a big deal to use a contractor who was not properly insured
  • You have misclassified employees into the incorrect class codes

Accurate and properly classified information is the key to a smooth audit that is probably as frustrating for you as it is to the auditor who is met with a reserved and tentative welcome. Here are a few tips that you can follow to make that stressful audit easier on you and your auditor.

  1. Prepare the required documentation before the audit date
    1. Payroll records
      1. Confirm that payroll data matches the policy period
      2. Copy payroll ledgers or state unemployment tax returns
    2. Employee records
      1. Ensure that each employee is entered into the proper classification
    3. Payment and cash disbursement records
    4. Compile Certificates of insurance for all Sub contractors
      1. Record uninsured Sub-contractor payrolls
    5. Detailed description of your business operation
    6. Experience Modification worksheets
  2. Deduct excluded remuneration
  3. Create a summary page

 

If you have taken the time to prepare for an audit throughout the year it should be smooth sailing.

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