A workers’ compensation audit is a review of a company’s payroll and other records (1099’s, subcontractor contracts, etc.) to ensure the correct premium was paid for a recently expired policy.
Because the insurance company realizes you may not know what your annual payroll will be a year in advance, they allow you to provide an estimate and make a final adjustment after the policy expires. This is called an audit. If your actual payroll at the end of the policy ends up being less than the estimate you gave at the beginning of the policy, you are given a refund on the excess payroll you were charged for. If your actual payroll ends up being more, you owe addition premium for the additional payroll you incurred.
Most audits are conducted through mail/email. Sometimes the auditor will want to visit you in person.
Subcontractors – unless they have their own workers’ compensation policy, are considered your employees in most states and you will be charged for them. For this reason, you should always require your subcontractors to provide you with a certificate of insurance for their own workers’ compensation insurance and keep it on file. Your auditor will ask for it. We can review your subcontractor’s insurance certificates for compliance if you send them to us.
Failure to comply with an audit will result in the cancellation of your current insurance AND cause the insurance company to estimate what your payroll was. This will generally result in a 300% payroll increase estimate by the auditor. Failure to pay at that point will usually result in the insurance company sending your account to a collection agency, impacting your creditworthiness.
« Back to Glossary Index
