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If you carry workers’ compensation insurance, the insurance company that underwrites the policy will require that you complete a premium audit. This audit will insure that the correct premium is charged. Audits are conducted in person, by phone or by mail. An accurate and successful audit depends on proper preparation. All records should be available for review. You, or a person with detailed knowledge of your business, should be available to answer the auditor’s questions. With proper preparation, you will save time, and possibly, premium dollars. The following tips will help you prepare for your Workers’ Compensation audit: 1. Maintain current records. The audit may require payroll, ledgers, receipt, and checkbook journals. 2. Keep copies of tax records. The audit will require proof of employee compensation. Compensation includes any holiday, vacation, or sick time wages. 3. Keep separate records for wages and tips earned by employees. Tips are excluded in determining policy premiums. 4. Many states allow owners and officers to be excluded from workers’ compensation coverage, which can save you premium dollars. Made sure all exclusions are signed and up-to-date. Failure to sign and provide exclusions may result in additional compensation being added to the final premium calculation. 5. If you use subcontractors, collect and maintain on file, a Certificate of Workers’ Compensation Insurance from each. If you employ uninsured subcontractors, you may be liable for their workplace injuries. The insurance company, therefore, may change you additional premium in the final audit. Audit requirements will vary by state. Your insurance company can provide you with an audit checklist for your state. The key to a successful workers’ compensation audit is to provide complete and accurate documentation.
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