Workers’ Compensation Audit Checklist

a business owner using a workers' compensation audit checklist
Mordechai Kamenetsky
Last Updated: 
March 13, 2024
Download a Workers' Comp Audit Checklist

A workers' compensation audit checklist can guide you on how to prepare for your workers’ comp audit when the time arrives. Use the downloadable PDF checklist to make sure that you’re prepared, and follow the steps outlined below to get more insights on exactly what’s required for a successful audit.

Table of Contents

1. Schedule Workers’ Comp Audit

Scheduling your audit as soon as you're contacted is the first step toward a smooth and successful audit process. This not only demonstrates your commitment to compliance but also allows you adequate time to gather the necessary documents and information. 

Physical Workers’ Comp Audit vs. a Telephone Audit

A physical audit is when an auditor visits your business location to review your records and operations. They will examine payroll, employee classifications, and other relevant documents to check the accuracy of your workers’ comp coverage and premium calculations. 

A telephone audit is conducted over the phone, with the employer providing the necessary documentation electronically. While physical audits tend to be more thorough, both types of audits serve to ensure the proper coverage and premium calculation for your business.

Why you should not avoid the Auditor

Avoiding the auditor can lead to issues and complications with your workers’ compensation coverage. An audit is important to ensure the most accurate assessment of your payroll, employee classifications, and overall risk exposure. 

Failure to comply with the audit process can result in a range of penalties, including policy cancellations, fines, or even legal action. Cooperating with the auditor will benefit your business in the long run.

Is your workers’ comp coverage optimized for your business? Get an instant quote to ensure you have the best coverage at the best cost.

2. Gather Records for a Workers' Compensation Audit

When preparing for a workers’ compensation audit, it’s important to gather all necessary records. This process involves collecting general information, payroll records, and subcontractor information (if applicable). 

General Information 

Begin by assembling your company's basic details, such as the Federal Employer Identification Number (FEIN), the type and scope of your business operations, and contact information for key personnel. 

You should also include details about your workers' compensation policy, like the policy number and coverage period. Providing accurate general information helps auditors get a clear understanding of your business and its operations.

Payroll Records 

Accurate payroll records should include a breakdown of payroll by employee class code, and any overtime payroll records. This information will enable auditors to determine if your initial policy premium accurately reflects the actual payroll and scope of work performed. 

To make it easier for the auditor, consider organizing your payroll records in the following format:

Employee Information:

  • Name
  • Job title
  • Classification code
  • Gross annual salary or wages

In addition to a detailed payroll report, have an up-to-date profit and loss statement prepared and readily available.

Subcontractor Information

If your business works with subcontractors, their information should also be gathered for the audit. 

Subcontractor information such as their business name, contact details, FEIN, and proof of workers' compensation insurance will be required. Providing this data can help demonstrate that your business has taken necessary precautions in verifying subcontractors' insurance coverage and avoiding any potential liabilities.

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3. Review Auditor's Work

This process includes accessing the auditor's worksheet and disputing the audit if necessary. By ensuring the accuracy of the audit, you can prevent potential issues and ensure proper classification and premiums for your business.

Request Auditors Worksheet

This document contains all calculations, classifications, and necessary information used during the audit. By analyzing the auditor's worksheet, you can gain insight into how the auditor determined your workers' compensation premium and whether your employees are classified correctly according to their job responsibilities

Audits can be Disputed

It's important to know that workers' compensation audits can be disputed if you believe there's an error or discrepancy in the findings. 

To start a dispute, review the auditor's worksheet and compare it with your payroll records. If you find any inconsistencies or incorrect information, gather supporting documentation to make your case.

Here's a brief guide on how to dispute an audit:

  1. Identify the issues: Pinpoint specific inaccuracies or discrepancies in the audit, such as incorrect employee classification or payroll totals.
  2. Gather supporting documentation: Compile evidence, such as payroll records, employee contracts, and job descriptions.
  3. Communicate with your insurance company: Contact your insurance company and discuss the disputed items. Be prepared to present your supporting documents and engage in a comprehensive review of the audit findings.

By taking the time to review and understand the auditor's work, business owners can make sure that the audit is an accurate reflection of their business and if not, they can take the necessary steps to dispute the additional charges.

Kickstand Tip: Keep an Eye on your Payroll

Your workers’ comp audit bill should never come as a surprise to you. Keep a close watch on your payroll throughout the policy term to make sure that your payroll projections stay accurate. 

Here are some tips for you to keep in mind: 

Stay Updated: Regularly check your payroll against projections to catch any changes early.

Set Aside Funds: Adjust your savings as your payroll fluctuates to cover potential adjustments.

Do the Math: Use the formula Rate x (Payroll/100) = Premium to estimate your premiums and adjust your budget accordingly.

You can find your rate on the declaration page of your policy. 

FREE Audit Prep Checklist

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Managing audit results after a workers’ comp audit

After the audit, you have another task: handling the results. Here’s a straightforward approach to dealing with the outcomes of your workers' compensation audit.

Request a payment plan 

Request a payment plan 

If the audit results in an additional bill, many insurance carriers will provide flexible payment options, such as a pay plan. This allows business owners to spread the payment over several installments, making it more convenient and manageable.

Discuss your options with your insurance carrier and choose a plan that best suits your financial situation.

Choose how to receive your refund

Choose how to receive your refund

In some cases, the audit may result in a refund. The refund can be issued in multiple ways, depending on your preference and the insurance company's policies. 

You can choose to receive a check, have the amount refunded back to your card, or apply the credit to your current premium invoices. 

Again, discuss your preferred refund method with your carrier to ensure a smooth process.

Be ready for policy adjustments

Be ready for policy adjustments 

If the audit results in a large bill, your insurance carrier may update your policy to reflect this increase. It's important to review the endorsements to ensure they accurately represent your business operations and discuss any discrepancies with your carrier.

Don’t ignore the audit results

Don’t ignore the audit results

Neglecting to address the outcomes of your workers' compensation audit can have severe consequences. 

If ignored, your policy renewal may be canceled by the insurance carrier due to non-compliance. This can leave your business exposed to potential liabilities. 

Get an Instant Quote with Kickstand Insurance

An audit is an essential component of maintaining compliance with workers' compensation regulations. 

By working with Kickstand Insurance, you'll have access to experienced audit professionals who can provide invaluable guidance, ensuring that you are well-prepared for any audit situation. 

Moreover, our straightforward and transparent quote process allows you to select the best coverage plan without confusion or ambiguity.

Don't hesitate to secure the protection your business deserves. Get an instant quote today!

Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.

Mordechai Kamenetsky

Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.

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