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.

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.