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Some time in the past year you applied and paid for your workers compensation insurance. Today, in the mail, you find a request for your annual workers compensation audit. Uh oh, now what?

First, understand that your workers compensation premium is based on an estimate of your payroll for the following year. Based on the number of employees you had at the time and how much you paid them, you determined your projected annual payroll. Your insurance carrier is going to assume, rightfully so, that your payroll may not have happened exactly the way you estimated. Maybe you needed to hire another employee, or turn a part-time employee into a full-time employee, either would be a reason that your estimates didn’t pan out the way you had planned.

Some carriers will provide you with a Voluntary Audit Form. You complete this form with your actual payroll amounts, send it in to your carrier, and they calculate the difference between what you paid and your actually premium amount. Some carriers do a Physical Audit. They come to your place of business and examine your payroll records, look at your subcontractor payments, and financial records. They confirm for themselves the accuracy of your payroll estimate.

Of course, the more complicated your policy is (more than one class code, for example), the more involved your audit is going to be. Also, remember that the outcome of your audit will either have you pay additional premium, or receive a refund if you paid too much. Either scenario is not an ideal.

If you just received your audit notice and are not sure how to complete a voluntary audit or prepare for a physical audit, give us a call and we can help. Worried that you may owe a large amount at your next audit due to changes in your payroll? We can also perform a mid-year audit of your workers comp so there are no surprises come audit time.