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Business Protection Bulletin


By March 1, 2008No Comments

You are scheduled for a Workers Compensation audit, and the dreaded time is drawing near. No fear. A little common sense and preparation will save you a lot of time, money, and frustration.

First and foremost, make sure you have scheduled the audit at a time that is convenient for you and allows you to devote a few hours to the audit. You should stay with the auditor the entire time. If you feel you have been pressured into meeting at an inconvenient time, call and reschedule. You will need to devote your full attention to the auditor, and to the auditing process.

Before the meeting, gather and organize your payroll reports, classification divisions, certificates of insurance, and overtime payroll records. You can summarize each of these beforehand and have the summaries ready for the review. This can help to streamline the audit process somewhat and assist you in more effectively communicating your business’ important information. Furthermore, if your calculations are well organized and can be reconciled to payroll stubs, W2s and other payroll records, the auditor will feel comfortable relying on your data.

Be prepared for the auditor to question you about the job duties and classifications of various employees. This is to be expected and should not alarm you.

If you have a question about proper classification, call your agent beforehand. Make sure you understand the different employee job classifications and have all of your employees properly classified. For instance, if an employee works 90% of the time in the office and 10% of the time outside of the office, the auditor can charge 100 % of the payroll for that employee to the outside sales classification, a higher-rated class.

Again, being prepared and working beforehand to have a good understanding of the different classifications is key to ensuring your audit goes smoothly.

Next, make sure you adjust payrolls, deducting bonus pay from any overtime pay. Also, be sure to apply the minimum and maximum payrolls to your calculations, if applicable. These maximums and minimums vary slightly depending on the career and on the state. The minimums and maximums also vary greatly for executive officers, sole proprietors, and even partners. Do your homework here and apply maximums and minimums where needed.

If you have issued any payments to subcontractors that do not have certificates of Workers Compensation, these payments may be charged against your Workers Compensation. If you did not get a copy of a subcontractor’s Workers Compensation certificate, you can get it before the audit as long as the certificate is current and shows the subcontractor was covered while working for you.

Once you’ve taken the time to gather the necessary information, organize it, summarize it, and relax. Auditors are not there to do you harm. Work with them; giving direct and honest answers to their questions backed by applicable paperwork whenever possible. When the audit is complete, request the audit worksheet from the auditor.

The good news is that you have the right to request a corrected audit in the event you feel any errors were made. You also have the right to recover any overpayments made during the three preceding audit periods.

Lastly, if an independent agent or broker represents you, ask the agent to review the final audit for accuracy. The audit should be checked against the current policy and against the general liability audit, making note of any discrepancies in payroll estimates and classifications.