Things to Know before your Worker’s Compensation Audit
By: Jane Montijo – Certified Software Consultant
You are being audited. Now what? A workers compensation audit is a provision found in your insurance policy. If an audit is not completed properly, your insurance company is allowed to use estimated audit figures. So, in order to make sure you are organized and understand the process before it begins, here are a few tips:
• Keep in mind the auditor works for an insurance company. They are not there to find a refund for you but to find any additional premiums you might owe the insurance company.
• Your worker’s comp premium is determined by the exposures to payroll and uninsured subcontractors.
• Know how your worker’s compensation premium is calculated. Knowledge is power! In California Workers Compensation premiums are calculated as a percentage of the gross payroll, adjusted for overtime, per employee for a range of time. Each WC classification has an assigned rate. The premium would be the WC Gross Pay (Total Hours x Regular Hourly Rate of pay) times the rate for that classification.
• Here is a simple example of calculating Workers Comp for one payroll period using a worker’s comp rate of 4.95%:
A) 80 Hours Total Hours both Regular and Overtime,
B) Gross Earnings of 2260.02,
C) 2260.02 X the WC rate of 4.95% = an Employer tax of 111.87
• Make sure you have classified your employees correctly. There are hundreds of different classifications in California you can use. This directly affects your premiums.
• Find out ahead of time what documents the auditor wants to see and have them organized and ready to go.
• Provide the auditor with exactly what they have asked for no more or no less. They want to be in and out of your business in a reasonable time so they can move on to the next audit.
• Make sure you have a Certificate of Insurance for each Subcontractor who has done work for your company during your policy period.
• Review and verify your audit. Insurance company auditors make mistakes too and many times the employer has no idea a mistake has been made by the auditor and they over pay the premium based on the audit.
In closing I guess the best advice to be organized and prepared. Be available to answer questions about your business. It should not be the receptionists job to give the auditor key information about your company. Keep a smile on your face and take a deep breath. The auditor will eventually move on to his next appointment .