Workers’ compensation audits are the bane of most business-owners’ existence. Everyone hates them. A workers’ compensation audit is the annual review by your insurance company of your business’s payroll and records, which determine your workers’ comp premiums. Usually, a workers’ compensation audit is a relatively straight-forward process without too many complications, but it can always be a hassle.
At Veritas Insurance, we like being there for our clients’ workers’ compensation audits. I learned this a long time ago when I first started insurance. I had a couple of clients with problems with their audits, and it took me hours on end to get the audits fixed. At Veritas, we help our clients get everything prepared beforehand so that when the auditor comes, they know what is going on and that there will be no surprises. However, we are one of the few agencies that do this. So, how should you prepare for your workers’ comp audit if your agent won’t be there to help?
1) Breakdown Your Payroll
First, have your payroll ready and correctly broken down. Remember, your workers’ comp policy starts at 12:01am and ends at 12:01am. If your policy is effective January 5, you want to track your payroll from January 5 to January 4 of the next year. Otherwise you will pick up 366 days instead of 365.
2) Separate Job Duties
Secondly, separate payroll out by your employees for their job duties. Under workers’ comp, you can usually separate employees out by their job functions. For example, if you are in the construction industry and you have an employee doing masonry for half the day and landscaping for half the day, you should separate those two tasks out. There is a large difference in premiums for those two tasks. Thus, make sure you have job functions broken down. Keep in mind that you may have to prove that by time cards or other payroll records that you separated the job duties out properly.
3) Separate Overtime
Make sure your overtime is separated out. You are not charged the full value of overtime—you are charged a smaller percentage. You should basically be charged at straight time. If you don’t have overtime pulled out, you will end up overpaying on your workers’ compensation.
4) Check the Classifications
Be sure that the job classifications are correct. There are a ton of classifications, you should carefully review each classification to ensure that it is correct. I have worked with clients whose classifications were off, and we were able to get them a refund on previous workers’ compensation policies for up to three years, and in some cases five years, simply because they weren’t being charged for the correct classification! Be sure the classifications that you’re being charged for are up to date.
5) Remove Bonuses
Finally, remember that in certain states, including Tennessee, bonuses can come out. If that is the case for you, make sure you do not get charged for those bonuses. There are, however, some situations where bonuses are chargeable. Talk to an expert to know if it can be done in your area and to make sure you classify bonuses correctly so you are not unnecessarily getting charged.
Contact Us with Questions!
Those are a few things you need to look for when you’re having a workers’ comp audit to help you make sure you are not overpaying on your workers’ compensation premiums. If you have any questions, we would be happy to help in any way! Contact our Tennessee office at (423) 292-4142 and let us help you make your life easier on an audit.