Worker's compensation insurance is a necessary investment for most employers. Unfortunately, the cost of worker's compensation insurance can be somewhat unpredictable. Your premiums will be dependent on your payroll expenses. That means you will be paying estimated premiums for each period and reconciling your estimated payments to the actual premiums when the premium period is complete. The actual premiums are calculated through a worker's compensation audit. Here's what you need to know.
An Overview Of Worker's Comp Audits
A worker's compensation audit is a review that's done on behalf of the insurance company that holds your worker's compensation policy. The auditor will review your payroll records to compare the salary payments that you actually made compared to the estimates that you reported and paid premiums on. Once those figures are calculated, the auditor will determine your actual worker's compensation insurance premium. If you paid less during that period, you'll be expected to make a payment to meet that premium when the audit is finished. If you overpaid, you'll receive a premium credit for your next policy period.
Preparing For Worker's Comp Audits
You'll receive an audit notification when your policy period concludes. The statement will tell you when the auditor will be onsite and what he or she will need for the process. For example, you need your quarterly estimated tax filings, all of your 1099's, and any payroll tax records. You'll also need all of your disbursement information, accounting ledgers, and your payroll records.
In addition, the auditor will want to look at your company's employee files, including job descriptions, contractor records, and insurance certificates. The more information you can provide, the easier and more accurate the audit will be. You should also appoint someone to serve as a point of contact for the auditor throughout the process.
Ensuring Accurate Premiums
The last thing you want to find out is that you significantly underpaid your premiums during the policy period. To avoid a sudden expense at the end of the policy period, you need to ensure that your salary estimations are as accurate as possible when you start the policy period. This means estimating your company's work demand as closely as possible, including accuracy in your contractor versus employee determinations. Talk with a worker's compensation auditor and insurance agent about estimating your salary costs accurately to help ensure a smooth audit at the end of your policy period and reduce the risk of surprise bills.
Share19 December 2019
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