What is a workers' compensation audit?
A workers' compensation audit, also called a workers' comp review or survey, is a routine evaluation of your workers' compensation policy, payroll records, and employee classifications. An audit ensures your premiums accurately reflect your current operations and workforce.
An insurance review typically occurs when it's time to renew your insurance policy, depending on the workers' comp laws in your state.
What happens in workers' comp audits?
The cost of workers' compensation insurance is based on factors like the size of your company and your industry's risk classification. During a workers' comp review, your current information will be compared to estimated payroll data and other information you provided when you bought the policy.
Differences between the estimate and current documentation can be used for a workers' comp premium adjustment. This helps ensure that you're paying the right amount for the right coverage.
Workers' comp audits in monopolistic states
In monopolistic states, the government requires employers to purchase workers' compensation coverage through a public fund rather than a private insurer. In these states, you'll still need regular audits. The only major difference is that the review will be conducted on behalf of the public fund rather than a private company.
Why am I being audited?
Audits are a regular part of workers' compensation policies. They're not a reflection on you or an indication that you've done something wrong.
It's normal for businesses to evolve over time. For example, you may have hired new employees if your company grew significantly since last year. Reviewing changes periodically is important because they can affect your workers' compensation premiums and the protection your employees need.
Are workers' comp audits mandatory?
Yes. If you have a workers' comp policy, audits are mandatory. Even if your coverage is canceled, you may need to complete a survey for the time you were covered.
How to pass a workers' comp audit
An insurance review is a straightforward process. You'll need to collect basic information related to your company, payroll, and taxes. Your workers' comp auditor will tell you what documents they need, but you can streamline the process by preparing beforehand.
Workers' compensation audit requirements
To comply with a workers' comp survey, you'll need to provide key documents to help verify your payroll and employee classifications:
- Recent tax forms (941s, 944s, W-2s, Schedule C forms, payroll records)
- Information about independent contractors and 1099 employees (1099s, insurance certificates)
- Your business ledger
- Other financial data, such as cash receipts
You'll also need to prepare information about the business's owners, partners, and officers, including their names, titles, locations, earnings, and stock ownership.
How to prepare for a workers' comp audit
Audits don't need to be stressful. A workers' compensation audit checklist can help you prepare throughout the year. To help things go smoothly, here are some actions you can take:
- Create a file to store all relevant documents in one place.
- Track changes in staffing and job roles that occur throughout the year.
- Keep accurate, up-to-date records.
- Answer your workers' comp auditor's questions completely and honestly.
What happens after a workers' comp audit?
The information collected during the review will determine if your coverage and premium align with the size of your business and the risks your employees face.
After the audit, you'll receive a summary of its findings. These may lead to changes to your policy at renewal, such as your premium or coverage. If the insurance review shows you overpaid or underpaid last year, you could get a refund or need to pay the difference.
Why the right workers' comp coverage matters for your business
Workers' compensation offers critical protection for your employees, and a workers' compensation insurance audit ensures you have the coverage you need.
If you're unsure whether you have the right workers' comp policy for your business, Progressive Commercial experts can help. Call us or start a quote online to get a personalized policy that meets your needs and protects your staff.
