Workers Comp Audit: What to Expect and 7 Signs You Are Overpaying

Every workers compensation policy gets audited, usually within a few months after the policy year ends. Handled well, the audit is a non-event. Handled carelessly, it quietly overcharges you. Here is what to expect, and the signs your audit deserves a second look.

What happens during the audit

The carrier's auditor (by mail, phone, or in person) reviews your actual payroll by classification, your overtime records, and your subcontractor payments, then recalculates the year's premium. You get either a bill for additional premium or a refund. The auditor works from your records and your description of operations, which is exactly why errors happen: vague duties become high-rate class codes, and missing paperwork becomes chargeable payroll.

How to prepare (and avoid a surprise bill)

• Keep payroll broken out by employee and by job duty, not one lump sum.
• Track overtime separately. In most states the premium portion of overtime can be excluded from workers comp payroll, but only if your records show it.
• Collect certificates of insurance from every subcontractor before you pay them. No certificate at audit time usually means their payroll is charged to you.
• Update your description of operations if the business changed during the year.

7 signs you are overpaying

1. Your audit bill jumped and nobody can explain why.
2. One class code covers employees doing very different work.
3. Office staff are not rated separately from field or production staff.
4. Overtime was counted at full value instead of straight time.
5. You paid subcontractors who carried their own coverage, but were charged for them anyway.
6. Your experience mod rose without a corresponding claim.
7. Your operations changed, but your codes have not changed in years.

Any one of these is enough to justify a review. Two or more and a refund is a realistic possibility.

What to do if the audit looks wrong

Audit disputes are time-sensitive, so do not just pay a bill that looks off. Gather your payroll records and the auditor's worksheets, and get an independent review of the classifications and exclusions. Our free workers comp premium audit does exactly that, with findings reviewed by a licensed advisor, and confirmed errors can often be corrected for prior years as well. Illinois employers can also start with our Illinois small business workers comp guide or talk to our Illinois workers comp team.

Work With Pro Insurance Group

Pro Insurance Group is an independent brokerage based in Elgin, IL, serving businesses in 40+ states through 20+ A-rated carriers. We re-shop your coverage at every renewal and stand with you at audit time. No agency fees, ever.

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Call 833-776-4671 for a fast, no-obligation commercial quote.

Frequently asked questions