What’s the purpose of the workers’ comp audit & how to avoid a big bill?

//LEARN:

💡 The ABC’s of Workers’ Comp

✔How is a workers’ comp premium calculated?
Workers' compensation insurance premiums are based on payroll to your employees. At the onset of the policy, you provide a projection of what you'd be paying your employees for the next 12 months, aka the policy term. The underwriter calculates your annual premium based on that estimate.

✔What is the purpose of a workers’ comp audit?
The purpose of the audit is to look back at the last 12 months of the policy and see what the actual payroll was. If you’ve hired new employees since the onset of the policy, for example, you will have a bill at audit because your payroll was higher than you projected.

💡 How To Avoid a Big Bill at Audit

✔When projecting your payroll for the year, it may be wise to overestimate a bit.
…That will mean your premium will be a little higher every month during the policy term. But that way, when the auditor performs the audit at policy expiration, you won’t be slammed by a big bill.

✔Examine your books and your payroll and be conscious of this throughout the policy term.
…For example, if you hire new employees, inform your insurance agent. Yes, your monthly premium may go up, but you're paying that additional premium over time versus paying for that additional premium at audit.

✔Keep the certificates of insurance that your subcontractors provide you with.
…If you hire subcontractors, make sure they provide certificates of insurance with accurate and enforced workers' comp policies showing that they carry their own workers' comp. If you don’t have those, the auditor may require you to include the payroll you paid them in your policy!

✔Keep great payroll records.
…Auditors will ask for those at audit. Having your profit and loss statement, your general ledger, and any records about payroll to your employees and the kind of work they're doing will help you avoid a large bill.

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⏱ Timestamps
0:00 How to avoid a big bill at your workers' comp audit
0:18 What is the purpose of a workers’ comp audit?
1:53 Understanding the workers' comp audit
2:13 Analyzing payroll of a hypothetical company
2:38 How you can avoid a large bill at audit
2:45 The first way is to overestimate your payroll a bit
3:39 The second way is to update your insurance agent when you hire new people
4:26 The third way is to keep the certificates of insurance from your subcontractors
5:50 Lastly, keep great payroll records

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