Workers' Comp Audit: 6 Tips to avoid a surprise BILL!

Love it or hate it, your workers’ comp audit will roll around at the end of every year or at the end of the policy term. The trick is to know how to avoid getting slammed with huge bill at audit time. Learn the secrets of a cost-free audit.

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TIP #1: Classify your workers correctly.
There are between 500 and 600 ways to classify your workers and choosing the one that fits you best can result in a lower rate. A common mistake is to add a clerical worker to a far more expensive job classification, for example classifying a secretary in an auto shop as an auto worker!

TIP #2: Don’t under-project your payroll.
Under projecting your payroll means that even though you've been paying your workers’ comp policy, you've been paying it on less an amount of payroll than you’re actually paying. Every policy is audited at the end of the year. They will discover this discrepancy and bill you for the difference by staying proactive and notifying them.

Tip #3: Collect certificates of insurance from your subcontractors.
If your subcontractors don't have workers' comp insurance and they get hurt on your job site, they can sue you to cover their injury-related costs. To avoid having to pay a premium on the amount of money you paid the subcontractors, ask them to give you a copy of their certificate of insurance. Keep this somewhere handy where you can provide it to your auditor at audit.

Tip #4: Have a clear process to report claims.
Not only should you have a clear process documented, you should make sure your employees know about it. It's important to report claims quickly because getting the insurance company involved from the beginning can help keep costs down and the claim under control. Your process should be outlined in your employee handbook and discussed periodically at meetings.

Tip #5: Report every single incident.
Generally, an incident may seem very minor and not worthy of reporting to the insurance company. However, even a minor injury can snowball over time into a much bigger injury. A minor strain in someone's back can turn into a debilitating injury that keeps them home and unable to work. Make sure you report it as soon as possible so you don't get fined from the state for being late.

Tip #6: Prepare for your audit.
It's no secret that workers' comp policies are audited. Keep this in mind at the beginning of your policy so you're prepared. Every state has a list of items that must be included in your policy. Make sure your policy includes yours. Your insurance agent will be able to help you with this. Keep your procedures updated and relevant according to state regulations.

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⏱Timestamps

0:00 6 Tips to avoid a surprise bill during workers’ comp audit
0:31 Classify your workers correctly
1:37 Don't under-project your payroll
2:29 Things you should count in payroll
2:56 Collect certificate of insurance from your subcontractors
4:07 Have a clear process to report claims
4:48 Report every incident
5:19 Prepare for your audit
6:22 Ensure a cost-effective workers’ comp audit

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