I got an audit on my Worker’s Comp policy—now what?
Worker’s compensation covers an employer’s liabilities or potential negligence should an employee become injured on the job. It can also cover sickness as a result of a job, even historically based, so long as your business is still in operation.
Worker’s compensation payments are based off a set amount for every $100 of payroll. This amount of money depends on the job type. For example, an employer who covers desk workers would not pay as much in workman’s compensation insurance as a general contractor.
This type of coverage is different than most because you have the ability to directly affect your rates. Payments are based on your claim history and comparison to others within your class code. If you are doing well compared to others in your class, your rates may go down. On the flip-side, if you have higher claim rates than most within your class, you may see that reflected through a rate increase. There are ways to ensure your company is getting the most favorable rates when it comes to paying for workman’s compensation:
1. Have safety programs regularly available to employees.
2. Work on your ex-MOD number (experience modification number).
If you would like assistance in reviewing how to get a more favorable rate, please contact us!
Audits will take place every year shortly before or after your renewal.
1. Keep accurate records. It’s imperative to the success of your audit that you are detailed in your payroll ledgers, have copies of every check given to any type of subcontractor, and keep copies of your tax records, including quarterly payments.
2. Provide accurate job descriptions. Each of your employees is classified to determine what code they reflect for their level of workman’s comp. Because an auditor has the ability to change an employee’s code, it’s crucial that you provide them with detailed and accurate job descriptions to explain why employees are coded the way they are.
3. Detail subcontractor responsibilities. Any time you work with a subcontractor, it’s necessary to itemize your expenses when providing them payment. If you pay them a lump sum without itemizing what dollar amounts are used for things like supplies, labor, taxes, etc., an auditor will consider the actual lump sum to be that person’s salary. This will greatly affect your insurance during an audit. You must also remember to obtain a certificate of insurance from every subcontractor and ensure you are listed on their policy. Read more about why this is important.
Now that you know how to prepare for an audit…
Here’s what you can do when an audit actually occurs:
1. Acknowledge the audit. When you receive notice that your company is up for an audit, respond. Return an auditor’s phone calls, engage them, and be timely. Making a great first impression will direct the tone of the experience.
2. Pull your documentation. Have everything ready in advance so you are not scrambling or providing false information to cover any delays in the future.
3. Involve your insurance agent. Notify your insurance agent so they can provide advice or even help walk you through the audit.
4. Be honest. Never hide anything from your auditor. Even if it seems like it will help, it could be extremely detrimental to the outcome.
Above all, the keys to a good audit experience are open communication, preparation, and honesty. If you have any additional questions about workman’s compensation, your policy, or how to handle an audit, give us a call!
Call Shane direct at: 707-402-8887.
Or shoot him an email at Shane@i80insurance.com.
Want more information? Let us know!
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