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Payroll Audit Referred To As Premium Audit More Often

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Payroll Audit – More Used Term Premium Audit

A payroll audit for Workers comp is actually not a fully accurate term. The term also known as a premium audit.  Actually, either term is correct.  A payroll audit may also be called a policy audit.  

Picture Of Woman Auditor Payroll Audit On Table
Used with permission StockUnlimited

This blog has provided many articles on the premium audit process.   Feel free to search for the term premium audit or click here.  The search results rank the relationship to the search words.   

This is also referred to as a premium audit. Your policy contains a summary of the rules on when and how your company may be audited by your current or prior insurance carriers.  Reading your policy before questioning or disputing an audit may save your company time and headaches every year.   The premium audit workpapers may also be very helpful. 

In Workers Comp the insurer will send an auditor (subcontractor or staff employee) to examine/audit the remuneration reported by the insured. The purpose is to determine if the premium is adequate and covers all employees. There are many posts in this blog on payroll or premium audits.

You may find them by using the search box on the right side of the web page.   The key to any audit is having data to provide the premium auditor that is concise and complete.   The payroll figure accuracy is tantamount to have a successful audit. 

Microsoft Excel is always the best way to organize the data into nice spreadsheets.  The premium audit department will usually send an audit notice letter approximately one month prior to the audit date.  

If you cannot meet the auditor on the proposed date, call the audit department as soon as possible.  Emailing the auditor remains the best way to reschedule a premium audit for documentation purposes. 

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2 Responses

  1. The comments on the payroll audit and it’s purpose are a good start; however, the audit has two primary purposes. In addition to verification of the correct amount equally important is the correct payroll classification.

    Be prepared when you commence the payroll audit. Do not just have with you the names of individuals and the reported payroll. To continue the discussion, what else should you have with you?

    I start the list with any and all claims for that employer together with brief description of the injury and the payroll classification shown. Regards Ray Neff

  2. Regarding “Claims will not be paid for claimants discovered not to be included in the payroll.”

    Claims are a double edge sword for an employer. If claimants are not on the payroll, then red flags pop up for me. I look further at general ledger accounts, 1099’s, cash payments, etc to determine if the the chargeable payroll (including subs) is being altered in any way to reduce the premium on the policy.

    Can claims be miscoded to the wrong employer, Yes, but it is very rare. Claims will be paid to anyone who is injured regardless if they are paid as an uninsured subcontractor or paid on a cash basis under the table.

    Thank you, Carlos Garcia

Comments are closed.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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