Company Growth = Workers Comp Audits Change
As your company grows the Work Comp audits will change. Workers compensation audits for very small companies are usually self-audit situations. Each state has a minimum level of premium that requires the insurance carrier to do an on-site audit.
One of the most common bases for mistakes on payroll (premium) audits is that a very small company and/or their agent will describe to the carrier what operations they perform in going about their daily tasks. As the company is so small, the agent or company owner is charged with making the initial determination. The classification codes can sometimes be wrong from the start.
The more common mistake is made when the company grows and the classification codes are just copied from policy to policy each year. I have seen where there should have been an additional seven classifications added to better describe some of the employees’ job functions.
The workers compensation payroll auditor will usually discover some of the errors and possibly reclassify some of the employees. However, the auditor is under pressure to perform as many audits weekly as possible. They may not have the time to review what each employee does on their job. I am not picking on premium auditors – it is just the nature of the business.
Knowing what classifications a company should be under is sometimes a very arduous and complicated task. I have seen employers try to use their SIC codes when describing what they do on their Workers Comp insurance applications. The SIC and Workers Comp classification codes can have (and are usually) night and day differences.
This mistake and others are mentioned in a previous post on red flags with your Workers Comp policy. I will cover classification by analogy next time.
©J&L Risk Management Inc Copyright Notice