Are Telephonic Payroll Audits Legitimate- Reader Question

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Telephonic Payroll Audits Legitimate For Smaller Employers

Payroll audits, also known as premium audits can take many forms.  Telephonic payroll audits have gained in popularity for smaller employers.  There are different audit types such as:

  • Telephonic- yes they are legitimate but read on for more info

    Picture of Payroll audits Businessman Using Telephone at Desk in Office
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  • Hybrid
  • Physical
  • Mail-in (Voluntary)
  • Estimated

Telephonic payroll audits are usually for very small employers.  Many states have a minimum premium threshold which requires an in-person audit for establishing the proper premium.

Each state has its own specific rules on the minimum premium that would require a physical audit.    For instance, as the reader is from California –  the minimum rule from the WCIRB for payroll audits: (The 13,000 minimum premium was just changed from 10,000).  This is a great example of the rules for most states.

Section VI

4. Audit of Payroll The audit and assignment of payroll shall be governed by the rules and classifications contained herein and the approved pure premium rates, subject to the following specific requirements:

a. The insurer shall audit the employer’s records for the purpose of determining the payroll in accordance with the

following (See Part 1, Section II, General Definitions, for the definition of “Physical Audit” and “Voluntary Audit” and Part 4, Section II, Definitions, for the definition of “Final Premium(s)”):

(1) Each policy producing a final premium of $13,000 or more shall be subject to a physical audit at least once a year. On policies subject to monthly, quarterly, or semiannual interim audits, voluntary audits may be accepted in lieu of interim physical audits. The last audit of the policy shall be a physical audit of the complete policy period.

(2) Each policy producing a final premium of less than $13,000 shall be physically audited at sufficient intervals to ensure determination of proper payrolls. For each policy that is not physically audited, a voluntary audit shall be performed.

Picture of Hand Presenting Payroll audits Concept
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(3) Each policy producing a final premium of less than $13,000 and developing exposure in a dual wage construction or erection classification that requires the regular hourly wage to equal or exceed a specified amount shall be physically audited, unless the policy is a renewal and the insurer physically audited one of the two immediately preceding policy periods.

(4) Notwithstanding the above, a physical audit shall be conducted on the complete policy period of each policy insuring the holder of a C-39 license from the Contractors State License Board. See California Insurance Code Section 11665(a) for additional requirements regarding the audit of C-39 license holders.

(5) In every instance, the audit report shall show the source or sources from which the payrolls were obtained. b. If a policy is not audited as required by this Rule, the insurer shall comply with the rules for reporting unaudited exposure on unit statistical reports found in Part 4, Section III, Rule 5, Estimated Audit Code, and Section IV, Rule 4, Exposure Amount, of this Plan.

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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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