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Premium Audit Payroll Figures More Critical Due To COVID-19


Premium Audit Payroll Numbers Now More Important Than Ever

Why is the Workers Comp Premium Audit payroll accuracy more important in 2020?  Yes, the COVID-19 pandemic may reach into your premiums more than you or your company may have anticipated.

picture of savings bond premium audit payroll figures
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Let us look at the basic components of your Experience Modification Factor – the Worksheets you should be receiving from your agent or rating bureau.

Basics of The Experience Modification Factor Formula

You do not have to figure it yourself – as the savings bond picture says – you may only need to understand how a heavy reduction in payroll can increase your Experience Mod.

Experience Mods have a lookback period of three years.  The last policy year and associated claims will not show up anywhere in your Mod sheets – one of the basic rating rules.

Yes, I do realize the Rating Bureaus are changing some of their rules to aid companies with the COVID-19 pandemic.  What I am covering will not change for the most part.

For example:

Policy renewal    January 1, 2022 – remember the workers comp rating algorithm is a delayed system.

The 2021 policy and claims will not show up anywhere (could be the post-pandemic recovery period?).

Payroll – these are from a worksheet I am currently reviewing and forecasting.

Policy Dates    PayrollClaims – Total Incurred
1/1/2018 – 1/1/2019$ 2,634,000323,000
1/1/2019 – 1/1/2020$2,874,000292,500
1/1/2020 – 1/1/2021$450,000102,000

Unfortunately, the payroll had fallen – the class codes stayed the same- in other words, the company shrank but did not change during the pandemic.

I will spare you cranking the formulas through with a ton of numbers in this article.   Think of higher payrolls being able to absorb the risk.    The premium audit payroll numbers are reported directly to the rating bureau.

The $450,000 looks out of place.  Why?  Unless the employer had a very bad year the $102,000 in total incurred for the 2020 policy year looks high or were the payroll figures not reported properly?

The Mod in this situation will likely tick up.  The $450,000 is not enough to cover the 102,000 in losses.

Wait – I thought lower Premium Audit Payroll Figures saved my company premium

Well, here is the “catch” on that one.   Many of our client employers bid on large private or governmental contracts. If the Mod is above 1.0, you are out in the cold.  I always advised the Risk Managers over these contracts to allow a little leeway.  Allowing an employer with a 1.0 Mod or higher to bid has become rarer each year.

Temp-to-perm employers now see the 1.0 requirement more often.

Bottom Line – you want accurate numbers on your Mod sheets including the premium audit payroll info.


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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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