The Workers Comp Audit Prep Mini Guide
A company’s workers comp audit can be a very trying time. You have to get your records together which sometimes can involve much more than an income tax audit.
The Workers Comp Auditor has sent you a letter and has likely called you to set up an appointment for your final premium audit for the preceding policy year. The workers comp audit usually needs to be completed within 60 – 90 days after your policy expiry.
The Top 10 Preparations For An Audit are:
- Organization is key. When your files are disorganized, your company looks disorganized. This is never a good way to start the audit.
- Excel(r) can be your inexpensive organizer of the audit. The spreadsheets you provide do not have to be fancy. They just have to provide the information requested.
- Set the date and time at your convenience. The audits are supposed to be completed as a non-interruption to your business day. If the time and date are not convenient, call the auditor and reschedule.
- Do not avoid the audit unless there is a valid reason. Your Workers Comp policy specifically states that you have to provide any/all records that are requested by the auditor. Many state insurance departments and rating bureaus are cracking down on uncompleted audits.
- Appoint one and only one person to speak with the premium auditor and to answer any of his/her questions. This is a huge timesaver and will reduce any confusion. They should be available to speak with the auditor the whole time the auditor is on-premises or after they leave in case of follow-up questions.
- The heavily debated point is the auditor that leaves with the file materials. You do not have to allow this if you feel uncomfortable with your company data going offsite. A part of the preparation for the person in #5 is that all data stays on-site. This is totally up to your company’s discretion.
- Be prepared to ask for the audit workpapers. The workpapers will usually be electronic nowadays. Ask the auditor for a copy or to provide before they leave your premises. The workpapers can usually clear up most misunderstandings you may have without having to contact the audit department.
- Make sure the person in #5 totally understands the operation of the business including the classification codes used in the last premium audit and the policy that is being audited. A confused auditor is never a good thing.
- Always make sure to obtain a copy of the premium auditor’s business card when they arrive at your business. Scan it into your computer system. This may save headaches later on if the auditor needs to be contacted for anything about your audit.
- Be prepared to ask for an exit interview with the auditor with the person in #5 present. This exit interview along with the workpapers will be very helpful in your understanding of the auditor’s opinions in respect to your company.
- Bonus – make sure the person in #5 understands the 8810 class code, who is in that code, and why they are considered clerical or administrative employees.
- Second bonus – as with #11, make sure the person in #5 understands the definition of an independent contractor, and that you have a list of them prepared with what work they perform. One of the big determinations is the amount of control that you have over the subcontractor. The IRS has a great definition of who is considered an employer or independent subcontractor.
The bottom line is to not stress out over the audit. If you disagree with it, there are certain procedures and time limits to lodge a valid dispute with your insurance carrier. One has to remember that the auditor works for the carrier or is an independent contractor for a company contracted with the insurance carrier.