What to Expect During a Workers Comp Audit

Audit — The word has a unique ability to instill fear in business owners. However, once you know what kind of Workers Comp audit will be conducted, what to expect, and how to prepare, the whole process should be quick and easy.

Insurance companies conduct work injury investigations to ensure that the premiums paid are consistent with the risks they are exposed to. Workers Comp Audits also confirm that employees are properly evaluated for their work.

In some states, these tests are required by law when annual premiums exceed a certain amount. In California, you can expect a Workers Comp audit to be conducted after each policy term, regardless of the annual premium you pay. This article explains what to expect in a Workers Comp audit and offers helpful tips to ensure everything goes smoothly.

How a Workers Comp Audit is Scheduled

If a Workers Comp audit is performed, it is most often scheduled at the same time as the policy renewal, and the Workers Comp audit itself takes place 30–60 days after the current policy expires. Your insurance company will contact you to inform you that you need to schedule an appointment for testing.

The person performing the Workers Comp audit may be employed by an insurance company or an independent accounting firm. This doesn’t change the process, but it’s good to know who to work with.

If you receive a phone call or letter informing you about an upcoming exam, don’t panic. We will need some time before the reservation time, so you can choose a convenient date and time. This appointment should be scheduled well in advance to collect all the necessary paperwork for the process.

Note that there are also multiple ways to conduct Workers Comp audits. As part of an onsite Workers Comp audit, it can be conducted by phone, email or in person.

Types of Workers Comp Audits Performed

There are two types of occupational injury assessments:
Physical and Voluntary Workers Comp Audits. The type of research a company receives depends on the type of business it operates and the amount of the bounty. Large and high-premium businesses typically undergo physical Workers Comp audits, while small and low-premium businesses often undergo voluntary Workers Comp audits.

Your company has a Workers Comp audit. An inspector will appear and inspect the items near you if there are any questions. For voluntary inspections, fill out the form and mail it to your insurance company along with the required documentation. Any questions should be directed to an insurance agent, as independent assessments are subject to significant error and these errors can result in significant losses.

Make sure you understand how the information you provide may affect the premium you pay for your new policy. Do your best to complete both types of Workers Comp audit on time.

Failure to comply with your Workers Comp audit can result in unwanted consequences, including the following:

• If you renew coverage with the same wireless service provider and the review of the previous period is not completed, the wireless service provider may terminate your current policy.
• If you do not receive a receipt after several follow-up checks, the airline may conduct a “presumptive audit” and your risk is generally estimated to be approximately 25% higher. In this case, you will have to pay an additional premium of 25%.
• Failure to comply with Workers Comp audits may also change your experience. Because WCIRB uses audited payslips when calculating ex mods, it is possible to put yourself in the position that experience mods are issued incorrectly. Importantly, there is a rule that a former mod cannot raise more than 25 points if there is only one claim during the experience period. However, this does not apply if you neglect to check your salary during the trial period.

Records to Have Available During Workers Comp Audit

The records required by examiners may vary. However, there are certain documents that you are likely to be asked to see.

Once your Workers Comp audit is scheduled, gather the following documents:

Payroll records, including:

• Payroll journal and summary
• Your checkbook if it is the only way you maintain your records
• Federal tax reports that cover the period of time being audited, particularly form 941 and 944
• State unemployment reports
• Individual earnings records
• Overtime payments, listed separately for each employee
• W-2 and 1099 forms
• DE-9 and DE-9C forms and quarterly tax reports

Employee records, including:

• Summaries of employee duties, given separately for each employee
• The total number of employees, divided by full-time and part-time status
• The hours, days, and weeks worked annually, given separately for each employee

Cash disbursement records showing:

• All payments made to subcontractors
• Money spent on materials
• Payments made for casual labor

Certificates of Insurance for:

• All subcontractors
• All independent contractors

A summary of your business operations, providing all relevant details.

Please keep these records organized as described above. This makes it easier for auditors to access the necessary records and complete the Workers Comp audit as quickly as possible. The examiner will provide you with the exact documents you will likely see.

Helpful Tips and Hints for Navigating Workers Comp Audit

It is natural to feel overwhelmed at this point. However, the exam will probably go smoothly.

To help things go as easily as possible, keep these tips in mind:

• When scheduling a Workers Comp audit, ask why the insurance company chose to conduct the Workers Comp audit at your facility. This helps you articulate your expectations and removes mystery from the process that often causes concern.
• If necessary, review previous Workers Comp audits to help anticipate changes.
  Please double check that all documents are correct.
• Do not share any information not specifically requested by the researcher. Then ask the examiner for the worksheet and check it for accuracy.
• Stay up-to-date by setting policies in our monthly reporting form or paying as you go. Many carriers can integrate with their payroll partners.

If the review results in a plan change and no more affordable perks, you may be able to find a cheaper plan. But don’t worry too much about the exam. For the most part, these are just routine checks.

J&L Risk Management Is Here for You

J&L Risk Management understands how stressful a workplace injury assessment can be and can help you with it. Our dedicated team is on-site to prepare and support customers undergoing medical examinations. If you have questions about upcoming exams or have questions about your insurance policy, contact one of our knowledgeable representatives today.