At the start of each workers’ compensation policy period, you must give an estimate of your company’s projected payroll and operational exposures. This number is used to determine your premium for that period. If your estimate isn’t accurate, you may wind up paying additional fees at the end of the policy period.
Understanding How the Premium Audit Works
It helps to understand the factors involved in determining premiums so that your workers’ compensation premium audit can go as smoothly as possible. Issues to consider include:
- Understand how freelance or contract workers affect your premiums
- Be aware of any payroll costs that don’t need to be included in the premium estimate
- If you aren’t sure about a specific classification, don’t guess
Preparing for the Premium Audit
There is no substitute for proper audit preparation. Become familiar with the types of documents your auditor will require. Develop a good understanding of the questions auditors may ask as well. Documents to prepare include:
- Tax reports
- Form 1040 Schedule C
- Ownership and corporate officer documents
- General ledger for regular employees
- Additional ledgers and insurance certificates for contract employees
- Specific payroll report for employees for the period in question
- Unemployment tax returns
The more prepared you are before your workers’ compensation premium auditors arrive, the less stressful the audit will become.