Every employer dreads an audit, whether it’s from OSHA or from your workers compensation insurance company. The process, however, doesn’t have to be a pure nightmare. In fact, if you prepare properly, you can make the audit relatively painless and can even use the results to improve your own practices. Here’s some advice on how to prepare for a workers comp audit and protect your construction and contracting business.
Why a Workers Comp Audit?
The first step in preparing is discovering why the audit was requested. There are two basic reasons your workers comp policies are audited, both based on exposure. These are payroll and the cost of your uninsured contractors. The premium you pay on your policy is based on estimated exposures, which you deliver to the company based on your own information. Upon policy expiration, you will be audited to see if you owe any further premium. This doesn’t necessarily mean you’ve done something wrong—it’s just a review of your estimate vs. actual exposure.
As you prepare for the audit, you’ll want to gather appropriate records. Find out exactly what the auditor will want, and don’t volunteer information for which they do not ask. Some of the records you might be asked to provide include:
- Payroll Records, including journal, summary, check register, federal tax records, unemployment and individual earnings records and overtime pay
- Employee Records, including each employee’s job description, your total number of employees and total hours worked
- Cash Disbursements, including subcontractor payouts, casual labor and materials costs
- Insurance Certificates for every independent contractor and subcontractor
- Business Operations description and breakdown
Keeping Detailed Records
The more organized and detailed your records are, the better off you will be. Make sure that your overtime is recorded separately with exact overtime work summarized based on the job class. Keep all of your insurance certificates current, particularly where subcontractors are concerned. Keep detailed payroll records in dollar amounts with proper payroll separation information.
Work with the Auditor
Let’s be realistic: the auditor in some ways holds your fate in their hands. That means that the better you work with them, and the easier you make their job, the better off you’re going to be. Auditors work on a tight schedule and don’t react well to being put off or having to reschedule. Be prepared, have all the information they need readily available, answer all questions and be direct and to the point in your information, but stick to exactly what they request. Keep it very simple, and try not to ask too many questions of the auditor.
Workers Compensation Insurance
Auditors are there to make sure that your workers compensation is being properly paid for and is being used as intended. The first step in this process is to make sure you’ve got a strong and solid policy. If you’re not sure about the coverage you have, we can help. Read up about your worker’s compensation obligations, and give us a call for a review of your policy today.