Workman’s comp insurance overcharges could cost your business thousands. To prevent unnecessary expense, it’s essential to fully understand the industry’s rules as well as the auditing process to protect your business against mistakes and overcharges.
Get prepared for your upcoming workman’s comp insurance audit:
• Understand what governs premiums.
The National Council on Compensation Insurance sets industry rules used in most states. Using employee classification codes in these guidelines, rates are calculated based on job-related risks. The rates for a clerical worker, for example, will be far less than those for a roofer.
• Gather paperwork.
What will you need?
- A detailed description of your business operations.
- Your payroll journal.
- Information on the hours, days or weeks worked by employees in the past year.
- Individual earnings records.
- Overtime pay (broken down by employee).
- Detailed job descriptions and duties.
- Federal tax records.
- State unemployment reports.
- Payments to subcontractors.
- Certificates of insurance for subcontractors and independent contractors.
• Review previous audits.
Having a list notating where employees were categorized in previous years' audits can help you verify correct classifications in your upcoming audit.
• Ensure correct classifications.
Never assume classifications are correct. Your business could be overcharged thousands in a single year due to these errors. In addition, check with subcontractors who might carry their own workers' compensation coverage, which could save you from unnecessarily paying premiums that are already covered by your subcontractors.
• Don’t overlook overtime.
Workers' compensation premiums are not calculated at the full overtime pay rate in most states, so accurate payroll records are essential.
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