If a client or an insurance agent was asked what their most exciting insurance experience was, chances are, Workers’ Comp Audits would not be in the top ten. An audit can be a grueling and frustrating experience but it doesn’t have to be.

What is a Workers’ Comp Audit?

What exactly is a Workers’ Compensation Audit and what is the purpose? Workers’ Compensation premium is initially based off of an estimated or projected yearly payroll. At the end of the policy year, the insurance carrier conducts an audit to determine if you’ve paid the correct premium based on your actual payroll. If you didn’t pay enough, you will owe an additional premium. If you’ve paid too much, you will get a refund.

What does Paradiso Insurance do to help me with this?

At Paradiso Insurance, it’s our job to ensure that our customers receive the best coverage at the best rates. With that, comes our audit assistance. Our audit verification is designed to save you money by finding any errors that the carrier may have made when conducting their end of the year audit. 

What We’d Need From You

In order to review your audit for accuracy, our in-house auditor will need your payroll reports that coincide with the specific policy period. For example, if your policy runs from 4/1/19 to 3/31/2020, we need  a payroll report that coincides with those dates. 

The payroll report should include:

• Gross totals for each employee, showing if there is any overtime.
  • Overtime pay is not included in the total payroll at 100% for the purposes of workers’ compensation payroll totals. Two thirds (⅔) of the total overtime pay is used and is referred to as compensable payroll.
• Employees need to be separated into class codes or departments such as driver, clerical or officer

Our in-house auditor will also need job descriptions for each employee who is not a driver. These descriptions include designating who is an officer and/or a clerical employee, who never drives. This is very important because drivers are charged at a higher rate than clerical employees.

Checking Net Rates and Class Codes

Another factor in reviewing your audit is checking the net rates for each class code. Class codes and rates vary by state. If your business has offices in different states, most likely the rates will be different for each location. If the rates are wrong, you could be overcharged or undercharged and that could have a significant impact on your audit results.

There are several options when it comes to paying your work comp premium. Using a “pay as you go” program can be crucial in making sure you don’t pay more than is required and in making sure you don’t owe money after the policy period. There are a couple of programs that we use at Paradiso Insurance to make this work correctly. The most important detail of this program is that you report your payroll accurately! Underreporting your payroll will be discovered during an audit and will cause you to owe money. 

What happens if you find an error in the audit?

How do you dispute an auditor’s results? Many people don’t know that you have that option! Generally, when you go through the workers’ compensation audit, the insurance carrier is not looking to save you money. As a matter of fact, they’re probably hoping that you owe more! That’s where our unique service steps in. Once an audit is complete, if you feel that the end result is not correct, we will review the audit for you. We will need the payroll documents and audit worksheets. We will look through everything thoroughly and report our findings to you. If the audit needs to be corrected, we will contact the insurance carrier on your behalf. We have had many success stories, from a client who was told that they owed over $80,000 and we discovered that they owed $20,000, a difference of $60,000!. To a client who was told that they owed $15,000 but we discovered that they only owed $2,000. To yet another client who was told that they owed additional premium when they were actually due a refund of $30,000!  

The Takeaway

A workers’ comp audit can be a wonderful experience when you get a refund or learn that you owe less than the auditor stated. This is why it’s critical to analyze each and every audit, so that you aren’t stuck paying for something that you don’t owe. While the task of performing the auditing re-evaluation can be tedious, it’s certainly worth it and is the reason why at Paradiso Insurance we offer this service to all of our Parcel Delivery Customers. Give us a call today at 860-453-0116 and experience the Paradiso Parcel Delivery Insurance difference.