As the owner of a business, you have a lot of different things to think about on a daily basis.
You've gotten this far because of how much you care for your employees' safety; a concern that isn't lost on them.
As such, you've selected a workers' comp policy that best suits both the needs of the company and the needs of your workers.
However, every business undergoes a workers' comp audit to make sure your company is properly classified for the policy you have. Here are a few tips to consider as you prepare for the workers' comp audit that's coming up.
1. Remember to Include Deductions
Even with the upcoming workers' comp audit seeking information on your premium, there will be things excluded from it that they need to see as well.
Not remembering to include deductions can cause a huge setback and also cause the numbers to be eschewed.
Be sure to include things such as overtime, allowances, tips, benefits you provide your employees, severance, bonuses, etc.
There's a hefty fine that comes with forgetting to include these, be exhaustive and list every facet that you can think of ahead of time.
2. Put Time Aside to Meet with the Auditor
Whenever the Auditor is scheduled to come to your place of work, be sure to prioritize it above anything else that day.
Find a quiet room in which they can set up shop for the day and conduct the necessary interviews of personnel in your company.
Should an emergency arise where you can't meet with the auditor, be sure to have a backup plan. Choose someone to meet with the auditor on your behalf that knows the ins and outs of your company as well as you do.
Just as important, make sure they understand your company's workers' comp plan and the classifications of said plan.
3. Provide Every Necessary Piece of Paperwork
Knowing your company's workers' compensation classifications and mentioning all deductions is only half the battle. You need to provide documentation to back up your claims.
As such, be sure to have documentation of your tax returns, insurance, payroll records, and proof of your business's labor and equipment requirements.
Having these printed out and ready to be handed over to the auditor will speed up the process and have them out the door that much faster.
4. Know What's Included in "Payroll"
Throughout the audit process, you'll be hearing the term "payroll" more than you will for the rest of your life. While you may know the role it plays in paying your employees, you may not be as familiar with what's included in it.
First, you want to layout the gross salaries and wages of your employees. Then you want to list employee commissions, bonuses, and the amount you've paid on their holidays, sick days, and vacation days.
As previously mentioned, don't forget those deductions. While some don't necessarily fit in the "payroll" category, they're still necessary for you to list out.
5. Know Your State's Specifications
Not all state workers' comp exclusions and deductions are created equal. Be very wary of compiling information for your audit based on the guidelines of different states.
Doing so could risk you missing out on extra exclusions that apply to your state and misinformation.
There's a general workers' compensation 101 that will help get you started, but then there are specifications you also need to consider.
If you need more information on what those look like, your insurance company or the auditor themselves can provide that before the audit takes place.
6. Identify Any Subcontractors You Have
In performing projects for your clients, you've more than likely used what are called subcontractors to bring the project to fruition.
If you're not familiar with the meaning of subcontractors, they're essentially companies that a contractor hires to perform a specific task.
For instance, say your company is a contractor that's tasked with constructing a building from the ground up. You've undoubtedly hired subcontractors such as an HVAC company to install the building's heating and air conditioning system.
In that example, you would be required to show documentation of that HVAC company (the subcontractor) in the form of a 1099 form.
If a worker from that HVAC company got injured, and the HVAC company itself is uninsured, you would be liable to provide their worker workers' comp coverage.
7. Double Check How You've Classified Your Employees
Don't try to cut corners and list employees as clerical workers to get your company off the hook for paying them workers' compensation.
If an employee is tasked with being in a setting of labor (such as a production floor) then they can't be placed in a clerical classification due to the risk involved.
Don't be afraid to ask your insurance company which classifications each employee would fall into.
8. Do the Necessary Research
Not knowing the proper classifications and exclusions won't leave a good impression on the auditor.
Be sure to do the necessary amount of research for any areas of the workers' comp audit process you're unfamiliar with.
Even if that means sitting down and going through each section with your insurance company, so be it. You'd rather be diligent than unprepared. Being unprepared, in this instance, can cost your company six figures in penalties.
9. Hire an Insurance Solutions Company
Don't get discouraged if this process is sounding overwhelming or confusing to you.
There are expert insurance solutions companies out there that can provide your business with the optimal workers' compensation and walk you through the audit process.
Business insurance is a necessity and you want to make sure your company is lined up with the best fit for its needs and classifications.
Don't Go the Workers' Comp Audit Process Alone
Why go through a workers' comp audit, that you're not completely knowledgeable on, alone when you don't have to?
Be sure to read this article on what workers' compensation covers to get a better understanding of the entire ideology behind it.
For more inquiries, please reach out via our contact us page and we'll be happy to assist you further.