January 1st of every year is a big day for many business owners. It’s the day their workers’ compensation policies renew and the workers’ compensation auditor will soon be calling.
For many, it’s a day that has a close resemblance to April 15th, tax day. They’re anxious, nervous and stressed, all rolled into one. The workers’ compensation annual audit is right around the corner and it could get ugly. But for other business owners, it’s another day at the office. Their payroll books are in order and their thoughts aren’t on this payroll audit, they’re focusing on growing their business for the upcoming year.
There’s a few ways to make your audit very pleasant and stress free. Have the coffee ready and make the auditor feels welcomed. Auditors are human and a little kindness goes a long way. Assign a friendly and qualified staff member to work with the auditor. It’s not a good idea to assign your most talkative employee to the auditor. Your employee may give the auditor information about their job that may be overstated and thus cause an unnecessary issue. Don’t let them sit at a desk that’s in the dirtiest and darkest room in your building. Make sure your employees know that there’s an auditor in the building and they may be walking around to interview them. The auditor has every right to do this but don’t encourage it.
Is your business classified correctly on your work comp policy? Are you sure? There are over 600 classifications for businesses and many are closely related but the pricing could be way off. The audit isn’t the time to discuss this. Your annual policy review with your professional agent is the best time to verify class codes per employee. Does your company have high risk positions that are performed by employees that are classified in a low risk position? Overtime payroll isn’t rated at the same level as regular hours. However bonuses to employees are included as payroll, however some states exclude safety or discovery bonuses in the audit numbers. Severance pay may be excluded on your audit payroll numbers, and this could be a large increase in your audit findings.
Owners, executives and members of a business can include or exclude themselves for coverage. Many states require a signature on the workers’ compensation contract to select this option. If you are the owner, executive or member and have excluded yourself, make sure that your health insurance policy is aware of this. Some health insurance policies have major coverage issues for work related injuries or sickness. The emergency room visit isn’t a good time to figure out the fine print. Again, discuss this with your professional agent.
Do you use uninsured sub-contractors? If so, there could be a big payroll surprise during the audit if you’ve not prepared for it by discussing this with your professional agent. Uninsured sub-contractors payroll that includes payments for supplies, equipment rental, travel cost, etc., could cause you to pay 100% of this amount towards your payroll audit. The general rule is ask your uninsured sub-contractor to provide you with detailed payroll numbers for the specific job. This simple request could be a HUGH savings for you as the business owner for the audit.
As you can see, workers’ compensation audit time isn’t the time to get your policy in order. By this time, it’s too late to make adjustments or set up processes to be ready for the audit. I recommend you work closely with your professional agent to review your current policy. These reviews shouldn’t take a lot of time but the time invested could save your business a lot of money over the years. Be prepared and only pay what’s owed. Not a penny more.
Rodney Stewart is the agency owner of Tristar Insurance Services
Rodney can be reached directly at 910-891-7081 or email @ email@example.com
His office located at 1204 N Ellis Ave Dunn NC 28334