What is a Workers Compensation Audit?

Hello, everyone! Today, I?m going to explain a little more about what a workers? compensation insurance audit is.

When people hear the word audit, they tend to panic.

First of all, don?t worry!

This audit is performed annually.

Why Is the Workers? Compensation Audit Necessary?

All businesses that have workers? compensation insurance are required to undergo an annual audit.

When you first purchase workers? compensation insurance, you estimate the amount you expect to spend on wages?both for the business owner and for employees, subcontractors, or other companies you work with.

The audit is conducted to verify if the estimated payroll expenses you reported match what actually happened during the year.

How Does the Audit Work?

Let?s look at a simple example (not based on real figures).

Suppose you initially estimated $20,000 in payroll expenses.

However, when the annual review is conducted, the actual amount spent on payroll?including subcontractors?turns out to be $100,000.

Now you might be wondering:

• ? ?Do I have to pay the entire $80,000 difference??
• ? No!

You don?t have to pay the entire difference.

Each type of work in your business is classified under a specific percentage rate for workers' compensation insurance.

For example, there are different rates for:

• Carpentry
• Office employees
• Other specialized trades
• Your final workers' compensation costs will be based on the classification and rates assigned to your business activities.