Carrying a valid workers' compensation insurance policy is a must for any responsible business owner. This insurance policy guarantees that you will be able to provide financial assistance to any workers who sustain an injury while performing job-related duties without sacrificing the financial health of your business.
The amount of money you owe for your workers' compensation insurance premiums is based on the total amount of money you pay out to employees over the course of a year. Since estimated payroll amounts are used at the beginning of the year to determine premiums, it's important to reconcile the estimate with your actual payroll at the end of the year to avoid over or under paying. This reconciliation can be conducted through an audit.
Here are three types of workers' compensation insurance audits that you should be performing each year.
The first step in any reconciliation process should be a self-audit. You should take a look at your payroll records internally to determine if the estimated payroll amount used to set your insurance premiums have been exceeded, or whether your estimate was too high and you have paid too much money in premiums over the course of the year.
A comprehensive self-audit requires that you list each employee that received a paycheck during the year and his or her job title. This information will help you calculate your actual payroll for use when reconciling your premiums with your insurance company.
2. Telephone Audit
The completion of a self-audit can adequately prepare you for the telephone audit your insurance company will likely conduct as they prepare to reconcile your workers' compensation insurance premiums at the end of each fiscal year.
Telephone audits involve an auditor employed by the insurance company contacting your company's bookkeeper or accountant to obtain vital information. The auditor will ask for an accounting of each employee paid, their job title, and any supporting tax documentation that pertains to your company's payroll. Preparing these documents during the self-audit will help your telephone audit go smoothly.
3. On-Site Audit
If the insurance company feels the need to delve deeper into your financial records in order to reconcile your workers' compensation insurance premiums, they may choose to conduct an on-site audit.
The insurance company will dispatch an independent auditor to your location to physically comb through payroll and tax records. An on-site audit can be expected if your actual payroll is significantly less than your estimated payroll, since the insurance company will want to verify the accuracy of your accounting before issuing a refund.
Understanding how insurance audits work will help you more successfully navigate your workers' compensation policy in the future. For more information, talk to a professional like Austin Insurance Agency.Share