Don’t be surprised (or overcome with dread) when you hear your workers’ compensation policy is being audited.
Every workers’ compensation policy must be audited annually at the end of the policy period to make sure you are charged the correct amount for your policy premium.
Why do I have to do an audit?
Why is a premium audit necessary? Because your workers’ compensation premium is based on your estimated payroll and classification codes for the year. Your actual payroll for the year could differ for a number of reasons. Maybe business was better than you expected and so you hired more employees than planned, or you started up or stopped part of your operation.
After the policy period ends, premium auditors verify the actual payroll and that each employee was correctly classified. Sometimes the audits are conducted onsite at your business, and sometimes you’ll just be asked to submit payroll information electronically or by mail.
As a result of the audit, you might receive a return of some of your premium amount or an additional bill.
Pay-as-you-go wage reporting
For businesses with a lot of fluctuation in payroll, like seasonal businesses, some insurers including SFM offer pay-as-you-go wage reporting. With this option, businesses report wages and pay premiums monthly, quarterly or semiannually rather than annually. This cuts down on discrepancies between the estimated payroll and actual payroll, increasing the accuracy of the premium.
See our Q&A video on this subject: