Have you ever had to pay an audit premium for workers compensation coverage? If so, you’d likely find it difficult to swallow the fact that over 75% of premium audits are incorrect. However, in most cases the audits are not incorrect because of the auditor, even though many auditors are not well trained on the rules. Most of those errors occur because the employers don’t keep the records that they should keep to validate the original premium amount.
Unfortunately, auditors are busy and have little interest in educating you on how to better substantiate the premium. Therefore, following some fundamental disciplines can assist you in avoiding unnecessary adjustments to your premium.
Since workers compensation follows payroll records, it’s important to keep detailed records, including class code and a simple job description. Classifying employees properly and understanding those classifications is very important. If someone is classified as a clerical employee, then 100% of their duties must be clerical. If an employee has 70% clerical duties and 30% non-clerical duties, you cannot classify the employee as clerical. In a nutshell, you’re either 100% clerical or 0% clerical according to the rules.
For instance, if Jane is classified as a clerical employee and periodically delivers paychecks to people on the production floor, make sure that if questioned by the auditor as to whether she ever goes to the production area, she properly answers yes, but only to deliver paychecks. If she were to answer the question as, “Yes, I go out in the production area all of the time” and doesn’t qualify the statement with the specific purpose of delivering paychecks, you could run the risk of that employee being re-classified from a clerical code to a production code, carrying a higher rate.
Following are some helpful tips to keep in mind:
There are certainly other things to consider. Keeping meticulous records and making sure there is a friendly and knowledgeable person available to work with the auditor is vital. Treat the auditor as a welcomed guest. Be prepared and present a package to the auditor. Don’t go above and beyond by offering gratuitous information. Stick to the fundamental questions. And finally, don’t allow the auditor to roam around the workplace unaccompanied. It only raises the risk of someone volunteering information that might not be favorable to the audit (Remember the “Jane” example above.)
If you follow the guidelines and assist the auditor in substantiating the original premium, if a grey area becomes present, the auditor will likely favor you. Most importantly, you will save time for your team and the auditor.
Remember, preparedness is the key. Being prepared means keeping good records in a system that allows you to present them in an organized format. The premium audit does not have to be difficult and, depending upon how prepared you are, might even be rewarding.