What Is a Workers Compensation Audit?

What Is a Workers Compensation Audit?

A workers compensation audit is a review of your business payroll, job classifications, and payroll records to confirm the workers compensation premium you were charged matches your actual exposure. Insurers perform these audits to verify that the estimated figures provided when you bought the policy align with what your business truly looked like during the policy period.

Why Audits Happen

Every workers compensation policy is built on an estimate of your payroll and the types of work your employees perform. At the end of the policy period, the insurer checks those estimates against real data. If your actual payroll was higher than expected, or if workers were classified into riskier categories than initially reported, the audit can result in an additional premium. If payroll was lower, you may receive a refund.

What the Auditor Reviews

The auditor typically examines payroll records, general ledger entries, subcontractor documentation, and job descriptions for each employee. They check whether each worker was assigned the correct class code, which directly affects the rate applied. Some audits also look at overtime, bonuses, and workers who may have been misclassified as independent contractors.

Types of Audits

Audits can be physical, meaning someone visits your workplace, or they can be conducted remotely using documents you submit. Physical audits are more common for higher-risk or larger payroll operations. Remote audits are faster but may require more precise paperwork to avoid adjustments.

Prepare for the Audit

• Gather payroll journals and tax filings for the policy period
• Organize job descriptions and classification codes for every role
• Collect subcontractor certificates of insurance and payroll records
• Keep records of any overtime, holiday pay, or bonuses paid

What Happens After the Audit

The auditor issues a final audit statement showing the adjusted premium. If additional premium is owed, it becomes a balance due. If there is a credit, it may apply to the current policy or be refunded. Disputes can usually be raised by providing supporting documentation or requesting a re-audit through the insurer.