How to Better Prepare for a Final Audit
Audits are a required component of the workers compensation insurance process. Knowing these three items can help employers in California successfully complete their audit and start the process on an educated foot.
Payroll
The term “payroll” as it applies to workers compensation insurance audits is a little different from the definition you may be used to hearing from the IRS.
For final audits, “payroll” includes the following:
· gross wages
· salaries
· commissions
· bonuses
· vacation
· holiday and sick pay
· overtime payments (excluding overtime excess)
· gifts
· lodging
These must all be considered when completing a final number for the “Payroll” portion of your audit.
Overtime Excess vs Payment
There is a difference between “overtime excess” and “overtime payment”.
Overtime payment is the payment for hours worked beyond normal scheduled hours. These payments are at a higher rate for hours worked.
Overtime excess is the increase in price above regular wages. This “excess” does not count towards your premium. This is why “excess” should not be included in your audit.
Employee Count
For “employee count”, this is the total number of employees at the end of a policy period. Fluctuations may have taken place during the term, but in California, it is only the final number which is included in the audit.
Reach out for assistance
Because audits are an infrequent occurrence, it’s natural for questions to arise. Nearly every insurance carrier has a customer service team ready to assist its clients. Many also have tools or resources accessible for their policyholders. Reach out to your carrier to see what is available and included in your coverage. For businesses in California, this summary from the Workers Compensation Insurance Rating Bureau (WCIRB) is a helpful place to start.
Our customers have access to new resources like this to help with the Audit process.
If you’re a customer of Preferred Employers Insurance, a Berkley company, feel free to reach out to us for your suite of educational guides that are now available for all policyholders.
Products and services are provided by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued.
SOURCES:
https://www.wcirb.com/guide-to-workers-compensation/standard-classification/pay-remuneration
https://www.wcirb.com/online_learning/preparing_for_the_final_audit/