How to Prepare for Your Workers' Compensation Audit: A Step-by-Step Guide

How to Prepare for Your Workers' Compensation Audit: A Step-by-Step Guide

For many businesses, the annual workers' compensation audit can feel like a daunting task. However, with proper preparation, the process can be smooth and stress-free. At Engage Insurance Group, we guide our commercial clients through every step of the audit process, ensuring accuracy and compliance. Plus, our in-house accounting team is available to handle the audit on your behalf, saving you time and effort.

What is a Workers' Compensation Audit?

A workers' compensation audit is an annual review conducted by your insurance carrier to verify your payroll and employee classifications. The purpose is to ensure that your premium accurately reflects your business's exposure to workplace risks. Underreported payroll or incorrect classifications can lead to unexpected adjustments in premium costs.

Steps to Prepare for Your Work Comp Audit

1. Gather Your Payroll Records

Your payroll data is the foundation of your audit. Be prepared to provide:

  • Payroll journals and summaries

  • Tax reports (941s, state unemployment filings, etc.)

  • Overtime records (with breakdowns of regular vs. overtime pay)

  • Employee classifications and job descriptions

2. Verify Employee Classifications

Each job role has a specific classification code that determines your workers' compensation rates. Misclassifying employees can lead to higher premiums. Double-check that each worker is assigned the correct classification based on their actual job duties.

3. Organize Subcontractor and Independent Contractor Documentation

If you work with subcontractors or independent contractors, ensure you have the following:

  • Certificates of insurance for each subcontractor

  • Contracts and payment records

  • Documentation of any uninsured subcontractors who may need to be included in payroll calculations

4. Review Previous Audit Results

Looking at past audits can help identify areas that may need improvement. If there were discrepancies in previous audits, address them proactively before the new one begins.

5. Be Ready for the Auditor’s Questions

During the audit, the auditor may ask about:

  • Changes in business operations

  • Employee job roles and classifications

  • Payroll discrepancies or missing documentation

How Engage Insurance Group Can Help

Preparing for a workers' compensation audit takes time and attention to detail. Our in-house accounting team is available to handle the process for you, ensuring compliance and minimizing any potential premium adjustments.

By letting our experts manage your audit preparation, you can focus on running your business with confidence, knowing that your insurance is accurate and optimized for cost savings.

Need Help with Your Work Comp Audit?

Don’t navigate the audit process alone. Contact Engage Insurance Group today to learn more about how we can assist you with workers' compensation audits and ensure your business is fully prepared. Let our accounting team take the burden off your shoulders!

Juan Luengo