The word audit always seems to come laced with some worry. If you’ve been told you are going to undergo a workers’ compensation audit, you’re probably scratching your head wondering what you need to do to prepare. Before I get into the steps you’ll need to take to make this audit as easy as possible, let’s look at what you’re getting yourself into, to begin with.
A workers’ compensation audit typically happens each year to verify that your business pays the right amount in workers’ compensation insurance and that you’re properly covered if something goes wrong.
Because this is a standard review means you probably don’t have a lot to worry about like you would other audits. While the auditor is looking for gaps in your coverage, they’re doing so as a means of verifying that you’re properly insured and will be protected if an employee gets injured or ill on the job.
How to Prepare for Your Workers’ Compensation Audit
The audit itself does not have to be a daunting process. It can be smoother than you might think if you take just a few steps ahead of time to prepare. These steps include gathering the information the auditor needs, and nothing more, ahead of time and keeping things simple.
Step #1: Gather Your Records
In order for the auditor to do their job well, they will need a few records from you. Gathering these records ahead of the audit will save you both time and energy. While the requested records might vary based on your insurance company, most auditors will ask to see records from your general company, payroll, cash disbursement, and insurance.
General Company Information:
- Your company operations
- Job descriptions for each employee
- Total number of employees at each location
- Owners/Officers’ names and titles
- Contractor and subcontractors
- Payroll register
- Business checkbook
- Accounting ledger
- Employee tax forms
- State insurance tax reports
- Number of hours, days, and weeks worked
- Overtime records
- Individual earnings
- Salaries, wages, commissions
- Payments to contractors and subcontractors
- Payments to local laborers
- Materials purchased
- Certificates of insurance for each subcontractor
Gathering this data ahead of time will speed the process and help verify that you have the information the auditor needs to do their job.
Step #2: Review Your Job Descriptions
Because your workers’ compensation insurance is based on payroll and employee risk, it’s important that your auditor understands the job duties of each team member and subcontractor. Having a list of these job duties will help the auditor understand how your business operates and what each employee’s day-to-day job responsibilities entail.
Sometimes, you will need to fill out a form and answer questions about the job responsibilities. In this case, it’s still a good idea to have reviewed the job descriptions ahead of time so you’re able to move through that form and questionnaire faster.
Step #3: Keep the Process Simple
Chances are, the auditor has been through this process more times than you have been. They know what questions need to be answered and what documents need to be seen. Offering more or less information than what’s requested can muddy the process and add unnecessary difficulty.
Still, if you have questions during the process or about the process, it’s okay to ask. Engaging the auditor during the review can help you know what was addressed during the audit. When it’s time to sign off, you will be able to look at the documents. Verifying that everything is complete and accurate will be far easier since you have done so much work to prepare.
We Can Help
Getting ready for an audit of your workers’ compensation insurance can feel overwhelming. If you have questions about your upcoming audit or want to verify that you have the right insurance for your organization, contact us at McGrath Insurance Group today.