Workers’ Compensation is designed to protect businesses and their employees from the expenses that result from workplace injuries. One requirement most states have in common is that insurance providers must conduct a workers’ compensation audit to ensure the businesses are paying the right amount for their coverage. Let’s take a look at what a workers’ comp audit is, the purpose of it, and the types of audits you will find.
What is a Workers’ Compensation Audit?
A workers' comp audit, or a workers' compensation audit, is an end-of-year review of records. In New Jersey, not only is it legally required for you to offer this type of insurance coverage for your employees, but it is just a good idea to protect your business with this coverage. It can provide benefits such as medical care, wages from lost work time, ongoing care, funeral costs, disability benefits, and more.
During an audit, your business's payroll will be verified. Auditors will go over your payroll because your workers’ comp premiums are partly based on the amount of compensation paid to your employees over a policy term. The amount paid includes money and benefits your employees have received.
What is the Purpose of a Workers’ Compensation Audit?
A workers’ comp audit conducted to ensure that your business has paid the correct premium for workers' comp insurance. Auditors will generally evaluate the risk, classification code, experience modifier, and payroll amount in the process. If they find a discrepancy, it will require an adjustment, usually making the premiums due in a short time after the audit.
Types of Workers’ Compensation Audits
The type of audit you receive depends on the size of your business operations and your insurance premium amount. There are generally four types of audits:
Phone Audits:
Your insurance carrier will go through your payroll records and other relevant documents via phone with you.
Mail Audits:
You are mailed audit forms to verify your payroll and other important information. You’ll have allotted time to complete the forms and send it back within a timely manner.
Physical Audits:
These are usually done for larger companies with higher insurance premiums. The audit will take place at the headquarters of the company, usually meeting with a couple of superiors in the company.
Voluntary Audits:
If you run a small business, your insurance company may require a voluntary audit. With this type of audit, they will send you an audit form via email. You’ll have sufficient time to complete the forms and provide the supporting documentation.
Our professional staff here at Danskin would be more than happy to sit down with you and discuss workers’ compensation options for your business. If you’d like to learn more about workers’ compensation or just have some general questions about it, visit our website or give us a call at 732-449-3800.