How to Avoid California Workers Comp Audit Surprises

When it comes to California Workers Comp Audits there is nothing more frustrating than when easily avoidable mistakes are made. This in turn causes the insured to have to pay costly premiums even after their policy period has expired. Some examples include incorrect annual payroll projections, lack of keeping accurate records and staying on top of payroll figures throughout the year, utilizing contractors or outside vendors who do not have workers compensation insurance themselves, and lastly not having an owner/manager in charge of working with the auditor who has a good understanding of how a California Workers Comp Audit is performed.  I am going to go into a bit more of each of these to ensure you have the best possible understanding of how to avoid these mistakes when it comes to your audit. For more information please visit our Workers Compensation page, see link: California Workers Compensation Insurance

Incorrect payroll projections can be detrimental. The best advice that can be given is to take the time to report accurate figures AND class codes at the inception of the policy.  Each employee’s job has a certain class code that the insurance companies use to determine the rate at which you will be charged. You may have several different class codes being utilized in one company. You must make sure each employee is classified correctly because if not you could be paying more than you should be. Or in another worse instances you may be paying less and when your California Workers Comp Audit comes around you will find yourself getting hit with a costly bill you were not expecting due to misclassification at the end of your policy term.

Keeping accurate records and staying on top of your projections for the year takes time but will ALWAYS pay off in the end. It is important to report all figures and class codes accurately in the beginning and if you are off a bit or things change as they often do, don’t worry! Your carrier will allow you to make adjustments at any time which would adjust your monthly payment based on updated figures and/or give you a chance to start putting some money away so you can start accruing for the additional premium you may be responsible for. That’s why it is vital to keep the best records possible so you will not have to be responsible for more premium than you should be.

Utilizing contractors and/or outside vendors who don’t carry their own workers compensation insurance is very dangerous as now you may be assuming responsibility for them AND their employees in an event of an accident or an audit. Workers Comp Insurance is a requirement and its sole purpose is to protect an employee from an injury sustained on the job. This includes sub-contractors. A prime example would be the auditor showing up on your job site and finds a sub-contractors roofer doing work on the roof. The auditor will then ask you to produce a sub-contractors workers comp certificate of insurance that covers this particular worker. If you cannot come up with this the auditor will include this workers (the roofer’s) compensation in your audit and now you will be responsible for additional premium.

It is crucial to have someone working with your auditor that has a good understanding of the audit process, is prepared and as well as has knowledge on workers comp insurance in general. Make sure the person responsible for the audit has a vast understanding of all various class codes as well as all job functions of your employees. In making sure this is the case the auditor will not have to do any guessing as they will be able to ask any pertaining questions they may have which can avoid employees to be miss rated and placed in a code that carries a higher rate. If this is not the case you may be responsible for paying the additional premium as a result of the auditor’s mistake.

Hopefully all these little tips and tricks will help you with making your California Workers Comp Audit go as smoothly as possible. They may seem simple but will save you valuable time and money if you are sure to follow them. Your audit should never sneak up on you and you should always know what to expect as everything is based on the information you provide.

For any more audit questions or if you would like us to take a look an audit related situation for your business, please do not hesitate and contact us right away. We can provide the proper information needed in order to have a successful audit and also give you a quote on any of your commercial lines of insurance that helps protect your business year round. We are just a click or a call away!