What Is a Workers’ Comp Audit? Why Do You Need One?

It’s an unfortunate fact that people sometimes get sick or hurt on the job. 

When someone experiences a workplace-related injury, they have a right to file a workers’ compensation claim. Commonly, workers’ comp claims are filed after falls, lacerations, sprains, fractures, broken bones, eye injuries, or “continuous trauma,” which is related to repetitive actions.

HOW WORKERS’ COMPENSATION OPERATES

Most states require employers with at least one employee to carry workers’ compensation insurance. Even if it is not required by your state, carrying this important insurance protects your business from major losses related to worker injuries. 

When an employee is injured on the job, they can file a claim. This involves notifying the employer of the injury and following all of the steps required to document what happened. They will also have to prove that their medical condition is a direct result of their work.

If the claim is approved, the insurer informs both the employer and the employee with information about what happens next. Typically, the insurance coverage will cover the employee’s medical bills, disability payments, medication costs, and some lost wages. Another option is for the employee to negotiate with their employer for a settlement in the form of a lump sum or structured settlement.

IMPORTANCE OF A WORKERS’ COMPENSATION AUDIT

A workers’ comp audit takes place at the end of the year. The process reviews your records and ensures that you have paid the right amount for your policy’s premiums. The audit can take place in-person, over the phone, or even through the mail.

When you apply for workers’ compensation coverage, you provide the insurance company with estimates of your annual payroll costs as well as information regarding the type of work that your employees perform.

The two key things that are compared in an audit are the quoted payroll at the start of the policy and the actual payroll at the end of the year.

If there is a mismatch, the price your business pays for a workers’ compensation insurance plan is adjusted appropriately.

While this can occasionally lead to an increase in premiums, it often leads to a decrease, especially if you have avoided major injuries and illnesses on the job. 

Make sure you’re not paying too much for your workers’ compensation premiums by completing your workers’ compensation audit in a timely and accurate manner.

HIRE A CPA TO PERFORM YOUR WORKERS’ COMPENSATION AUDIT

The amount of paperwork needed to complete your workers’ comp audit can be daunting. If you want to make sure that all of this is done correctly, bring a qualified CPA on board to manage this process for you! 

Your company’s bookkeeper can compile all of the appropriate records, navigate complex reporting systems, and keep your company aligned with state requirements related to workers’ compensation. 

You'll save time when you don't have to navigate this process yourself. This will free you up to do the work you want to do: focusing on your business and growing your profits.

At Chaliff + Associates, our experts are ready to discuss your upcoming workers’ compensation audit along with all of your small business bookkeeping and accounting needs. Request a free consultation to learn more about how your small business could benefit from hiring a CPA.