Do you know that workers compensation cover is one of the biggest challenges that small business owners face, and it comes at a cost? According to business consultant Ed Priz’s book “A Field Guide for Employers,” wrote that he found an overcharge of $ 20 million during his 30 years career. That shows that small business owners need to have the required knowledge on how workers comp work. A correct business audit protects a business owner from the general mistakes of being overcharged.
The following guides would help small business owners on how to prepare for a workers comp audit.
Plan for the Audits
Before the policy expiration, your insurance provider will notify you of an audit, so it’s upon you to schedule for it. Below are the various forms of audits
- Physical Audit – A physical audit involves an auditor’s presence at your work. Their involvement may include questioning your employers, making observations, and reviewing your business records. It usually has a 30-day duration before submitting the final review.
- Voluntary Audit – In a voluntary audit, most of the review is done through mail and phone conversation. In most cases, a form is sent to fill with a time duration lasting to 60 days.
To determine your first premiums, you can have a preliminary audit. This audit is performed if business owners are in a hurry to have workers compesation cover.
In case of a change of functioning, interim auditing may be performed to provide workers comp insurance.
Understand the Working of Workers Comp Cover
As an employer, you need to know how workers comp premiums are calculated that is according to your employees. The process is known as remuneration which the NCCI sets the guides used in the different states. The insurance rates depend on an employee’s position and the associated risks. There is also the need to understand the classification codes that each insurance provider uses to charge for each position.
Have Your Records Ready
Before any audits, there is a need for you to prepare and gather all the required documentation. This is because worker’s compensation cover is based on the salary statement, exposed risks, and declarations. Such paperwork’s may include:
- Business Information
- Employees positions and responsibilities
- Employees names and designation
- Officers number in each department
- Contractors and subcontractors work assignment and their insurance covers
- Payroll and cash disbarment statements
- Annual report of your employees’ number of hours and days while at work
Have an Updated Job Operation Description
Worker’s compensation costs are also based on the risk your workers face while on their daily positions while at work. This shows that auditors would review each position and your job operations. In order to be safe and avoid overcharges, there is a need to check how your workers were classified and are in their current positions.
The Importance of having an Updated Job Role Descriptions.
Having an updated job role description is of great advantage when it comes to a workers compensation examination. With the correct job description, auditors are in a position to use the correct class code in determining your works comp premiums. Wrong application of class code would result in wrong premiums pay with either an overcharge or undercharge.
There is also the need to know if your contractors and individual subcontractors are insured or not. In case they have a workers comp, then you are obliged to not pay premiums for them. With such information, you are in a position to assess the auditor review for correct payments.
How to Examine an Editors Review
After an editor assessment, you need to examine the work in order to make sure that it matches your business roles and responsibilities. The detailed part to review consists of
- Salary review – Since workers comp relies on the payroll data, the payroll review needs to match with your accountant data.
- Job Classifications – Worker’s compensation premiums are considerate of the classification code, which relies on job categories. Unless your organization underwent a massive positions change, your previous categories should match the on expiring policy.
- Experience rates – In most states, the experience modifier is supposed to remain constant. If the auditor made a change on it, you are allowed to ask for the reasons for such changes. Being in a position to understand the working of a workers compensation policy puts you in a position to know if there is an overcharge on not.
How to opt for a better premium on a workers compensation cover
Worker compensation auditing is a must. However, opting for pay as you go cover puts you in a position to enjoy lower premiums as compared to the normal annual reviews.
Pay as you go cover only charges you once you update your payroll statements. Even with its precise premium, there is the need to have auditing to avoid remuneration errors.
After reviewing an auditors assessment, you need to put a sign to prove that you took part in the assessment and have the knowledge of its undertaking.