Workers' compensation audits require various documents and records to accurately assess an employer's exposure to risk and determine the appropriate premium. These records serve as evidence of the workforce, payroll, and other important information. Having these documents readily available and organized is essential for a smooth and successful audit process. Below, we'll outline the typical documents and records required for a workers' compensation audit.
1. Payroll Records:
Accurate payroll records are at the core of a workers' compensation audit. These records should detail the wages paid to employees during the policy period. Payroll records should include:
- Employee names and identification numbers
- Job classifications
- Regular wages
- Overtime payments
- Bonuses and commissions
- Sick pay and vacation pay
- Any other forms of compensation
2. Personnel Records:
Personnel records provide crucial information about employees and their work status. These records help in verifying job classifications and employee exclusions. Personnel records typically include:
- Employee names and contact information
- Job titles or descriptions
- Dates of hire and termination
- Employee status (full-time, part-time, temporary, etc.)
- Exclusion forms for business owners or officers if applicable
3. Certificates of Insurance:
If subcontractors or independent contractors are used, the audit may require certificates of insurance. These certificates should demonstrate that subcontractors have their own workers' compensation coverage in place. Failing to provide these certificates can lead to additional charges in the audit process.
4. Check Registers and Check Stubs:
Check registers and check stubs are financial records that can be used to cross-verify payroll and wage information. These documents provide additional evidence of wage payments made to employees.
5. IRS 941 Forms:
Form 941 is the Employer's Quarterly Federal Tax Return, which reports employment taxes. While not always required, it can be useful to cross-check payroll information and verify employment tax payments.
6. Overtime Records:
If overtime pay is a significant part of the payroll, specific overtime records may be requested. These records help auditors accurately assess the premium associated with overtime wages.
7. Timekeeping Records:
Timekeeping records, such as timecards or time sheets, can serve as valuable evidence of hours worked by employees. They help confirm regular hours and overtime hours worked by employees.
8. Job Descriptions:
Job descriptions provide insights into the nature of work performed by employees in different roles. Accurate job descriptions help auditors confirm that employees are classified correctly for premium calculations.
9. IRS W-2 Forms:
W-2 forms provide a summary of employee compensation for the year, including wages and taxes withheld. These forms can help cross-verify payroll information.
10. Subcontractor Agreements:
If subcontractors are used, contracts or agreements with subcontractors should be available. These documents can help determine the need for certificates of insurance and compliance with workers' compensation requirements.
11. Employee Rosters:
Employee rosters, which list all employees and their job classifications, can help streamline the audit process and provide an overview of the workforce.
12. Expense Records:
Documentation of expenses related to the workers' compensation policy, such as dividends or other discounts, should be accessible for review during the audit.
13. Claims History:
The insurance carrier may request information related to previous workers' compensation claims. Employers should be prepared to provide details on past claims, their costs, and their resolution.
14. Safety and Training Records:
Records related to safety training and workplace safety measures can have an impact on premium calculations. Employers should maintain records related to safety programs, accident prevention efforts, and training.
15. Communication with the Auditor:
Correspondence and communication with the auditor should be documented. This includes any emails, letters, or notes regarding the audit process.
16. Additional Documentation:
The specific documentation required may vary based on state regulations, industry, and the insurance carrier's requirements. Employers should consult with their insurance provider or auditor to ensure they have all necessary records ready for the audit.
Maintaining organized and complete records is essential for a smooth workers' compensation audit. Employers should be proactive in record-keeping throughout the policy period to ensure accurate premium calculations and a successful audit process. Additionally, open communication with the insurance carrier and the auditor can help address any questions or concerns about the required documentation.
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