Workers’ comp audits: how to make yours boring

Every workers’ compensation policy ends with an audit. The carrier compares the payroll you estimated at the start of the term against what you actually paid, then bills or refunds the difference. Handled well it is a formality. Handled poorly it is a surprise invoice.

Why audits go badly

Wrong class codes. Premium is calculated per class code, and rates between codes differ enormously. An employee coded as roofing when the work is clerical costs you many times over. Misclassification is the most common reason businesses overpay all year and then argue at audit.

Uncounted subcontractors. If a subcontractor cannot produce their own workers’ comp certificate, the auditor may add their payroll to yours. Collect certificates before the work starts, not at audit time.

Overtime reported at full value. In most cases only the base portion of overtime counts toward premium, not the premium portion. Payroll records that do not separate the two hand the auditor a higher number than you owe.

Officer payroll not capped. Florida applies specific inclusion and exclusion rules to corporate officers and LLC members. Reporting officer compensation without applying them inflates the audit.

Making it boring

• Separate overtime base from the premium portion in payroll all year
• Keep a current certificate on file for every subcontractor
• Review class codes with us annually, not at renewal panic time
• Track payroll by code, not just by employee
• Tell us when job duties change materially mid-term

An audit should confirm what you already knew. If yours regularly produces a number you did not expect, the problem is upstream of the audit — and it is fixable.

We review class codes with commercial clients before renewal, not after the bill arrives.