Every workers’ compensation policy ends the same way: with an audit. The premium you paid all year was an estimate, based on projected payroll. At the end of the term the carrier reconciles that estimate against what you actually paid out — and bills or refunds the difference. A boring audit is one where that difference is small and expected. Almost every unpleasant surprise traces back to four avoidable things.
Workers’ comp premium is built from your payroll and the class codes that describe the work your employees do. At the start of the policy nobody knows the exact final payroll, so the carrier estimates. The audit trues it up. If your payroll grew, you owe more; if it shrank, you are owed a refund. The mechanics are neutral — the surprises come from records that do not hold up.
The most common one. You estimated $400,000 in payroll, the business had a good year, and you actually paid $560,000. The audit lands and the additional premium is real. The fix is not to hide the growth — it is to call your agent mid-term when payroll runs meaningfully ahead of estimate, so the policy can be adjusted and the year-end bill does not arrive all at once. A growing business should expect a truing-up; it should not be ambushed by one.
Class codes carry very different rates. A clerical worker and a roofer are priced worlds apart, and if payroll gets lumped into the wrong code, the audit corrects it — sometimes expensively. The reverse also happens: an employee who does lower-risk work coded into a higher-risk class means you overpaid all year. Accurate job descriptions at the start, and clean records showing who did what, keep the codes honest in both directions.
This is the quiet one that catches contractors. If you hire a subcontractor who cannot show their own workers’ comp coverage, the auditor can treat that sub’s payroll as yours and charge you premium for it. Every subcontractor you pay should hand you a current certificate of insurance proving their own coverage — and you should keep it. No certificate, and at audit that sub becomes your payroll. Collecting certificates is not paperwork for its own sake; it directly protects your audit.
In Florida, the premium-bearing portion of overtime is generally the base wage, not the time-and-a-half total. If your records only show the gross overtime paid, the auditor may rate the whole inflated number instead of backing out the premium portion. Payroll records that separate straight time from the overtime premium can lawfully lower the payroll the audit rates. Most businesses have this data; they just do not present it, and money is left on the table.
You already keep almost everything an auditor needs. The trick is having it organized before they ask:
Businesses that walk into the audit with these in a folder tend to finish quickly and without argument. Businesses that go looking for them afterward tend to accept whatever the auditor estimated.
Audits are performed by people and they contain errors — a misapplied code, a sub charged despite valid coverage, overtime rated at the gross. You have the right to dispute an audit, and a good agency will do it with you: pull the records, show the carrier where the number is off, and get it corrected. Do not simply pay a bill that looks wrong. The window to dispute is limited, so raise it as soon as the audit arrives.
The best time to think about the audit is the month the policy starts, not the week it ends. If your payroll is running ahead of estimate, or you are not sure your subcontractor certificates are current, let us review it or call (561) 503-2696. A ten-minute check mid-term is how a year-end audit stays boring.
This article describes the general case. Coverage terms, limits, and exclusions vary by carrier and policy form — your policy governs. Send us your declarations page and we will tell you exactly where you stand.
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