As your company’s workers’ comp pro, you know your annual premiums are “confirmed” by a year-end audit. You can’t avoid this audit, but you can be well-prepared for it. Preparation is the key to a workers’ compensation audit that goes smoothly and produces desirable results. Lack of preparation can bring disastrous results, in the form of higher premiums.

To help you prepare, we’ve pulled together some tips from audit experts. These tips come from two national firms, Workers Compensation Consultants and Advanced Insurance Management. They note that the purpose of the workers’ compensation audit is to determine if total payroll you projected for the preceding policy year was accurate. Your annual insurance premium is based on total payroll and worker classifications. “Payroll” includes payments you make to any uninsured contractors you do business with.

1. Designate the Right Contact Person. The person who works with your auditor should be the company owner or someone else fully familiar with your company’s various job positions and your payroll records. If you can’t adequately answer the auditor’s questions, they will guess – not in your favor. Your liaison should review relevant records before the audit, so information is fresh in their mind.

The right contact person needs the right attitude, too. Be cordial and helpful, not confrontational. The auditor is just doing his or her job. If you seem uncooperative, the auditor may wonder if you’re trying to hide something. This is not the path to a successful audit.

2. Assemble Everything in Advance. The easier you make the auditor’s work, the faster your audit will go. Your auditor will want to review documents such as:

• Detailed description of your business operations
• Payroll records
• Individual earnings records
• Overtime payments by individual
• Federal 941 tax records for the audit period
• State unemployment reports
• Employee records
• Certificates of insurance for all subcontractors

Preparing everything in advance cuts down on paper shuffling and needed clarifications.

Separate overtime payments, and summarize overtime by job classification. That way the auditor can easily discount overtime pay back to straight time. This is allowed in most states, and it can save you considerable money.

For employees whose work falls in more than one classification, track payroll by dollar amount, not percentage. If this payroll separation isn’t clear, the auditor will apply the employee’s entire payroll amount to their highest classification.

3. Set Aside Space for the Auditor to Use. You want them to work on your premises. That way you can be available to answer any questions. This also makes it easier for you to review their work before they leave. If the auditor must work off-premise, make sure your liaison is always available via phone during the audit.

4. Do not volunteer anything. Answer every question the auditor asks. Give them whatever records they want to review – they have a great deal of latitude in this. But do not offer any additional documents or comments. And don’t ask questions. The less the auditor has to look at or listen to, the sooner they can finish their work.

5. Schedule Final Review Time. You will have to sign off on the auditor’s findings. So set aside time to review their work in detail once they have finished. How did they classify your employees? How might the audit affect your business? Make special note of anything you may want to dispute. If a worksheet is incomplete, do not sign it. Obtain a copy of the audit for your files, and retain it.

Know your role and what information you’ll need to provide. Prepare in advance and stick to the audit schedule. When you’re forthcoming and can simplify the auditor’s work, your workers’ compensation audit will go smoothly. That’s the best way to ensure your premiums are accurate and as low as possible.