All it takes is a few clicks.
What Is a Workers’ Compensation Audit?
When an employee suffers a work-related injury or illness, workers’ compensation insurance can help, providing benefits such as:
- Medical care
- Wages from lost work time
- Ongoing care
- Funeral costs
- Disability benefits
During a workers’ compensation premium audit, your company’s payroll will get verified. Audits look at your payroll because your workers' compensation premiums are partly based on the amount of compensation paid to your employees over a policy term. The amount paid includes money and benefits your workers have received.
Your insurance premium also depends on job classifications. These classifications help show the amount of risk your workers face. So, if the audit finds job duties and roles have changed at your business, you may receive a different premium.
When reporting your payroll, be sure to include any overtime payments employees receive. This will ensure your payroll record is as accurate as possible.
One of the main benefits to a workers’ comp audit is that it makes sure your coverage and premium match. This is important because it means you won’t be paying too much for your workers’ compensation coverage.
Most states require insurance companies to audit a majority, if not all, of their policies. Also, keep in mind that if your policy expires, your insurance carrier still has the right to audit you. For statement or phone audits of expired policies, we’ll typically notify you a week or two after your policy expires. We’ll then try to complete the audit within two months. For field audits, we generally complete them in around six weeks to three months.
What Is the Purpose of a Workers’ Comp Audit?
Your workers’ comp policy requires audits to verify your estimated payroll. These audits help make sure you’re paying the right amount for the right coverage. Depending on your state, workers’ compensation audits can also be a legal requirement.
When Should I Expect a Workers’ Comp Audit?
Our insurance agents start the audit process by sending you a notice that your premium audit is due within 35 days.1 In most cases, our premium auditors will notify you by email. To complete the audit, you’ll need to send us your payroll records and answer any questions we have about your business’ operation.
Remember that premium audits are not done at random. They’re mandatory when you have a workers’ compensation policy.
If your workers’ comp policy gets canceled, a premium audit will likely happen for the policy period when you had coverage.2
How Does The Hartford Do a Workers’ Compensation Audit?
Our auditors almost always reach out by email. In this email, they’ll let you know if we’ll be doing your audit by phone, in-person or online.
Regardless of how we perform your audit, we’re an insurance carrier that works hard to make the process as easy as possible. That’s why we offer our online self-service portal. We can do many of our audits online through this portal.
How Does The Hartford Schedule a Workers’ Comp Audit?
In some cases, The Hartford may make an appointment with you for a field audit or phone audit. If this is the case, you can count on us to be flexible with your schedule. We’ll be sure to schedule your audit on your terms when it works best for you. We’ll also schedule field audits at your place of business and be sure to tell you exactly what records you need in advance.
How Are Appointments for Workers’ Comp Audits Made?
Most of the time, our auditors at The Hartford will notify you by email when we’re auditing your business.
Types of Workers’ Compensation Audits
We do most of our audits digitally, but in some cases, we request other types of audits.
- Field audits are physical audits on-site at your place of business.
- Phone audits are done remotely. There’s no travel needed for these workers’ compensation audits. Once you send us your information, we’ll schedule the phone audit.
Comply With Your Insurer During a Workers’ Comp Audit
Providing your workers’ compensation insurer with the information they’ve requested is important. It’s also important that the information you send is accurate.
In fact, there are penalties for providing false information, including policy cancellation or fines. Some examples of fraudulent actions include:
- Underreporting payroll to reduce a workers’ comp premium.
- Supplying inaccurate job descriptions to represent lower risk for reduced workers’ compensation premiums.
- Providing false financial documents, such as fake tax returns.
- Not reporting subcontractors to lower your workers’ compensation premium. Make sure you check your state’s laws to see if you need to report independent contractors.
Getting the Results of a Workers’ Comp Audit
Our premium audit team will provide updates on your audit throughout the process. Audits usually take two weeks to complete.3
With each audit, we’re striving for the same goal: to ensure your payroll matches up with the payroll listed on your policy. If your payroll is too low, your audit may generate an additional premium. If you payroll is too high, we may lower your premium.
Audit reports also show changes to your classifications. If your business is misclassified, our team of auditors may add new workers’ comp class codes, which can change your premium. This is why reporting your business’ jobs accurately is essential during the small business IRS audit process.
Prepare for a Workers’ Compensation Audit
The best way to be ready for an audit is to always be prepared. You can do this by:
- Organizing all your documents
- Collecting information you need consistently
- Documenting any changes to job descriptions and other business functions as they happen
If you keep these tips in mind, you won’t have to scramble to find key information for your workers’ compensation audit.
Create a Workers’ Comp Audit Checklist
Auditors need financial information for the period covered by your workers’ compensation policy.
To prepare for your workers’ compensation audit, consider creating a workers’ compensation audit checklist to help keep track of:4
1. Employee information, including Form 941 for policies with employee payroll. For policies without employee payroll, you’ll need the Schedule C Tax Form or other Income Tax Forms along with other payroll records.
2. Owners, officers and partners information, including payroll information like:
- Their name
- The state where they work
- Their corporate title
- The percentage of stock they own
- How long they’ve been employed
- Their total earnings
3. Payment and certificate verification, including:
- 1099 Forms
- Certificates of insurance for each leased employee or subcontractor
4. Your business’s information, including:
- Your general ledger
- Sales journal
- Cash receipts
- Sales tax records
Workers’ Comp Audit Checklist
Remember, the main items you’ll need for your workers' compensation audit are:
- An accounting ledger
- Tax forms such as W-2, 1099, Form 941, Form 944 and a federal tax returns
- Certificate of insurance for every subcontractor
- Detailed descriptions of each business function
This list can change depending on what state your business is in. Contact our specialists at The Hartford to ensure you have all the information you need by calling 855-829-1683.
Last Updated January 4, 2023
1,3 The Hartford, “Trust The Hartford to Help Ensure Your Premium Is Accurate.”
2 The Hartford, “Preparing For the Premium Audit – Frequently Asked Questions.”
4 The Hartford, “Preparing For Your Premium Audit.”
Additional disclosures below.
Workers’ Compensation Audit
A workers’ compensation audit is a checkup to ensure your insurance company has the most up-to-date information on you and your employees. This confirms that you have the right amount of business insurance coverage.