Workers Compensation Audit Errors – Separation of Payroll; Policy Credits Removed

Several years ago I developed a list of the ten most common audit errors and mistakes. This page, published on our website, is visited quite often and I thought this blog would be a good place to talk about a few of them. For a complete list and description of common workers compensation audit errors just drop by our website.

  • Previously Applied Policy Credits Are Removed; The rating process used to arrive at a premium for a workers compensation policy is made up of many individual parts. Rates, payroll or remuneration, static fees and charges, dynamic fees and charges, credit and debit factors, merit and experience modification factors are a few of the types of premium modification factors used in the rating formula. Of course some of these are dictated by the individual state in which the business is located and subject to the state rules and laws that apply. Most audit processing is automated…someone keys in the corrected information generated from the audit…and poof…the computer spits out the completed audit. Problem is that sometimes policy credits that were applied at the beginning of the policy are lost in the process.
  • Separation Of Payroll Not Allowed; For the most part a workers compensation risk is classified into what’s known as the governing classification code and the entire payroll for the business is all dumped into that governing code. Under special circumstances payroll is allowed to be split between different classification codes. The application of these rules is very specific and not all business operations qualify for payroll separation. However we often see mistakes where a business owner, who may be allowed to separate payroll between codes, is not allowed to do so and during the audit the payroll separation is disallowed by the auditor. This can make a significant impact on the final premium an employer pays.

We’ll continue this line of thought in future blogs. In the mean time if you have questions about audit errors or need to discuss a specific problem you may be having be sure to give us a call. (Sorry about the commercial!)

Hope this helps you out! Thanks!