Page 6 - SIB Whitepaper - Workers' Comp Audit

in some states you can reverse additional charges imposed on your company up to ve years after they occurred.
The rst step in any workers’ comp audit for a successful subsequent re-audit of the insurer is to be prepared. Have your payroll and tax records ready, as well as a full understanding of the classi cation codes that apply to your business for each department. Develop a rm understanding of your company’s use of subcontractors and their adherence to their own workers’ comp guidelines. Review all non-HR materials that the insurer might additionally review in an attempt to rede ne your operations and employee codes, such as company websites, prospectuses and promotional materials.
Be especially prepared for an in-depth review of payroll and classi cations. Individual employee calculations are based on a rate per class code multiplied by every $100 of payroll. A clerical worker may have a rate for his class of $0.15 per $100 and a warehouse employee
may have a class code rate of $7.53 per $100. If each of those employees earns $40,000 per year, this translates to annual costs of $60 to cover the clerical worker and $3,012 for the warehouse employee, assuming no claims have been led. With the addition of administrative costs, higher premiums based on a higher EMR, and classi cations of hundreds or thousands of employees, a company will face very tedious calculations with the potential for large degrees of error. A few misclassi ed or miscalculated employees can cause thousands of dollars of increases to your annual premiums.
Review your original policy, which was based on an estimate. Were your o cers excluded from the original policy and are they now showing up post-audit? Is your EMR higher than it used to be, even though you’ve had no claims or more than three years have passed since the last one? Is the structure of your business – or how you’ve structured it on your policy – di erent from your original assessment? Were you given credits on your original policy that aren’t being credited now? Are employees assigned to more than one classi cation code when they shouldn’t be? (Note: some should be.)
Misclassi cations and miscalculations – whether based on improperly organized processes on your end or human error on the part of the insurer – will cost you. You need to familiarize yourself with the code system speci c to your state, NCCI or otherwise, to determine what each of your employees should cost and maximize your potential for savings. Moreover, not all NCCI states interpret
“In fact, in some states you can reverse additional charges imposed on your company up to ve years after they occurred.”
PAGE 6 WORKERS’ COMPENSATION AUDIT • © 2017 SIB FIXED COST REDUCTION