What is Workers’ Compensation?
Workers' compensation insurance is one of the most complicated and tightly regulated types of commercial insurance. Its purpose is to shield businesses and their employees from the costs associated with workplace injuries. Medical expenditures, lost wages owing to a leave of absence, and legal fees associated with a worker's injury may all be covered under this policy.
Workers’ compensation, also called workman’s comp, gives you peace of mind. Accidents can happen anywhere and being on the edge about it can hamper your work efficiency. With a good compensation policy, you can rest assured that your business and employees are protected.
What is Workers’ Compensation Audit?
It is basically an end-of-year review of records. The purpose is to ensure that your company has paid the correct premium for workman’s comp. The audit can be carried out via email, phone or in-person. Your company's payroll will be examined during a workers' comp audit.
Because your workers' comp premium is largely based on the amount of compensation provided to your employees over policy terms, audits look at your payroll. The money and benefits received by your employees are included in the total amount paid.
Why Is This Audit Needed?
Workers’ comp insurance requires an estimate of payroll and the type of work the employee will be engaged in. Based on this information, an insurance premium is calculated. However, the estimated payroll doesn’t always match the actual payroll for the policy period (usually a year). The workload may be more than predicted, or for some unprecedented reason (like COVID) it may be less. That is why an audit is needed to make appropriate adjustments to the premium.
In simple terms, these audits ensure that you are paying the right amount for the right coverage. A major benefit is to ensure that your coverage and premium match so that you are not paying too much for your workers’ comp coverage.
What to Do for Plumbers Workers Comp Audit?
The process will be less overwhelming if you know everything you need to prepare for it early on, so you can organize ahead of time. This will ensure that the audit goes smoothly.
1. Schedule the Audit
The first thing to do is to schedule an audit. Shortly after your workers’ compensation policy expires, your insurer will contact you for an audit. You can mutually choose a date that works for both, making sure that you have enough time to prepare. Also, ask the insurer to provide you with a list of information he/she needs.
2. Collect Necessary Documents
A common requirement of all auditors is usually financial data. Some minor details may vary from auditor to auditor but here is a detailed list of documents that you should sort beforehand.
Description of company operations
Detailed job descriptions
Number of employees at each location
Name, title, and designation of employer
Salaries, wages etc.
Number of hours worked per day, annually
State unemployment insurance tax report
Terms of policy
Cash Disbursement Record
Payments to casual laborers
Receipt of material purchase
Receipts of equipment and tool purchase
Payments to subcontractors
Certificate of each employee’s workers’ comp coverage
3. Organize Records
Once you have collected the important data, it is best to sort it out. Separate all payroll records (as mentioned above) from the general documents. Organize all information related to subcontractors, payments and insurance certificates collectively in one place. This may seem like extra effort, but a well-sorted file makes the audit process go smoothly and fast.
4. Communicate with the Auditor
Depending on the mode of audit, you will need to stay connected with the auditor or he/she will make contact for further information or a possible meeting. Try to be cooperative and well-informed. You should know your business well and understand all phases of your work and the tasks of each employee. Most importantly, you should understand the workers’ compensation policy, its coverage and its limitations. Another tip is to be fully informed about your company’s financial records, as auditors usually question that.
Should Owner’s payroll be included in Plumbers’ Workers’ Comp premium?
It is not a necessity. The majority of auditors do not require the owner’s payroll in the list of data that is needed for audit or policy setup. However, providing payroll adds to the transparency of the policy. Providing details of the owner’s premium does not harm the owner of the company in any way. However, if you want to leave it out, you can.
How do I handle a Plumbers’ Workers’ comp claim?
Compensation claims are made when an employee gets injured at the job site. After a claim is made, the situation is analyzed to decide who is at fault, the extent of damage and the financial aid required for treatment. Nonetheless, the claims affect a company by increasing premiums, additional wages, work reduction, reduced manpower, overtime costs, etc.
However, there are effective ways to manage plumber’s workers’ comp claims that can help mitigate the effects of claims. Some of which are listed below:
Search the market to compare costs for workers’ compensation insurance
Classify all workers beforehand according to their class code
Implement effective safety strategies for your customers and workers
Carry out safety training and inspect for workplace safety
In case of a workplace injury, train your employees to administer first aid
Provide a list of hospital and emergency contacts to all employees
Submit the workers’ comp certificates and claims on time
Be vigilant about fraudulent worker comp claims
Distribute workload among other employees for smooth and continued working
At the end of the day, one of a company's top concerns should be to guarantee that its employees are safe on the job and that they are adequately compensated if they are harmed. Depending on a company's size, direct and indirect costs will have different effects.
Workers' compensation claims may have a smaller impact on large corporations, but this is not always the case for small businesses. A claim's impact on their premiums and overall costs can be significant.