Payroll Audit

At expiration of each workers’ compensation policy the insurer performs a final audit to determine the actual payroll that will be used to calculate the final premium. Smaller policies are audited on a voluntary basis by mail. Larger accounts require a visit, always by appointment, by an auditor who reviews the insured’s books and records to determine actual payroll. Records required are usually California EDD quarterly payroll reports (DE-6), Federal Form 1099s and the general journal. The auditor is looking for actual payrolls, less overtime bonus pay, benefits in lieu of cash, like lodging and food and vacation and bonus payments. He or she is also looking for payments to independent contractors who might be construed as employees if not properly documented. Such payments are required by State law to be included in payroll reports if no clear independent contractual relationship can be shown to exist. After the auditor has made his or her report the insurer prepares a final audit invoice which compares premium developed by the actual audited payroll with interim payments made during the policy term. This invoice could reflect an additional amount of premium due or a return based on that comparison. This is another area that is overseen by Tegner-Miller Insurance Brokers’ trained service personnel. Each final audit is checked to assure that correct classifications and rates have been used. While we have no way of knowing the actual audited payroll, large additional or return audit premiums will trigger a review of the actual audited figures with the insured. And, of course, we are always ready to answer any questions triggered by a final audit.

For more information, or to obtain a quote please contact our office at 1-800-775-TMIB.