For construction contractors, facing an unexpected bill after a workers’ compensation audit can be a daunting experience. We’ll delve into each tip in detail to arm you with the insights and strategies essential to sidestep these unforeseen charges. So, let’s journey through this crucial roadmap together:
1. Accurate Classification of Workers:
It’s essential to recognize that not all construction jobs are created equal. From site managers to bricklayers, each role carries its own set of risks. Classifying workers correctly, based on their job duties, ensures you’re not overpaying or underpaying your premiums. Regularly review and update these classifications, especially when an employee’s role changes.
2. Maintain Detailed Payroll Records:
Detailed payroll records aren’t just good practice — they’re your shield during an audit. This includes regular salaries, overtime, bonuses, and other compensation forms. By maintaining a comprehensive and transparent payroll system, you ensure that when audit time comes, your records will reflect the actual compensation given to employees, minimizing discrepancies.
3. Separate Payroll:
Separating the payroll becomes crucial if your company operates in various domains—say, construction and property management. Combining these can muddy the waters during an audit, as each operation has distinct risk levels. By segregating the payroll, you offer a clear view of each operation’s risks and costs.
4. Subcontractor Verification:
Engaging subcontractors is common in construction. However, ensuring they have their own contractors’ workers’ compensation insurance is pivotal. Always obtain, verify, and file their Certificate of Insurance. This procedure safeguards you from potential liabilities and ensures you’re not billed for their coverage during your audit.
5. Regularly Update Estimated Payroll:
As the year progresses, business can fluctuate. You might hire more employees or face slow periods. Regularly updating your estimated payroll to mirror actual figures ensures you’re neither underestimating nor overestimating your premiums, offering a more accurate picture at audit time.
6. Safety First:
Prioritizing workplace safety isn’t just about preventing injuries — it’s also a smart financial move. Implement and regularly update safety protocols and training programs. Fewer workplace incidents can lead to a lower experience modification rate (EMR), directly impacting your premium. Plus, showcasing a commitment to safety can provide favorable terms during renewals.
7. Stay Informed about Exclusions:
Your policy might exclude certain roles, often owners or officers, from coverage. Being knowledgeable about these exclusions is key. Your insurer might retroactively charge premiums if an excluded individual files a claim. Regularly review your policy and consult with your contractor insurance broker to understand any exclusions.
8. Document Everything:
In the construction world, documentation is king. Having a detailed record is essential, whether it’s a minor change in job duties, a new hire, safety training sessions, or equipment purchases. Not only does it provide clarity during an audit, but it also serves as evidence, safeguarding your interests.
9. Communicate with Your Contractors’ Insurance Broker:
Your contractors’ insurance broker is more than just a service provider; they’re partners. By maintaining an open line of communication, you can stay updated on changes in workers’ compensation laws or industry best practices. They can also advise optimizing your coverage, ensuring you get the best value.
10. Prepare for the Audit:
Proactivity is your best defense against unexpected audit outcomes. Well before the audit, review your records, classifications, and any changes made throughout the year. Organizing and cross-checking these details ensures you’re presenting a coherent and accurate representation of your business, minimizing potential premium hikes.
While workers’ compensation audits might seem complex, they are essential in ensuring you’re paying the correct amount for your coverage. By staying proactive, organized, and informed, you can navigate this process smoothly and avoid those unwelcome surprise bills.
Stay safe and build on!
For more information or a free quote, contact a Contractors’ Workers’ Compensation Specialist at (866) 805-3800.
Fairbanks Insurance Brokers — The Nation’s Ultimate Source for Discount Contractors’ Workers’ Compensation Insurance!