Avoid Work Comp Audit Aggravation

Avoid Work Comp Audit Aggravation

If I could do away with one thing with Work Comp insurance, it would be to eliminate the audit process! The mere word “audit” makes my skin crawl. Unfortunately, I cannot wave a magic wand to rid ourselves of the Work Comp audit, so here is some helpful information to make your audit go as smoothly as possible.

First of all, the purpose of the audit is for the Work Comp insurance company to receive the appropriate premium for the exposure that your business has. If you have more employees, you have more exposure to a workplace injury. Because your employee situation can change drastically throughout the year, looking back at the prior year is the only way for the insurance company to gain the proper premium. They do this by utilizing an audit. So if your audit shows that you had more payroll than estimated, you’ll owe more premium, if you had less payroll, you’ll get the respective premium back.

Understanding the timeline of Work Comp policy is critical. Here are the basic milestones for your policy:

Projected annual payroll is given to the insurance company to generate estimated premium.
You pay premium throughout policy year based on payroll estimate.
Your policy renews using prior year’s estimated payroll amount.
A Work Comp audit is required to adjust prior term premium.

There are four key points that I want you to be aware of regarding audits:

Non-Compliance – Audits are required by the insurance company and failure to complete them will result in cancellation of your current policy and any future policies until the audit is completed.

Class Codes – No matter how your policy was set up at the beginning of the policy, the audit will ultimately determine the classifications of all employees. To get the proper class codes, make sure:
– To have specific job descriptions for everyone outline their exact job duties.
– To keep separate payroll records for the different jobs performed by your employees.

Sub-Contractors – Sub-Contractors will be considered employees, unless you have a certificate of Work Comp insurance from them showing active coverage during the dates they worked for you.

Payroll Adjustments – You don’t have to wait for an audit to adjust your payroll estimate. This can be done at any time during the policy year at your request or it may happen automatically when the insurance company adjusts the payroll on your current policy to match the prior year’s audited payroll.

Because Work Comp audits are a source of frustration for every tree care company, here are my tips for being prepared for your audit.

Designate a friendly, knowledgeable individual to meet with the auditor. This person should know what each employee does for the organization. If an employee’s job duties are unclear to the auditor, they will assign the highest code to that individual.

Prepare payroll records by classification for the policy period. Make sure to have overtime pay in a separate category so the auditor can discount it back to straight time.

Show your officer payroll separately, as the officers payroll is capped and some companies have elected to exclude officers from coverage altogether.

Prepare a summary statement of the payrolls by classification.

If you use subcontractors or independent contractors, have Certificates of Insurance copied for the auditor verifying the subcontractor/independent contractor carries their own Work Comp insurance.

Have documentation of how you arrived at your payroll numbers available, but not copied, for the auditor. Often the auditor will only take your summary and a few pages of your documentation that the auditor will ask you to copy for them.

Talk to appropriate employees about attire and duties for the day of the audit.

Stay with the auditor at all times. The auditor should not be allowed to wander around the premises and question employees about their duties.

Ask the auditor to send you a copy of their worksheets. Get auditor’s business card so you can follow up for the worksheets.
Confirm the payroll and classifications from the audit worksheets as soon as possible to avoid any mistakes.

We have created a simple audit checklist to help minimize the audit aggravation. If you’d like a copy, contact me at [email protected].

Written by: Eric Petersen

Drug Free Workplace – Is it Possible?

Drug Free Workplace: Is it Possible?

One in four workplace injuries arise out of drug or alcohol abuse. Operating with a drug free workplace has become a hot topic, particularly with the legalization of recreational marijuana in eleven states across the country. No matter the stance you take on the topic, the question we all want to know the answer to is “How will this impact my business?”

Depending on your company’s operations, you may be subject to different standards in regards to substance abuse. For example, if you travel across state lines, you are subject to Federal laws and regulations in which case there is a Zero Tolerance policy for drugs and alcohol. The same goes for any tree services falling under DOT regulations, as the DOT took its stance stating “Marijuana is still illegal under federal law, meaning all “safety sensitive” employees who are subject to federally-mandated drug testing are still prohibited from using the drug. This group of employees includes anyone who operates commercial vehicles, including train engineers, pilots and school bus drivers.”

When looking at the state regulations, tree care companies are in an entirely different situation. In Colorado for example, there is Amendment 64, which provides business owners with the choice to test employees and determine the consequences should those tests come back positive. Make sure to check with your state and verify its stance on the topic.

Although some states say implementing a drug free workplace is up to the employer, here are my three reasons you should have one.

Your Safety Culture – Creating a drug-free policy at work is fairly straightforward. The easiest way to approach it is making it synonymous to your alcohol policy. Just as it seems ridiculous to think of an employee operating a 23 ton grapple truck after consuming alcohol, we don’t want anyone operating while being under the influence of marijuana. In doing so, you exemplify the importance of your employees along with others who would potentially be at risk.

Insurance Availability & Discounts – We recently attended the Ohio Tree Care Conference and had the opportunity to sit in on a presentation regarding Ohio worker’s compensation. Ohio employers are eligible for up to 10% rebates on their worker’s compensation costs if they implement a drug-free safety program, the same goes for employers in Washington. Here in Wisconsin, we have seen insurance companies require a drug-free workplace program from insureds in order to renew their policies. Check with your insurance carrier to learn about possible discounts from implementing a drug-free workplace policy.

Productivity – A WCF insurance company study shows employees who have substance abuse issues are twice as likely to change employers three or more times in a year. The average cost to account for the lost productivity, new training, and risk of higher claims adds up to about $35,000 per year in expenses to the employer. Minimizing these expenses will have a direct impact on increasing your bottom line.

Employers have many resources that will assist in building a drug free workplace for example: Society for Human Resource Management (SHRM) offers a free document on their website that will serve as a good starting point. To view the site (click here: https://www.shrm.org/resourcesandtools/tools-and-samples/policies/pages/cms_019908.aspx).

Personalize your program to your business’s location and operations, and have each employee sign off stating they have read and understand the policy.

If you are unsure of what guidelines your business may be subject to, contact our office as helping implement drug and alcohol policies is part of our Thrive program. Building and believing in this policy will help increase your bottom line and most importantly ensure that you are doing everything you can to make sure each employee gets home safe at night.

Written by: Malcolm Jeffris, CTSP