Workers comp premium audit

Definition

Workers comp premiums are based on estimated wages at policy inception. After the policy year ends, the carrier conducts a premium audit to verify what actually happened: actual wages paid, accurate class code distribution, any uncovered 1099 contractors, owner/officer payroll inclusions.

Audit findings can result in additional premium owed (if wages were underestimated or class codes were misclassified) or refunds (if wages were overestimated). For businesses with significant contractor use, audits often uncover 1099 workers who should have been on the policy — adding premium retroactively.

In a PEO arrangement, the PEO handles premium audits for the master policy. The client's exposure to audit-driven cost surprises is significantly reduced because the PEO maintains accurate wage + class code data continuously.

Common questions about Workers comp premium audit

Related terms

• Workers compensation insurance — Insurance that pays medical expenses and lost wages for employees injured on the job, in exchange for limiting the employer's tort liability.
• Workers comp class code — A four-digit code that classifies a job role for workers compensation premium calculation purposes.
• Independent contractor — A worker who provides services to a business under a contract but is not an employee — typically receiving 1099 income.

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