At the end of every workers' compensation policy period, your insurance carrier conducts an audit to make sure the premium you paid for your insurance coverage accurately reflects your business operations over the duration of the policy period. This is necessary because the workers' compensation premium you are instructed to pay at the beginning of the policy period is only an estimate based off of your projected payroll and the classification codes your employees have been assigned to.
Thus, as your business operations change, your insurer will use the results of your audit to determine whether you will be billed an additional premium, or if you will receive a return of premium.
Many people anticipate an audit will result in an additional premium being owed, but that's not always the case. Especially in this current environment, it's very possible a workers’ compensation audit may result in some return of premium. Many states are contemplating charging different rates for the employees that are working from home and are not doing their normal job functions.
It's important to note that there's no guarantee of a return of workers’ compensation premium due to COVID-19, but to give your organization the best chance of receiving this returned premium it is vital to maintain proper record keeping.
Record-Keeping Guidelines
With various government-issued stay-at-home orders, adjustments to actual payroll must be detailed and verified.
Payments to Paid Furloughed Employees
If you continued to pay your employees to stay home and perform no work during a time where your business operations have been suspended because of a federal, state, or local emergency order, you will need to identify the wages your company has paid to your furloughed employees and provide them to your auditor at the time of your audit. Payments made to paid furloughed employees may be excluded under certain state orders (NY will include these wages at the clerical rate), if separate, accurate, and verifiable records are available.
Temporary Changes in Your Business Operations
If you have temporarily changed your business operations because of a federal, state, or local emergency order, you will need to identify these changes in business operations as they may affect the rating and classifications on your policy.
Employees Working From Home or Performing New/Different Job Duties
If your employees are temporarily being paid to work from home or have been reassigned to different work, please indicate these employees on the payroll records and provide the new job duties to your auditor.
Verifiable Records
It is imperative to maintain proper record-keeping with verifiable records including, but not limited to, hard copy or electronic versions of payroll ledgers, journals, registers, vouchers, or contracts.
Incentive Pay
If you are paying your employees an incentive for working during COVID-19, these incentives will likely be included in the premium calculation.
Important Information Needed
Please provide the following to your auditor:
- Date furlough began/ended for each employee
- Names of the employees who changed duties
- Date of change
- New duties
- Previous and current schedule - Date your operations changed
- New operations your business is performing
If you have any questions please contact your Connor & Gallagher OneSource (CGO) insurance consultant or email us at info@GoCGO.com.
This blog is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.
Source: Selective Insurance
