Workers' Compensation Premium Audit

What is a workers’ compensation premium audit?

A premium audit, also known as a final audit, is a standard practice where your workers’ compensation policy is reviewed after the term ends to ensure that the premium accurately reflects the exposure for your company over the policy period.

It’s important to us that your audit process is as smooth and convenient as possible. Check out this video to learn more about what to expect and how to prepare.

Why do workers’ comp audits happen?

A premium audit is standard practice for insurance policyholders that helps ensure your premium is based on accurate, up-to-date information about your business. Your workers’ compensation policy was originally issued using estimated payrolls for the policy period. 



During this final review process, we gather the actual payroll figures to finalize the policy for the concluded policy period. Even if you reported monthly payroll during the policy period, a final audit is still needed to close the term.

How does a workers’ compensation audit work?

At the end of your policy period, our premium audit team will contact you with an invitation to complete your audit online or in-person. How your audit is completed depends on premium size, type of operation, and state requirements. We want to make this process as seamless as possible for you and will do our very best to arrange a date and time that best accommodates your schedule and the auditor’s availability.

Once the audit is complete, you’ll receive an invoice displaying the premium calculations based on actual payroll figures as shown in the audit. This invoice may show a refund or that money is due once actual payroll figures are calculated.

For more information on what to expect and how to prepare for your final audit, see our article on Conducting Your Workers’ Compensation Audit with Ease.

Premium audit timeline

Take a look at a typical premium audit process timeline.

Collect documents throughout term

Policy term ends

Receive audit notice

Gather remaining documents 

Complete
audit with auditor 

Review results

Receive final invoice
or credit 

How to prepare for a workers’ compensation audit

What documents are needed for a workers’ comp audit

To be prepared for your audit, you’ll want to be sure to keep proper records and documentation throughout your entire policy period. When we reach out to get your audit scheduled, you will be given logins to a secure portal to upload your records for the recently expired policy period. It’s important to note that once the records are received, an auditor will review the records and request additional information based on your policy’s individual needs. In order to help you prepare for your workers’ compensation final audit, we’ve compiled a handy Premium Audit Checklist, as well as the list below. Many find that collecting this information throughout the year can be a helpful time-saver.

Workers’ comp audit requirements that may be requested

Company information
  • Description of your operations
  • Ownership information
  • Employees names, titles, and job duties

Detailed payroll records

Additional payroll items

  • Total payroll by class code is required for each named waiver
  • OCIP/CCIP/Wrap-Up payroll and certificates

Subcontractor or casual labor information*

Tax information

  • 940, 941, 1096, 1099, W-2, W-3
  • State unemployment insurance (SUI) quarterly returns (Form for state of CA is: DE-9/DE-9C)

What happens after my workers’ compensation audit?

After the audit, we will send you an invoice displaying the premium calculations based on actual payroll figures as shown in the audit. The Final Audit Invoice reconciles what you’ve paid based on your policy estimates or monthly reported payroll.  It will either show a refund or that money is due once actual payroll figures are calculated.

Resources

2025 Officers and Partners Annual Payroll Limitations

2026 Officers and Partners Annual Payroll Limitations

Workers’ Compensation Payroll Inclusions/Exclusions

For more information or assistance

Pay & view invoices online myresource.icwgroup.com 877.289.1644
Payment assistance AR@icwgroup.com 858.350.7262
Invoice questions billing@icwgroup.com 858.350.7399
Monthly payroll reporting support@smartpayllc.com 877.905.0786
General questions premiumaudit@icwgroup.com 858.350.2933
Pay & view invoices online 877.289.1644 myresource.icwgroup.com

Payment assistance 858.350.7262 AR@icwgroup.com

Invoice questions 858.350.7399 billing@icwgroup.com

Monthly payroll reporting 877.905.0786 support@smartpayllc.com

General questions 858.350.2933 premiumaudit@icwgroup.com

Frequently asked questions

A premium audit is a standard practice where your records are reviewed to ensure that the premium for your workers’ compensation policy accurately reflects the exposure for your company over the policy period.

A premium audit is standard practice for insurance policyholders that helps ensure your premium is based on accurate, up-to-date information about your business. Even if you reported monthly payroll during the policy period, a final audit is still needed to close the term. The expectations for audits are laid out in item 5 G of your policy, which states:

“You will let us examine and audit all your records that relate to this policy. These records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will be used to determine final premium. Insurance rate service organizations have the same rights we have under this provision.”

This is a standard practice for all policyholders. Your policy premium was based on information provided by you and/or your agent when the policy was issued. This included the estimation of your company’s payroll as well as employee job classifications. Payrolls or business operations could have changed over the policy period and the premium audit will review and compare your company’s actual payroll and business operations to the original estimates, endorsements, and any payroll reported throughout the policy period.

No, state regulations and the policy issued to your company require us to conduct annual premium audits. Many states have adopted audit non-compliance rules and additional charges if the audit is not completed. These potential charges are a part of your policy. Because an audit is a standard practice for all insurance companies that provide business insurance coverage, the workers’ compensation audit process is routine for an insurance company. Please note that a premium audit is required for all workers’ compensation policies regardless of whether the policy has been renewed, cancelled, or moved to another carrier.

We definitely want to work with you to get the documents ready for the audit and are here to help. Please contact us at premiumaudit@icwgroup.com.

Because audits are required, we will need to continue with your final audit. In most states, there are state statutes or Workers’ Compensation Bureau rules that allow the estimate or non-compliance charge to be up to three times the original Estimated Annual Premium. In addition to the estimate, your current coverage may be subject to cancellation. All of this will also affect your Ex-mod calculation.

We want to obtain the requested information so that we can process the final audit correctly without any estimates or cancellations. If you assist our auditor by providing the requested records and information, they can ensure you receive all available credits and discounts, so your premium accurately reflects your exposure – no more and no less.

In general, an independent contractor is someone in the business of providing a specific service for a specified price to multiple customers and they control the method and manner of their work. The treatment of independent contractors will vary by state. If the independent contractor does not meet the criteria to be truly an independent contractor, they will be treated as a statutory employee and may be included in the premium calculation on the audit. The following are general tips to evaluate a potential independent contractor arrangement and whether or not they would be treated as a statutory employee and be included in the premium calculation.
  • If you pay a contractor who is required to have a license, but is not licensed, he/she is likely not considered as an independent contractor and would be included.
  • If you supply the tools, and the work is performed on your premises at your direction, he/she is likely not considered as an independent contractor and would be included.
  • If the services provided are the same as the core operations of your business, he/she is likely not considered as an independent contractor and may be included.
  • If the person is paid through commissions, piecework or by the hour, it indicates an employee/employer relationship.
  • If the person performs work in the same capacity for other businesses, he/she is probably an independent contractor and may not be included.
Because each situation varies and requires a factual determination, please contact our Premium Audit department with any questions regarding independent contractor versus employee.
Please contact us at premiumaudit@icwgroup.com. We will provide you with the status of your audit.

After the final audit has been done at your office, you’ll receive a final audit invoice within 30 days. This invoice will reconcile what you’ve paid (including your original deposit) based on your estimates or your monthly reporting. If you have any questions, please feel free to call us at 858.350.7399 to review the invoice or the audit information.

Preparing for your final audit

An accurate audit will depend on the accuracy and completeness of the records provided for the audit. There are two ways to help ensure accurate and complete records.

  1. Keep proper detailed records and documentation concerning your company operations throughout the year.
  2. The person tasked to complete the audit must have detailed knowledge about the specifics of the operations. Often an accounting employee will gather the records which is completely fine, but it may be necessary for the auditor to speak directly to the owner or officer of the company in the completion of the audit.
The auditor will generally be able to gather all the information needed from one or more of the following:
  • Payroll journals and summaries
  • Individual earnings records or employee earnings summaries
  • Cash disbursements journals
  • General ledger
  • Profit & loss statements or financial statements
  • Quarterly payroll tax reports
  • Payments made to sub-contractors and certificates of insurance showing workers compensation coverage.
  • Payments made to consultants, contract laborers, temp agencies or PEO, along with certificates of insurance if applicable.
  • Payroll reports for OCIP/CCIP jobs

The list of workers’ comp audit documents below is typical for most companies. However, the auditor may request additional information to properly complete the audit for your company. If there are multiple named insureds listed on your policy, the auditor requests this information for each company.

  • Description of company operations.
  • Officers or owner’s names, titles, percentage of ownership and duties.
  • Employee names and job duties – the actual duties performed will be needed, as job titles alone are typically not sufficient.

Your payroll report should contain all employees paid within the audit period, including any employees who are no longer working for the company. Rules will vary by state, but the auditor will advise if there are specific additional items required in your state. Generally, the following items should be listed in the report:

  • Employee name
  • Type of work performed (job titles are not sufficient, actual duties performed should be provided)
  • State of employment
  • Total gross wages per employee (this should include all items which contribute to total wages paid to the employee)
  • Overtime wages if any (a sample of the overtime calculation will be needed)
  • Severance wages if any
  • Total tips if any
  • Total SEC 125 amounts
Gross wages include hourly wages, salary wages, commissions, bonuses, overtime, pay for holidays, vacations, and periods of sickness. It can also include the value of housing provided to employees. Some items may be excluded from the premium calculation in some states. The auditor will properly apply the rules for excluding any portion of the gross wages paid from the premium calculation on the audit based on state rules.

We ask for additional financial records to determine any possible workers’ comp exposure not included in your payroll records. For example, a sales breakdown ensures that the proper workers’ compensation class code(s) is applied to your company operations.

The auditor will only ask for documents they need to complete the audit, including certain tax records such as federal 941 quarterly returns, state unemployment returns (SUTA), 1099’s, 1040 (Schedule C), 1120, 1065. All of your information is kept strictly confidential and only used for verification of the audit records.

The auditor must review information from a primary source document such as the payroll reports and validate these amounts by comparing them to a verification document such as the quarterly tax reports or financial statements.

The auditor may request items outside the policy period dates for reconciliation purposes. For example, the auditor may request dates which are for a full month as opposed to the specific dates listed on the policy. While the policy period may be 05/13-05/13, the auditor may request 05/01-05/01. A second example might be when verification documents don’t line up exactly with the policy period. In that case, the four quarterly reports that most closely align with the policy dates will be requested. Since these dates will differ, the auditor may also request an onset and offset payroll amount so that the reports can be verified to the primary source document. Using the same example, the auditor will request the payroll for the month of May at the beginning and end of the policy. It will then be added and subtracted to reconcile to the quarterly reports.

Profit and loss statements

As your partner in risk, it’s important we help verify coverages for non-employees such as subcontractors and temporary labor. Your profit and loss statements (P&L) are helpful in determining if there are any workers’ compensation exposures not included in your payroll records. They are important for the auditor to review to ensure that any individuals that you used during the year meet the definition of an independent contractor.

Part five: Premium. Specifically, sections C (remuneration #2), F (records) and G (audit).

If you do not wish to provide Profit & Loss statements to the auditor, you can provide:

  • Check register and bank statements
  • Schedule C or Corporate 1120 for the nearest year
  • General ledger or general ledger chart of accounts

Please be aware that after reviewing these documents more questions might come up. The auditor would then contact you for this information.

  • Uninsured or under-insured subcontractors
  • Casual labor and day labor
  • Temporary or leased employees
  • Employee payments on 1099 such as probationary payroll, bonuses, commission, miscellaneous labor

How final audits affect your payments

The premium earned for the policy period could change from the estimates established at the beginning of the policy. The audit reviews your actual payroll paid, business operations, employee classifications, officer inclusion or exclusion and the use of sub-contractors, contract laborers or temp laborers. The end result of the audit is to ensure that the proper premium is paid and that you do not pay more or less than you should for the coverage provided.

The rates and rating factors used on your policy (at the beginning and including any changes by endorsement) are the same ones used to calculate the final audit. The one exception is with the premium discount. This is a discount based on the subtotal of the premium, therefore it changes as the subtotal changes. Beginning with page 2 of your final audit invoice, you can see the payrolls used by classification code.

Your final audit calculates the actual premium for your policy and subtracts that from payments that you have made. These payments include the deposit, endorsements, midterm payroll pay-as-you-go payments and installments.

Your final audit credit will be applied to your next invoice(s). To request a check, please send an email to AR@icwgroup.com.
Please email us at premiumaudit@icwgroup.com. We’ll look into the delay for you and give you an updated status.

An insured is considered noncompliant if the audit is not completed or if the insured refuses to allow permission to review audit records. Multiple states have adopted an audit noncompliance policy and charges. The audit noncompliance charge will vary by state, consult your workers compensation policy and endorsements, or contact your agent to find out more about your specific state’s policy.

Discrepancies

We strive for 100% accuracy on your audits and invoices. As you review your final audit invoice, please let us know right away if you find any discrepancies or disagree with the findings by contacting premiumaudit@icwgroup.com and providing as much detail as possible.
  • A brief description of what you are questioning. Let us know about any errors or discrepancies you have found.
  • If you think any of your employees have been misclassified, please provide the details. If it involves an individual employee, please complete and return a Statement of Duties form.
  • If you think the payroll amounts are incorrect, please provide copies of the payroll records provided at the time of audit, or any additional records that you feel would help resolve the issue.
Please contact premiumaudit@icwgroup.com and provide the information above.

If necessary, we will place the billing in dispute while we investigate further and make any necessary corrections or adjustments. Once we receive your information, we’ll review the audit and billing. We’ll also compute any amounts that are still due based on the “undisputed” portion of your billing. Undisputed amounts will still be due in accordance with the original invoice.

  • Our dispute resolution process is outlined in the policyholder notice attached to your workers’ compensation policy.
  • You may send us a written complaint and request for action. In this complaint, you may ask that we reconsider a change in a classification assignment that results in an increased premium and/or request that we review the manner in which our rating system has been applied to your policy.

Applies to Delaware only

We strive for 100% accuracy on your audits and invoices. As you review your final audit invoice, please let us know right away if you find any discrepancies or disagree with the findings by contacting premiumaudit@icwgroup.com and providing as much detail as possible.

  • A brief description of what you are questioning. Let us know about any errors or discrepancies you have found.
  • If you think any of your employees have been misclassified, please provide the details. If it involves an individual employee, please complete and return a Statement of Duties form.
  • If you think the payroll amounts are incorrect, please provide copies of the payroll records provided at the time of audit, or any additional records that you feel would help resolve the issue.
Please contact premiumaudit@icwgroup.com and provide the information above.
If necessary, we will place the billing in dispute while we investigate further and make any necessary corrections or adjustments. Once we receive your information, we’ll review the audit and billing. We’ll also compute any amounts that are still due based on the “undisputed” portion of your billing. Undisputed amounts will still be due in accordance with the original invoice.
Our dispute resolution process is outlined in the Policyholder Notice attached to your workers’ compensation policy. Insureds who wish to challenge the results of an audit dispute may submit an appeal to the Delaware Compensation Rating Bureau (DCRB) during the applicable policy period or within 12 months after policy termination. Detailed procedures for initiating an appeal are available at https://www.pcrb.com/dcrb/classification/appeal_procedure_de.pdf
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