Workers’ Compensation Insurance Premium Audit

Workers’ Compensation Insurance is required by regulation in most states when you have W-2 employees.  In Oregon all employers with one or more subject workers are required to have a policy.  A subject worker is someone under your direction or control that you pay to provide services for your business.

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For most insurance carriers you are required to have an annual premium audit.  The premium audit is a review of pay for the prior year to ensure that the coverage you have is accurate.  The goal of the audit is to assess and collect a premium that accurately represents your risk exposure.

When you get ready to fill out your premium audit paperwork it is important to only include the required pay.  Adding in pay that is not required can significantly affect your premium.  There is a long list of pay that can be excluded.  Below is a list of some of the pay that should be excluded.

  1. Corporate officers compensation.
  2. Overtime excess pay – the portion of the overtime pay which is in excess of the straight-time rate.
  3. Severance pay – unless it is for time worked.
  4. Uniform allowance – for those required for employment purposes.
  5. Vacation pay – exclude when paid.  This does not include holiday or sick leave. **Item to note, if you have replaced your traditional vacation plan with a PTO plan you can only exclude PTO wages if you have a tracking system to record pre-arranged time off for purposes of vacation.

It is very important that you classify all employees into the correct category on the premium audit form.  Misclassification of employees can affect the premium that you pay.

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If you would like help handling your next Workers Compensation Premium Audit or have any questions, please give our office a call.  We are here to help ensure that these amounts get reported correctly.

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