Workers Compensation Audit Worksheets are like a tool that the auditor uses to gather all the important information like payroll, classification codes, and independent contractors that are collected from the employer during the audit process. Workers Compensation Audit Worksheets are a blueprint of the data that the auditor has gathered.

Table of Contents

  1. Workers’ Compensation
  2. Workers’ Compensation Law
  3. Workers’ Compensation Claim
  4. Workers’ Compensation Insurance
  5. Workers’ Compensation Premium
  6. Workers’ Compensation Premium Audit
  7. Breakdown of the auditing process
  8. Workers’ Compensation Auditor
  9. Workers’ Compensation Audit Training
  10. Workers’ Compensation Audit Checklist
  11. Workers’ Compensation Audit Rules
  12. Workers’ Compensation Audit Subcontractors
  13. Workers’ Compensation Audit Worksheets
  14. Workers’ Compensation Audit Report Form

Workers’ Compensation

A worker is an individual who works on payroll, for an employer. Workers’ Compensation is the benefits that the said worker will receive for his liabilities.

Now, what liabilities are we talking about here?

Liabilities, in this context, mean the monetary losses and health impairments that the worker has sustained. This mostly includes things like the wages for days when he did not come to work, the fees that he paid for appointments with his attorney, and the expenses that he incurred to pay his medical bills.

Workers Compensation Law

workers compensation audit worksheets klearai

workers compensation audit worksheets klearai

Every workplace has its own set of safety rules. And the reason they exist in the first place is so that nobody gets injured. But we are not living in a utopian world and humans will always make mistakes and somebody will get injured. Mildly or severely. In an unsafe work environment, people can get injured even if it is not their fault.

Before the time when the Workers’ Compensation system did not exist, if a workman got injured at his workplace, then things would get complicated for him and his employer. Apart from the pain of his injury, he would also have to bear the loss of time, money, and in some cases, his ability to earn.

As for the employer, he would also be in a very vulnerable position as he is now exposed to litigation and can have a lawsuit from his employee coming his way. The settlement amount of the lawsuit in which the employee and the employer are tied up can be manyfold higher than the actual amount of money that the employee will lose during his suffering.

If the employee loses the settlement, then he would have lost even more money in the court proceedings and to his attorney and he would still be miserable. If he wins, then the employer will have to pay a ridiculously large amount of money. This puts both of them in hot waters.

Fortunately, ever since the Workers’ Compensation law came into play, both the employee and the employer can get away with a relative win if ever a workman is involved in an accident at the workplace.

Workers’ Compensation Claim

A Workers’ Compensation Claim protects both the employee and his employer.

If a workman ever gets injured while carrying out his employment duties, then he can file for a Workers’ Compensation Claim. The workers’ compensation will compensate for their losses. Workers’ Compensation covers everything from the cost of medical treatments to death benefits.

If you are an employer, then you are in a legally safe place in more ways than one. Your employer can not sue you under the Workers’ Compensation Law. Also, it will become mandatory for you to buy a Workers’ Compensation License, not doing which is equivalent to committing a felony if you have a business, with employees on the payroll.

But exceptions can always arise, and there can be a case where an employee can get around the Workers’ Compensation Claim and still file a lawsuit against his employer if he thinks that his employer deliberately hurt him. Manage claims effectively with your workers comp claims management software.

Workers’ Compensation Insurance

workers compensation audit checklist

workers compensation audit checklist

Workers’ Compensation Insurance works just like any other insurance policy. If someone wants to claim insurance money, then he needs to buy insurance first. Simple as that.

Workers’ Compensation Insurance is the insurance that needs to be purchased so that an employer can pay for the Workers’ Compensation claims. Most employers try to get away with it because they need to keep paying for the insurance, even if there is no injury.

The legal obligation to buy a Workers’ Compensation Insurance has been administered by the state government and the reserves for the Workers’ Compensation Claims are funded by various insurance companies and employers.

One thing to note is the different types of frauds and abuses that occur with workers’ compensation claims. This insurance, if anything, serves as a legal reminder that says ‘you have been warned’, to anyone who tries to take advantage of the system.

Workers’ Compensation Premium

workers compensation audit checklist questions

workers compensation audit checklist questions

This is what you pay, or rather, keep paying for having Workers’ Compensation Insurance. Workers’ Compensation Premium is calculated by considering many factors like the type of business you own, the safety of the workplace, the safety of the location of the workplace, the categories of workers’ and payroll. Payroll is the most important factor in deciding the premium.

All of the above factors aside from the payroll are used to determine the value of the Rate. There is a mathematical formula for getting a precise value of premium and the value of the Rate is used in that formula.

The product of rate and payroll, upon division by a hundred, gives the value of Workers’ Compensation Premium. This value can be moderate to extremely expensive for employers, who need to be very careful in classifying their business in any category.

Workers’ Compensation Premium Audit

One of the terms in the Workers’ Compensation Insurance is the Workers’ Compensation Audit. Audit, in general, means an official inspection of any organization’s account, typically by an independent body. A Workers’ Compensation Audit refers to the inspection of the company’s payroll and financial records upon expiration of the policy period.

There could be a possibility that a company with its premium set at $1200, after an audit, has its revised premium up to $30,000. A 2400% increase in premium. This is a true story.

It is also called a premium audit, payroll audit, or shock audit. It can be difficult to understand why it is called in so many ways. Also understanding what exactly is an audit, based only on its definition, can be confusing. So here is a breakdown of the process.

Breakdown of the auditing process

Whenever an insurance company issues an insurance policy to an employer, in this case, the Workers’ Compensation Insurance, a premium amount is determined for that insurance. The value of the premium is based on many factors but the employers’ payroll is the decisive factor.

But it is quite a challenge to come up with an accurate value for the premium and the premium that is quoted at the time of inception of the policy is only an estimate.

As it turns out, the factors that determine the premium, including payroll, are not constant and they may change throughout the policy period. This means that the premium value that was determined initially can be different from the actual premium.

So by conducting an audit, the insurance company is checking if the initial value of the premium was correct. In most cases, it is not. If the premium determined after the audit is more than the premium at the time of the policy’s inception, then the employer will have to pay that excess premium cost.

Workers’ Compensation Auditor

He is the person who will conduct the audits. The premium amount determined by the audit is totally in his hands. He works for the insurance company and if he makes any mistakes in the audit worksheet then they are most likely in favor of the insurance company.

Workers’ Compensation Audit Training

Workers’ Compensation Auditors take their work very seriously. It is very hard for agents and brokers to counter their arguments without solid facts. The reason why they are so good at their jobs is because of the audit training that they have. They are well-versed in the technical aspects of basic compensation coverages and premium auditing techniques.

Workers’ Compensation Audit Checklist

Now there are 2 ways in which an audit can be conducted by the auditor. It can be a physical audit or a voluntary audit (one via email). Usually, insurance carriers require an audit to be carried out within the first 2 months after the expiration of the policy period. Once assigned with an audit, the auditor must return the completed audit to the carriers within a month.

Some obvious boxes need to be checked before an audit occurs. For starters, do not voluntarily give information to the auditor. Speak only when spoken to and give straightforward answers that address the point of the question.

A list of mandatory documents for a smooth flow of the audit process is listed below:

1. Workers’ Compensation Classification Codes

2. Payroll Records

  • Summary of Payroll
  • Overtime Payroll records
  • Individual Earning Records
  • 941s for the policy period (Federal Tax Record)
  • State Unemployment Tax Reports

3. Employee Data

  • Categories of Employees with their descriptions and job duties individually
  • Average working hours – daily, weekly, fortnightly, monthly

4. Insurance Certificates

  • Of independent contractors during the policy period
  • Of subcontractors during the policy period

5. Disbursement records of cash and payment

  • Labor expenses
  • Material expenses
  • Subcontractor fee

6. Experience Modification Worksheet for cross-checking the correct application of E-MOD by the auditor

Workers’ Compensation Audit Rules

Workers’ Compensation Audit is one of the terms in the insurance policy and not upholding it is a direct violation of the insurance policy. There are some do’s and don’ts that need to be strictly followed if one wants to avoid legal action against him and financial losses down the road.


  • Ignoring audit requests
  • Underreporting of payroll
  • Misrepresenting employee job description
  • Presenting forged or false documents of any sort
  • Not reporting the sub-contractors


  • Acknowledging audit request
  • Assign a POC (Point of Contact) to the auditor
  • Cooperate with the auditor
  • Verify the auditor’s audit worksheet
  • Ask questions

More often than not, employers have a bad experience with the auditor. The best plan of action is to be prepared.

Workers’ Compensation Audit Subcontractors

Sub-contractors are people or a group of people who provide their services to a client for a fee. They can have multiple clients and they work on their terms and regulations. Contracts with these independent contractors should not be kept a secret from the auditor. Employers are charged for having independent contractors if those sub-contractors do not have Workers’ Compensation Insurance.

The terms subcontractor and independent contractor have been used interchangeably here.

Workers’ Compensation Audit Worksheets

This is like a tool that the auditor uses to gather all the information that has been collected from the employer during the audit process. Information like payroll, classification codes, and independent contractors are included here. It is a blueprint of the data that the auditor has gathered.

Just like any Excel spreadsheet, the workers’ compensation Excel spreadsheet has standard templates that are like a snapshot of the employers’ payroll and finances. These audit spreadsheets Excel files give an outline of how the audit was carried out, how the payroll was figured out, and how they were mapped to the classification codes.

Depending on the insurance company, these worksheets may vary in their layout but most of them can be generalized as a spreadsheet that contains:

  1. Payroll with the employees mapped to them
  2. Classification Codes
  3. Names of client contact
  4. Summary of business operations
  5. The list of locations
  6. Phone number, address, and names of the insured people
  7. Partners, owners, LLC members, executive officers
  8. The contact name of the client
  9. List of interviews conducted

Incomplete audit worksheets by auditors should not be signed off. Your Workers’ Compensation Auditor may not volunteer to share a copy of this audit worksheet. In that case, it is up to you to promptly ask for a copy of the worksheet.

Due to their complex nature, these worker’s compensation audit worksheets are not always accurate. In fact, 50% of the time there are inconsistencies in the audit worksheets and this eventually leads to workers’ compensation audit disputes being filed.

These worksheets contain sensitive payroll info and should be kept confidential.

KlearAudit: Workers Compensation Claims Audit Automation AI Software

KlearClaims: Workers Comp Claims Management Software with Native AI

Workers’ Compensation Audit Report Form

This is provided to employers who are involved in a voluntary audit. They have to fill this form with all the details that they would have given to the auditor during the physical audit. It is an alternative to physical audits.