A workers compensation audit is a review of records at the request of an insurance company. It can be conducted telephonically, by mail or physically.
How an Audit Works
You will be notified in writing that you have been selected for inspection. The notice must provide details of the auditor. That auditor is to contact you to make arrangements for the audit to take place.
During a physical audit, the auditor will arrive at your business and examine payroll records, tax returns, cheque books, and other pertinent documents in order to obtain the actual payrolls and classifications for the policy period which just expired. Payroll is generally used as the basis of premium because it is measurable and can be verified to outside sources (tax returns, time-cards, cash registers, payslips etc.). The auditor’s findings are then compared with the estimated figures as shown on your policy.
If the auditor finds that the wage figures increased, you normally get a bill from the insurance company showing the “Additional Premium” due. If the auditor finds that the wages went down, the insurance company owes you a “Return Premium”. Due to time constraints, the audits are often completed off-premises or without the auditor taking a tour of your operations to verify classifications and operations. As a result, premiums can be overstated.
What is expected of you during an enquiry or audit?
An employer must cooperate in relation to an inspection. In particular, they must cooperate in making arrangements for the inspection to take place within a reasonable time after the initial request.
If the employer does not comply with the insurer’s request to audit the employer’s wage records, then the insurer may request that iCare (previously WorkCover) issue an order requiring the employer to provide access to the requested records. iCare has the power to make those orders under section 174 of the Workers Compensation Act 1987. If an employer does not comply with the Order, the employer may be prosecuted and fined up to 500 penalty units (that is, $55,000 at the time of printing).
What information may iCare request?
The records iCare may require include:
- Financial statements;
- Documents relating to contractual arrangements with other parties;
- Profit and loss statements, cashbooks, cheque butts, etc;
- Details of long service leave and superannuation payments by employers,
- Details of all contracts of employment; and
- Any other relevant documents.
If you require further assistance with respect to the above or would like to know more about workers compensation audits, you are welcome to contact our team of experienced auditors, lawyers and accountants by clicking here to submit an online enquiry form or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange conference or appointment.