- 01The notice arrivesShortly after expiration the carrier or its audit firm requests records, by mail, phone, online portal or a visit for larger accounts.
- 02Gather the recordsPayroll by employee with job duties, quarterly tax filings, overtime detail, officer compensation, subcontractor payments and their certificates of insurance, and sales or receipts for liability audits.
- 03Classifications are checkedThe auditor assigns payroll to class codes based on what people actually do. Clerical staff separated from field staff, owners treated per state rules, overtime premium portions excluded where allowed.
- 04Subcontractors are reviewedSubs without their own certificates are treated as your employees and their payments added to your payroll.
- 05The adjustment is billedActual exposure times the rates equals the final premium. More than estimated means a bill; less means a refund or credit.
Why policies are audited
Payroll and sales are not known in advance, so the policy is issued on an estimate and corrected afterward. The audit is not an accusation; it is how the premium is finally calculated. The surprise comes when the estimate was low, the work changed, or subcontractors were paid without certificates on file.
What the auditor is looking for
- Total remuneration by employee, with job duties, so payroll lands in the right class code.
- Separation of duties. Clerical employees who never visit a job site belong in a lower-rated class; an employee split between office and field is usually placed entirely in the higher class unless records show otherwise.
- Overtime, because many states allow the premium portion of overtime pay to be excluded.
- Officers and owners, included or excluded per the state's rules and the policy's elections.
- Subcontractors, with a certificate of insurance for each. No certificate, no exclusion.
- Receipts or sales for general liability policies rated on that basis.
How to prepare during the year
Keep payroll by duty, not just by person. Collect a certificate from every subcontractor before paying them and store it with the payment record. Note when the business adds a new kind of work, because a new class code mid-year is better than a reclassification at audit. Keep the wallet's size figures current so the renewal estimate and the audit tell the same story.
After the audit
Read the audit worksheet, not just the invoice. Check that each employee's class code matches their duties, that excluded overtime was excluded, and that every subcontractor with a certificate was removed from payroll. If something is wrong, dispute it in writing with records attached. If it is right, the result is also your best estimate for the renewal.