How to Prepare for a Construction Industry Audit

Summary

This video guides construction company owners through the workers' compensation audit process mandated by the Workers’ Compensation Insurance Rating Bureau (WCIRB) in California. It emphasizes the importance of maintaining detailed payroll records and accurately classifying employees to ensure fair premium assessments. Carl, a construction company owner, learns how to prepare for his audit with the help of his office manager, Julia. The video underscores the significance of verifying subcontractor insurance and maintaining meticulous records to facilitate smooth audits and potentially lower premiums, ultimately contributing to a well-functioning workers’ compensation system.

Takeaways

• 📋 Audits are year-end payroll reviews required for California workers' compensation insurance policies.
• 🏢 The WCIRB tracks benefit costs for injured workers and recommends insurance rates annually.
• 🔍 Most construction companies must undergo annual audits as mandated by the WCIRB.
• 📑 Organizing paperwork is crucial; State Fund provides a checklist and support for the audit process.
• 🛠️ Accurate payroll records help ensure proper premium payments, maintaining the integrity of the workers' compensation system.
• 🔄 Multiple classification codes may apply to one employee in construction due to varied job duties.
• ⏱️ Detailed daily records, including hourly rates and work times, are essential to meet WCIRB requirements.
• ⚖️ Supervisors must be classified under the trade they supervise, not as clerical, according to WCIRB rules.
• 📜 Verify that subcontractors have active licenses and workers' compensation insurance to avoid liability.
• 💰 Maintaining accurate records can lead to smoother audits and potentially lower premiums.

Q & A

What is the purpose of the workers’ compensation audit process for construction companies?

The purpose of the workers’ compensation audit is to review year-end payroll to ensure that policyholders are paying the correct premiums, which helps maintain the overall workers' compensation system.

Who is responsible for conducting the audits in California?

In California, all workers’ compensation carriers are required to conduct audits, as mandated by the Workers’ Compensation Insurance Rating Bureau (WCIRB).

What does the WCIRB do?

The WCIRB is a non-profit organization that tracks the costs of benefits provided to injured workers and produces annual rate recommendations for California insurers.

How often must construction companies undergo audits?

Most construction company policies are required to be audited every year.

What kind of records must construction companies keep for the audit?

Construction companies must keep detailed daily records that include hourly rates, start and stop times for each type of work, and must accurately classify employees based on their work.

Why is it important to maintain detailed records during the audit process?

Maintaining detailed records is essential because it ensures accurate premium calculations and protects the company in the event of a claim or dispute.

What classification issues might arise for supervisors during audits?

Supervisors must be classified under the trade classification of the work they supervise, not as clerical staff, as per the WCIRB’s general inclusion rule.

What should companies do to verify subcontractors and independent contractors?

Companies should ensure that all subcontractors and independent contractors have active licenses and workers’ compensation insurance for their employees to avoid potential liability for workplace injuries.

How can accurate record-keeping affect insurance premiums?

Accurate record-keeping can lead to lower premiums, as it ensures that the correct classifications and payroll information are used during the audit.

Where can policyholders find additional resources or assistance regarding audits?

Policyholders can visit statefundca.com/audit for additional resources or contact State Fund or their broker for help with questions about their policy or premium.