Glossary · PA Workers' Comp

Payroll Audit

The end-of-policy-year review by your insurer to verify actual payroll and class code allocation, determining whether you owe additional premium or receive a refund.

Definition

A workers' compensation payroll audit is a review conducted by your insurer at the end of each policy year — or sometimes mid-year — to verify your actual payroll and class code allocation against the estimates used to set your initial deposit premium.

Common Audit Surprises and How to Avoid Them

Workers' comp policies are written based on estimated payroll. If your actual payroll was higher than estimated, you'll owe additional premium. If lower, you'll receive a refund or credit. This is called an audit adjustment.

During the audit, your insurer (or a third-party auditor) reviews payroll records, time sheets, certificates of insurance from subcontractors, and job descriptions to verify that each employee is in the correct class code.

Common audit surprises include: uninsured subcontractors being reclassified as employees (charged at your rate), payroll that wasn't separated between class codes (all charged at the highest rate), and clerical employees who were put on job sites (reclassified from Code 953 to a field rate).

Pay-as-you-go workers' comp billing — where premium is calculated each payroll cycle — reduces audit surprises by keeping your premium aligned with actual payroll throughout the year.