The premium audit

What gets audited

Workers' compensation almost always, because it is priced on payroll. General liability frequently, because it is often priced on revenue or payroll too.

The audit compares what you estimated at the start with what actually happened, and adjusts the premium accordingly. A business that grew will generally owe more; one that shrank may be owed a refund.

It is not a penalty and it is not an accusation. It is how the pricing basis of the policy works, and the only genuine mistake is not expecting it.

What the auditor looks at

• Payroll records for the period, by employee and by classification
• The classification codes themselves, and whether they match what people actually do
• Payments to subcontractors and independent contractors
• Certificates of insurance for those subcontractors
• Revenue, where the policy is rated on it
• Overtime and bonus treatment, which is sometimes handled differently from ordinary pay

Where the surprises come from

Uninsured subcontractors are the big one. Where a subcontractor cannot evidence their own cover, their payments are frequently treated as payroll and rated as if they were your employees.

Misclassification is the other. Employees rated under a cheaper code than their actual work produce an adjustment for the whole year, and it can be substantial where the codes are far apart.

Growth is the innocent one. A business that estimated conservatively and then had a good year will owe the difference, which is a good problem with poor timing.

Making it uneventful

Almost all of this is preparation rather than argument.

Collect subcontractor certificates before work starts and keep them current — that single habit removes the largest source of audit surprises. Keep payroll records organised by classification rather than reconstructing them afterwards.

Update the insurer during the year when something changes materially: a hire, a new activity, a significant change in revenue. Adjusting as you go turns one large year-end bill into a premium that was roughly right all along.

If you disagree with the result

Ask for the audit worksheet showing how the figures were derived. Most disputes are classification questions or payments that were categorised as payroll when they should not have been.

Missing subcontractor certificates can sometimes be provided after the fact, which is worth attempting where the subcontractor genuinely was insured at the time.

Audits can generally be disputed through a defined process, and doing so promptly matters — these usually have deadlines.