Business insurance • Workers’ compensation
Workers’ Comp Premium Audit: What to Expect and How to Prepare
Workers’ comp premium starts as an estimate based on your expected payroll. After the policy ends, the insurer audits your actual payroll by class code and either bills additional premium or refunds the difference. Skipping the audit can lead to cancellation and, under NCCI rules followed by many insurers, a charge of up to three times your estimated annual premium.
This guide explains how premium is calculated, what happens during an audit, the records to have ready, and the mistakes that cause surprise bills.
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How workers’ comp premium is calculated
For each class code, “each $100 of payroll is multiplied by the rate,” the class premiums are added together, and your experience modification is applied (NCCI: ABCs of Experience Rating). NCCI’s illustration, using example rates rather than current ones:
| Class | Payroll | Rate per $100 | Premium |
|---|---|---|---|
| Clerical | $70,000 | $0.75 | $525 |
| Roofer | $200,000 | $63.17 | $126,340 |
| Total before mod | $126,865 | ||
| With a 1.25 mod | $158,581 |
A mod of 1.00 is average; below 1.00 lowers premium and above 1.00 raises it. Mods generally use about three years of payroll and loss data, not counting the current policy. See workers’ comp class codes.
Types of audits
- Self or mail audit. You complete a payroll report and return it with supporting records, common for small accounts.
- Phone or virtual audit. An auditor reviews documents with you remotely.
- Physical audit. An auditor visits to review records, usually for larger or more complex accounts.
Audits are typically done at the end of the policy period or on cancellation, and some insurers also do midterm audits to avoid large adjustments (BHHC: premium audit).
Records to have ready
- Payroll reports and general ledger for the policy period
- Federal Form 941 quarterly returns and state unemployment wage reports
- Job titles and duties for each employee, to support the right class codes
- Payments to subcontractors, with Forms 1099 and 1096
- Certificates of insurance for every subcontractor you paid
- Certified payrolls for wrap-up (OCIP/CCIP) projects, if any
Source: BHHC: premium audit.
Uninsured subcontractors
If you pay subcontractors who don’t carry their own workers’ comp, insurers commonly treat their pay as your payroll and charge premium on it, because you could be responsible if their workers are hurt. Collect a current certificate of insurance before each sub starts and keep it with the payment records. If you use 1099 workers, see insurance for independent contractors.
How to avoid a surprise bill
- Give an accurate payroll estimate at renewal, and tell your agent midyear if payroll grows.
- Split payroll by job duties; don’t put a mixed-duty worker under one code without records.
- Track overtime separately; many states exclude the overtime premium portion from premium payroll.
- Ask how owners and officers are counted; inclusion and payroll limits vary by state.
- Review the audit statement and dispute errors promptly, in writing.
If you disagree with your audit
- Ask the insurer for the auditor’s worksheet showing payroll by class code.
- Send missing records, such as certificates of insurance for subcontractors or payroll splits between class codes.
- Request a review in writing within the time the insurer allows.
- If it isn’t resolved, ask your agent about your state’s dispute process for workers’ comp classification and premium.
Workers’ comp audit FAQs
Why do I owe money after a workers’ comp audit?
Your premium was based on estimated payroll. If actual payroll or the class mix was higher than estimated, the audit bills the difference.
What happens if I don’t complete my workers’ comp audit?
Your policy can be canceled, and under NCCI audit noncompliance rules many insurers can charge up to three times your estimated annual premium.
What records do I need for a workers’ comp audit?
Payroll reports, 941s, state wage reports, job duties, subcontractor payments and 1099s, and subcontractor certificates of insurance.
Are subcontractors included in a workers’ comp audit?
Payments to uninsured subcontractors are commonly added to your premium payroll. Insured subcontractors with valid certificates usually are not.
How is workers’ comp premium calculated?
Payroll per $100 for each class code is multiplied by the class rate, then adjusted by your experience modification.
Can I dispute a workers’ comp audit?
Yes. Ask for the audit worksheet, send missing records, and request a review in writing.
Related guides
Important information
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Cost figures. Published averages and ranges are cited from the sources named, as of the dates shown. They are not quotes and may not reflect your price, which depends on the insurer, your state, your business, your payroll and revenue, your limits, and your claims history.
Not legal advice. Contract, classification, and workers’ compensation rules summarized here are general information as of November 2026 and vary by state. Have an attorney review contracts and status questions.
Availability. Coverage, prices, discounts, and eligibility vary by insurer, state, and applicant, and are subject to underwriting. The issued policy controls.
Your next step
If an audit bill surprised you, or you want help setting up payroll tracking, a licensed agent can review your policy and class codes with you.
