Two Big Bills in January: Your Audit and Your New Deposit
Melody Flores
If your trucking company's workers' comp renews January 1, two bills may come close together early next year. One is the audit on your old policy. The other is the deposit on your new one. Neither one is a mistake. It is how most workers' comp policies are billed. Knowing this now gives you time to plan.
What is the audit bill?
Most workers' compensation policies initially calculate your premium (the price of your policy) based on the amount of payroll you expect to pay during the policy term.
At the end of the policy period, the insurance company conducts a workers' compensation audit to verify what you actually paid in payroll. If your actual payroll is higher than the original estimate, the additional premium owed as a result of that difference is commonly referred to as the audit bill.
The audit usually happens 30 to 60 days after the policy ends, and the payment is often due within 30 days.
Why does it come in January and February?
For a January 1 renewal, the old policy ends December 31. The audit then comes in January or February. That is when your new policy needs its first payment or deposit. It is also right after year-end payroll, bonuses and taxes. So several large payments can come close together.
Not a January 1 renewal? The same thing happens after your own renewal date. The months are just different.
What makes an audit bill bigger?
- You hired more drivers than you planned.
- You gave raises or paid more overtime.
- Some workers were listed under a different job code.
- Owner-operators had no proof of their own coverage. The auditor may count them as your employees and charge you for them.
A growing company will often owe money at audit. Growth is good news. It just helps to see the bill coming.
How can you plan for it?
- Compare your real payroll this year with the payroll on your policy.
- Ask for a rough idea of the audit amount before the policy ends.
- Collect certificates of insurance from any owner-operators.
- Set cash aside for both the audit and the new deposit.
Renewal is also a good time to look at your full setup. Read why your renewal date is your best time to look.
Is your current setup still working for you?
Many businesses set up workers' comp years ago. The business has grown since then. The way you pay for it may not fit the business anymore.
There are other ways to handle workers' comp. Some options charge workers' compensation with each payroll, based on the wages you actually paid. With these, there is usually no large deposit to start and no big audit bill at year end.
A PEO (Professional Employer Organization) is one example. It is not right for every business, and other options may work better for you. Learn more: Why Businesses Use a PEO
How SE Davis helps
You know your business. We know the market. SE Davis is not owned by or tied to one provider. We start by reviewing your current setup. Then we see what is available. We compare your options side by side with what you have now. We handle the legwork. If a change does not make sense, we will tell you that too.
Workers' comp is one of seven areas we look at. See what we review.
There is no cost to your business for the review. If you choose one of the providers we recommend, that provider pays us. It works much like a lender paying a mortgage broker.
Your next step
If your policy renews January 1, now is a good time to plan. Getting started takes about 5 minutes. No payroll reports or applications are needed.
