What Happens if I Can't Pay for a Workman's Compensation Audit?
Although workers' compensation laws vary among states, most employers must pay workers' compensation insurance premiums to a state authority or purchase a policy from a private insurance company. Several factors determine a company's compensation insurance premium, including the number of workers it employs, the type of work they perform and the company's history of workers' compensation claims. Periodically, auditors examine a company's books to ensure it paid a proper amount of premiums, and findings may require a company to pay additional back charges or face premium increases.
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Assessments Following an Audit
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Auditors examine a company's payroll records, employee classification and premiums paid when they perform a workers' compensation audit on a company. Auditors work to ensure all employers pay premiums commiserate with their chance of an injured worker making a workers' compensation claim. If an audit reveals an employer underpaid its compensation premiums, either its future premiums will increase or it will be assessed the previous underpayment to compensate for its increased risk in the insurance pool.
Unable to Pay Assessment
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If a state authority or an insurance company's auditor determines an employer owes additional workers' compensation premiums following an audit, it may seek to settle the matter with an installment plan in which the employer pays a portion of the auditor's assessment each month, plus interest charges. If an employer can't meet the costs of a settlement plan, many states authorize workers' compensation agencies to issue a bank lien and report the delinquency to credit reporting agencies. Insurance companies may seek a judgment against the employer and receive court approval to receive the funds using a bank account seizure,
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Causes for Additional Assessments
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If an employer isn't maliciously underreporting its workers' compensation statistics, several reasons may cause it to face additional charges following an audit. Many companies mistakenly underestimate the amount of wages they pay in a year and don't pay premiums high enough to cover their workforce. Other times, companies hire subcontractors who don't carry unemployment insurance, and the burden of coverage reverts to the primary contractor. Other times, workers may be mistakenly classified as a type with less risk, and, therefore, lower premiums are paid than what is required for the work performed.
Workers' Compensation Payroll Deductions
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Most states consider the cost of workers' compensation insurance as a cost of doing business that's merely part of overhead costs, much like corporate taxes, licensing fees and payroll taxes. Because of this, most state laws prohibit employers from making deductions for workers' compensation insurance premiums from their employees' paychecks. As with taxes and all other expenses, an employer is expected to cover workers' compensation payments as a matter of course, and should structure their business plans to cover these payments.
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