WorkSafe – Wage & Premium Audit

Workers’ Compensation (WorkCover) Audits

To understand why insurers are given the power to select or randomly conduct employers, we need to look at how the workers’ compensation scheme work. The scheme in each legislative state varies slightly but when it comes to wage and premium audits will have the same methodology. A workers compensation premium audit may be performed after each policy period to verify payroll, industry classification, contractors and sub-contractor exposures. The audit is an annual review of records at the request of your insurer and a financial penalty applies if you do not comply with the audit.

How does the Workers Compensation Scheme Work?

Insurers in each legislative state collect premiums from employers to fund the scheme to pay:

• the costs associated with work-related injuries
• diseases
• benefit payments to injured workers to cover the loss of income
• rehabilitation
• ongoing medical treatment
• lump sums paid for permanent disabilities
• impairment payments

Employer’s Premium

Each employer’s workers’ compensation premium is based on:

• Employer’s business activity
• Remuneration the employer pays to its workers
• Cost of any claims made by their workers

An employer must provide an estimate of the remuneration expected to pay throughout the renewal period to the insurer at the commencement of the policy period or renewal period. If the estimate is not provided, the insurer will review the wages, create an estimate, and renew the policy because it is mandatory insurance. However, insurers in the Underwritten states of WA, TAS, ACT, and NT require at least a verbal confirmation from the employer in order to renew the policy.

“The Audit”

WorkCover and its registered insurers have a legal right to view an employer’s wage records under their legislative state. The purpose of the audit is to make sure that employers are paying the correct premium. Your insurer’s entitlement to examine wage detail records will be outlined in the Terms and Conditions on your policy paperwork. Every year, the legislative state selects employers for audits at random, unless the employers have done something that would cause the insurer to perform an audit. The wage and premium audit is a significant subject because the information acquired will be used to recalculate your premium and might include fines. There is no limit to how many times an insurer can audit an employer’s records, especially when employers have a poor history.

Employer’s Obligation & Compliance

If the employer does not comply with the audit, the insurer will make various Orders directing the employer to comply.

The Act will allow the insurer the Rights to the following:

• Require an employer to supply information
• Require an employer to make information available for inspection by an authorised WorkCover Auditor
• Set the time in which the information must be supplied or made available for inspection.
• All records such as payroll summary, Tax Returns, employee listings, contracts etc.

Penalties

If the employer does not comply with the Order, the employer may be prosecuted and fined up to 500 penalty units (that is, $55,000 at the time of printing).

The penalty for providing false or misleading information to the insurer to obtain or renew a workers’ compensation policy is up to 100 penalty units (currently $11,000 at the time of printing).

Auditing Process

If you are chosen for the Wage & Premium Audit, you will be notified in writing. The auditor’s contact information, when to contact you to schedule the audit, and what information you must give for the audit will all be included in the letter.

The initial process of the audit is normally conducted via telephone and email requesting:

• Tax Returns & financial statements
• Profit & Loss statements
• Minutes of Board meetings
• Documents relating to contractual arrangements with other parties.
• Cashbooks, cheque butts, cash registers
• Pay slips, details of long service leave and superannuation payments by employers,
• Details of all contracts of employment; and
• Any other relevant documents

The auditor may also request to attend the workplace for further inspection for other records and to review the business activity to determine if the applied industry classification is correctly assigned or in the case of “best fit”. If the Auditor finds that the wage figures increased, you normally get an invoice from the insurer showing the “Additional Premium” due. If the auditor finds that the wages went down, the insurer owes you a “Return Premium”. Due to time constraints, the audits are often completed off-premises or without the auditor taking a tour of your operations to verify classifications and operations. As a result, premiums can be overstated.

myWorkCover Solutions can help you to prepare for the audit

A large number of business Workers’ compensation audits are stressful and time-consuming, and fines are frequently imposed as a result. WorkCover Solutions knows that businesses have certain needs and concerns. We take the effort to explain the laws and regulations that govern workers’ compensation in plain English. We have a lot of experience and understanding in assisting companies with workers’ compensation audits, both in terms of preparation and response. We’ll help you prepare for your audit, provide expert advice, and instil confidence in your ability to manage your workers’ compensation responsibilities.

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Disclaimer:

The information in this post is strictly for informational and educational purposes only and should not be construed as legal advice. It is not intended to express specific opinions about specific cases. Before acting on any of the issues discussed in this post, seek additional advice. The information provided should not be relied on for any purpose other than to assist you in understanding how Workers’ Compensation insurance works. It is for illustrative purposes only and My WorkCover Solutions Pty Ltd does not accept liability for any loss or damage suffered by any person resulting in any way from the use of or reliance on, the information provided. The information in this article is believed to be correct as of the date of publication. However, changes in the applicable laws may have an impact on the accuracy of the material. This article contains general information that is not tailored to any specific person’s situation. This publication may contain information that relates to the regulation of Workers’ Compensation insurance in your State or Territory. To ensure you comply with your legal obligations, we would recommend you refer to the appropriate legislation as currently in force in the State or Territory you conduct your business. You can find up-to-date legislation by visiting each state’s WorkCover Authority website, alternatively contact myWorkCover for updated information.