Avoid Costly Mistakes: Get Your Payroll Classifications Right Before a Premium Audit

If you’ve ever been through a workers’ compensation premium audit, you know the process can feel intense. One small mistake in payroll classification can cost your business thousands, either in overpaid premiums or unexpected bills after an audit.

At MCAC, we understand the premium audit process and what documentation auditors look for. That insight allows us to help Alaska businesses prepare in advance, so payroll classifications and supporting records are accurate, consistent, and ready for review.

The Financial Stakes Are High

Workers’ compensation premiums are calculated based on classification codes that reflect the risk level of each job role. If your employees are assigned higher risk codes than their duties require, you could be paying far more than necessary. On the other hand, if codes are too low-risk, you could face a big adjustment and a big bill after the audit.

Common Classification Mistakes

• Overgeneralizing job roles – Using one broad code for all employees instead of separating by role.

• Misclassifying administrative staff – Office employees often qualify for lower-rate clerical codes, but only if their duties are properly documented.

• Forgetting subcontractors – Subcontractor payments can be pulled into payroll totals if you don’t have certificates of insurance.

• Not updating for role changes – An employee who moves from field work to a desk job mid-year needs a classification change.

  
  

What Premium Auditors Look For

Premium auditors focus on details. They compare payroll reports, job descriptions, and certificates of insurance against your classification assignments. Any gaps or inconsistencies are red flags.

How to Stay Audit-Ready Year-Round

·        Maintain accurate, detailed payroll records

·        Keep updated job descriptions for every role

·        Review classification codes quarterly with your insurance broker or advisor

·        Track certificates of insurance for all subcontractors

·        Work with a financial consultant who understands bookkeeping, payroll, and pre-audit preparation.

How MCAC Can Help

While we are not premium auditors and do not conduct audits on behalf of insurance carriers, our bookkeeping services can ensure that payroll classification codes you provide are entered accurately in your records. This alignment between your provided job classifications and our bookkeeping data entry supports cleaner reports and smoother preparation if an audit occurs.

By keeping your books accurate and consistent, we help reduce the risk of last minute corrections.

📞 Need accurate payroll records ahead of your next premium audit? Let’s make sure your books reflect the right details.