Should I Worry If I Am Audited for Workman’s Compensation?

Should I Worry If I Am Audited for Workman’s Compensation?

There is that word again. AUDIT.  Oie.

Even if it isn’t in the attacking context, that word gives a lot of pet business owners the heebie jeebies!

I was contacted by a pet sitter last week, stressed out a bit, saying,  “I am being audited for Workman’s Compensation!”

pet sitting audit

Although after we talked a bit, I told him to calm down and this is to be expected. To make sure I explained this properly, I reached out to the expert on the subject of Insurance, David Pearsall with Business Insurers of the Carolina’s. He always is an incredible resource and I suggest you call him anytime you have insurance questions. Here’s what he had to say:


“No one should worry about a workers comp audit if they are operating above board. Workers Comp audits are not IRS audits, but rather a request to see actual payroll paid out to all employees and uninsured subcontractors (IC’s). All workers comp policies are based on actual payroll exposure, but when they are quoted/first written they are based on an estimated exposure. This is because no one knows what the actual payroll will be until the end of the policy term.  Therefore the reason for the audit. At that time the insurer will request a copy of your payroll records and any payments made to subcontractors. They will also request certificates of insurance for all subcontractors showing they are insured (if not, they bill for them as payroll). Last, they will request a list of what each employee does to make sure they were classified correctly upfront.

If your payroll at audit is less than the payroll amount estimated, you are entitled to a refund (so long as you are not at the lowest minimum premium offered by the company in your state). If your audited payroll is higher, you will be billed for the difference. In addition, the insurance company will also amend you renewal policy to match the most recent audit. So if you do underestimate your payroll upfront, or are classified incorrectly by an agent upfront, be aware that you may get a double whammy come audit time, as it will affect the policy that just expired, as well as your renewal policy.

Workers Comp insurers offer various pay plans including: 10 equal installments, 25% down and 9 monthly, 25% and 8 monthly, 25% down and 5 monthly, quarterly, semi-annual and annual. Some companies allow 12 equal installments on renewals, and some companies offer pay as you go. With pay as you go, you are responsible for submitting your payroll to the insurer as you incur payroll, and pay based on the payroll incurred during the pay period. Typically they offer an online application where you must report your payroll online each time you perform a payroll (weekly, bi-weekly, monthly, etc.) You then pay on the amount you paid out based on the rate per $100 of payroll.

In the US, the rates vary by state, but range anywhere as low as $1.95 (in AZ) per $100 up to $13.06 (in NJ) per $100 with average being about $5-$6.

Wow! What an incredible and thorough response. Thanks from all of us pet sitters David!

workmans compensation codes


I felt bad for this pet sitter because he really thought he was being audited. But I was happy that he reached out to me because by the end of the call I was able to explain it all to him and eliminate the stress level.

Some pets business owners aren’t as lucky. Did you see my series on pet sitting business audits? I actually interviewed a bunch of pet sitters who have been through the process to see what they learned and what they were told. It was very eye opening.

Rest assured the workman’s compensation “audit” isn’t anything to be scared of.


What Does Workman’s Compensation Do For You?

A lot of pet business owners know they need workman’s compensation but they aren’t sure for what or why.

I actually have done a lot of research and interviews in the industry for you. I have a very close relationship with David Pearsall from Business Insurers of the Carolina’s and in this interview we talk about the Top 15 Workman’s Compensation Claims   It was really eye opening and showed all the real-life examples that happen for Workman’s Compensation and Liability.


Other real life examples include:

  • Your pet sitter is walking down a staircase and then miss the last step and twist their ankle. They need to get it seen by a doctor and since it was on company time your company needs to pay for it.
  • A dog they are playing with jumps up and scratches their arm, tearing the skin, causing a deep cut that needs stitches.

So, now you know.

This is one audit you don’t have to fear *AND* now you just made a new virtual friend (or insurance encyclopedia as I like to call him) in David Pearsall. If you have more questions for him you can reach him at 1-800-962-4611 x 214


Back To You:

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