If you carry a workers’ compensation policy, you’re going to face an audit — it’s not a matter of if, but when. For a lot of business owners, that word alone causes some anxiety. But a work comp audit isn’t something to fear if you understand what it is, why it happens, and what your carrier needs from you to get it done right.
Why Do Carriers Audit Work Comp Policies?
Your workers’ comp premium is based on an estimate — specifically, an estimate of your payroll for the policy period, broken out by job classification. Since nobody can predict payroll with perfect accuracy a year in advance, the audit exists to true up that estimate against what actually happened.
That means one of two things happens at audit time:
- If your actual payroll came in higher than what was estimated, you’ll owe additional premium.
- If your actual payroll came in lower than what was estimated, you’re due a refund.
Audits aren’t a penalty and they aren’t optional — they’re simply how the carrier makes sure your premium matches your actual risk and payroll exposure for the period.
What Do You Need to Provide for a Work Comp Audit?
Being prepared for your audit makes the process faster and helps avoid unnecessary charges. At minimum, most auditors will ask for:
- Certificates of insurance for all subcontractors used during the policy period. If you can’t produce a current, valid certificate showing a subcontractor carried their own workers’ comp coverage, their payroll may be added to your policy as if they were your own employee — which can significantly increase your premium.
- 1099 payroll reports covering the designated audit period, to verify independent contractor payments and confirm proper classification.
- 941 reports for all W-2 employees, which verify actual wages paid and support the payroll figures used to calculate your final premium.
Keeping these records organized throughout the year — not scrambling to find them right before the audit — is one of the easiest ways to keep the process smooth.
What Happens If You Don’t Comply With the Audit?
This is the part that catches employers off guard. If you don’t respond to audit requests or fail to provide the required documentation, your carrier doesn’t just estimate and move on — they can apply a non-compliance charge, and it’s a steep one. Carriers can charge up to 50% above your estimated premium when an audit can’t be completed due to missing records or an unresponsive policyholder.
And here’s the part that surprises people most: the state backs this up. Non-compliance charges are enforceable, and both Missouri and Arkansas take workers’ comp compliance seriously at the state level, not just the carrier level. Missouri’s Division of Workers’ Compensation actively investigates noncompliance and can refer cases for prosecution through its Fraud and Noncompliance Unit. In Arkansas, the Arkansas Workers’ Compensation Commission similarly enforces coverage and compliance requirements, and noncompliant employers can face real financial and legal consequences.
In short: not responding to an audit, or not keeping your subcontractor certificates current, isn’t a paperwork inconvenience you can put off. It’s a real financial risk to your business.
How to Make Your Next Audit Painless
- Keep current certificates of insurance on file for every subcontractor you use, and update them as they expire.
- Maintain organized 1099 and 941 records throughout the year rather than reconstructing them at audit time.
- Respond promptly when your carrier reaches out to schedule the audit.
- Talk to your agent before the audit if your payroll changed significantly during the year — a heads-up can prevent surprises on either side.
Whether you’re in Missouri or Arkansas, staying audit-ready protects your business from unnecessary charges and keeps your workers’ comp program running the way it should.
If you have questions about an upcoming audit or want a second look at how your policy is set up, reach out to our team at MBG Insurance — we’re here to help.
About the Author
Brandon Thompson is the CEO and co-founder of MBG Insurance (Millennium Brokers Group), with expertise in workers’ compensation, high value homes, lessor’s risk, and tree care risk.