Annual workers’ compensation audits might feel like just another administrative task—but skipping or ignoring one can have serious consequences for your business.
If your company has a workers’ comp policy, you’re likely required to complete an audit each year. This process verifies your actual payroll and employee classifications to ensure your premium reflects the true risk and exposure of your operations.
But what if you don’t complete the audit?
Let’s break down what happens if there’s no annual workers’ compensation audit, why it matters, and how to avoid costly penalties.
Why Are Workers’ Comp Audits Required?
When you purchase a workers’ compensation policy, your premium is initially based on estimated payroll and employee job classifications. The audit—usually done at the end of the policy period—compares your estimates to the actual figures.
This helps determine whether:
- You underpaid (and owe more),
- Or overpaid (and are due a refund or credit).
Without this audit, your insurer can’t accurately assess your liability—putting both your business and the insurance carrier at financial risk.
What Happens If You Don’t Complete the Audit?
Failing to comply with an annual audit can trigger a domino effect of problems:
1. Policy Non-Renewal or Cancellation
If you don’t respond to audit requests, the insurer may refuse to renew your policy—or even cancel it mid-term, depending on state regulations.
Result: You could be left without required coverage, putting your business in violation of state law.
2. Assigned Audit Premium (Estimated Audit Bill)
Without actual payroll data, the insurance company will often issue an “estimated audit”, which tends to be much higher than what you might really owe.
Result: You’ll receive a hefty bill based on inflated figures—and have little recourse without proper documentation.
3. Loss of Refund or Credit
If your actual payroll was lower than estimated, you might be entitled to a refund or credit. But without completing the audit, you forfeit that opportunity.
Result: You lose money you might rightfully deserve.
inal Thoughts
Skipping your annual workers’ compensation audit might seem harmless—but it can open your business up to higher premiums, legal trouble, and loss of coverage.
The audit isn’t just a formality. It’s a vital part of your insurance agreement that protects both your business and your employees. Don’t risk the consequences of non-compliance. Prepare for your audit, complete it on time, and work with a trusted insurance advisor to ensure your business stays covered and compliant.