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What does it cost me?

Why did my workers' comp audit raise the bill?

Your audit raised the bill because payroll, class codes, or subcontractors differed from your estimate. The standard workers' comp policy (NCCI form WC 00 00 00) sets the final premium after the policy ends, from actual payroll and the correct class codes. If that is higher, you owe additional premium; if lower, the carrier refunds the difference. The carrier can audit for up to three years after the policy ends.

Updated September 29, 2026. Written by Andre Beukers, principal at Redoubt, a commercial insurance agency in Salt Lake City, not a government office.

What is a workers' comp audit?

A premium audit is the carrier's check of what actually happened during the policy year. Part Five of the standard policy, NCCI form WC 00 00 00 C, says the premium on your information page "is an estimate" and the final premium uses "the actual, not the estimated, premium basis." The form calls remuneration "the most common premium basis"; rates are quoted per $100 of payroll in each class code.

The same form lets the carrier reassign class codes that don't fit your work. Under NCCI Item B-1429, the audit can be by mail or email, telephone, remote access, or in person.

What documents do I need for a workers' comp audit?

The policy form lists "ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records." In practice, have these ready for the policy dates, not the calendar year:

Payroll register by employee, with overtime's extra pay in its own column
Quarterly federal 941s and state unemployment wage reports
W-2s and every 1099 you issued
Ledger or check register showing payments to subcontractors
A certificate of insurance for each subcontractor, dated to cover the work
Job duties for anyone who did work in more than one class code
Owners and officers, and whether each was included or excluded

What counts as payroll, and what can be left out?

NCCI's Basic Manual counts wages, commissions, bonuses, holiday, vacation, and sick pay, and employees' pre-tax 401(k) or cafeteria-plan deferrals. It leaves out tips, severance beyond time worked or vacation accrued, employer contributions to group insurance or pensions, documented expense reimbursements, and uniform allowances.

Under NCCI's rule, overtime's extra pay is excluded when your records show it separately by employee and in summary by class code; if time-and-a-half is recorded as one combined amount, one third of it is still excluded. Independent-bureau states such as California and New York write their own manuals, so ask the carrier which rule applied.

What if I ignore or refuse a workers' comp audit?

In most NCCI states, a carrier can add an Audit Noncompliance Charge of up to two times your estimated annual premium, under NCCI Item B-1429 and endorsement WC 00 04 24. The carrier must first try twice to get your records, and the endorsement must be on the policy from inception. If you later complete the audit, the charge is refunded or applied to your balance.

In California, the Department of Insurance says refusing the audit can mean a total premium of three times the estimated premium, plus cancellation or non-renewal.

How do I dispute a workers' comp audit bill?

Start with the carrier in writing: name each line you dispute, show your own calculation, and ask for the auditor's worksheets. NCCI's Dispute Resolution Process requires you to pay the undisputed premium, then lets you take manual-rule disputes (class codes, payroll allocation between codes, experience mods) to NCCI and then a state appeals board. In California, the Department of Insurance hears classification appeals after a written complaint to the insurer.

How do I avoid a big audit bill next year?

Tell your agent when payroll or duties change mid-year; California's Department of Insurance notes corrected estimates reduce the chance of a large audit bill. Collect a certificate before each subcontractor starts, keep overtime in its own column, and consider pay-as-you-go billing.

Side by side

Why did my workers' comp premium go up after the audit?

Find the line on your audit statement, then check the third column.

What the audit found	What it does to the bill	What to check
Payroll higher than the estimate	Additional premium at the same rates	Excluded pay (overtime extra, tips, severance) was taken out
Uninsured or lapsed subcontractor	Their payroll, or the contract price, added to your policy	A certificate covering the dates they worked
Work reclassified to another code	Payroll moved to a higher-rated code	Job duties documented for the audited period
Overtime recorded as one combined amount	Only one third of time-and-a-half pay is excluded	Payroll register showing overtime's extra pay
Owner or officer included	Their payroll added, within state limits	Whether an exclusion was on file for that period
Audit never completed	An added charge of up to 2x estimated annual premium in NCCI states, or a total premium of 3x in California	Complete the audit; the charge is re-rated

Rules differ in independent-bureau states and the four monopolistic states, and depend on the business, the worker setup, and current carrier instructions.

Sources

Where these answers come from

Statutes, state agencies, and rating bureaus. Requirements depend on the business, the worker setup, and the current instructions of the state agency, so check the source for your state before acting.

NCCI policy form WC 00 00 00 C, Part Five (Premium)The standard workers' compensation policy: estimated vs final premium, reclassification, subcontractor contract price, records, and the three-year audit window. Copy hosted by the North Carolina Rate Bureau.NCCI Basic Manual, payroll definition (excerpt)What counts as payroll, what is excluded, and how overtime is excluded. An undated excerpt hosted by the West Virginia Offices of the Insurance Commissioner; check your carrier's current manual.NCCI Item B-1429, Audit Noncompliance ChargeThe charge of up to two times estimated annual premium, the two-attempt requirement, the refund once the audit is completed, and the audit types it covers. A 2015 filing memo (effective 2017) hosted by the Indiana Compensation Rating Bureau.NCCI endorsement WC 00 04 24, Audit Noncompliance ChargeThe policy wording that lets a carrier apply the charge. Hosted by the Wisconsin Compensation Rating Bureau.NCCI Dispute Resolution ProcessCarrier first, pay the undisputed premium, then NCCI and a state appeals board for manual-rule disputes.California Department of Insurance, Workers' Compensation guideAn independent-bureau state's rules: audit bills and refunds, the three-times charge, mid-term payroll corrections, and appeals to the CDI.

The next question

Workers’ compensation insurance: every question, every stateThe hub: the 51-state requirement table and the nine buyer questions.Do 1099 subcontractors go on my workers' comp?When a sub's pay is charged to your policy, and what their certificate changes.What is a workers' comp class code?How codes are assigned, and the errors that cost money at audit.How much does workers' comp cost?Rate per $100 of payroll and what moves it.Pay-as-you-go workers' compPremium priced from each payroll run instead of an annual estimate.Utah workers' comp audit helpReview a Utah audit line by line before disputing it.Request the audit workpapersA written request for the payroll, codes, and rates behind the bill.Wrong class code on my auditCompare the code used with the work performed.Subcontractor payroll charged to my auditBuild a schedule of subs, certificates, and work dates.Audit noncompliance chargeWhat the charge is and how completing the audit changes it.NCCI audit disputes in UtahCarrier first, undisputed premium paid, then NCCI.

By state

Workers’ comp requirements in every state

Each state page gives the employee threshold, the owner and officer exemptions, the penalty for going without, the rating bureau, the market, the enforcing agency, and the exemption filing, each with its statute or agency source.

Frequently asked questions

Workers' comp audit FAQ

How long after my policy ends can the carrier audit it?+

Up to three years. Part Five of NCCI's standard policy form allows audits during the policy period and within three years after it ends.

Do I have to pay the audit bill while I dispute it?+

Pay the part you don't dispute. NCCI's Dispute Resolution Process requires you to pay all undisputed premium and give the carrier a written estimate of the disputed amount first.

Are overtime payments excluded from workers' comp payroll?+

The extra pay is, not the straight-time part. NCCI's rule excludes it when your payroll records show it separately by employee and in summary by class code.

Talk to Redoubt

Have an audit bill you don't understand?

Send us the audit statement and your payroll records. We'll walk the line items with you, show where the increase came from, and help you put a written question or dispute to the carrier.

Talk to Redoubt Call 385-375-7655

This is general insurance information, not legal advice or a coverage determination. Statutes, agency instructions, policy forms, and the facts of the business control.