Why You Need to Report Payroll to Your Insurance

Employee relations and recruitment aren’t the only responsibilities of the human resources department. This department is also in charge of payroll. Without payroll, nobody in the business gets paid, and that means very little work gets done.

Another part of running payroll is keeping track of payroll deductions, depositing and filing taxes, and adhering to all relevant rules. Accurate record-keeping is essential in all aspects of your company, but it is especially critical in payroll. 

Small blunders or noncompliance in payroll reporting  can have serious ramifications for business owners. The payroll should be audited regularly to detect irregularities and ensure that all documents are correct. Obviously for things to run smoothly, a trustworthy employee  must be assigned to this role. 

If you are not aware of insurance payroll audits or why you need to report payroll to your insurance, this article will help you better understand what to do.  

What is a Payroll Audit?

Every  three to five years your company may be subject to a payroll audit from your insurance company. Since your workers’ compensation premium is partially dependent on the amount of compensation accrued to your staff throughout a policy period, insurance payroll audits look at your payroll amount. 

Money and benefits earned from the employees are included in the total amount paid. The insurance premium you pay is also determined by your work classification. These classifications aid in determining the level of risk that your employees are exposed to. If your company’s work duties have changed as a result of the payroll audit, you could be eligible for a different premium. 

Consider any overtime bonuses workers earn while reporting your payroll. This will ensure the most reliable payroll record possible. 

One of the most important advantages of a workers’ compensation audit is that it ensures that the coverage and premiums are in sync. This is beneficial because it ensures your company doesn’t overpay for workers’ compensation coverage. 

What Records are Needed for Payroll Audits?

Businesses can check that their payroll records are accurate by conducting an insurance payroll audit. The auditor (either an employee or an independent auditor) will verify that all participating workers are being paid at the proper amount and that no one is being underpaid or overpaid. 

An insurance payroll auditor should also ensure that workers are compensated for all hours worked. 

This audit process ensures that your business follows the law while still paying your employees correctly. Compliance is beneficial to the company’s success. 

Not keeping correct records may also be an error. Most employers are required to maintain records of hours worked, sums charged daily, and reductions taken daily. They must also keep track of workers’ holiday compensation, bereavement pay, paid holidays, and other forms of compensation.

The good news is that payroll audits can also detect several different forms of payroll fraud. For example, unauthorized hours may have been charged or a fraudulent employee’s rate of pay may have been changed. 

In rare cases, past employees may still be collecting paychecks, or that the payroll system contains fictitious workers. These forms of payroll fraud can be identified and corrected by insurance payroll audits.

How To Conduct an Effective Payroll Audit

First, make an internal payroll audit a routine part of your yearly operations. It is highly recommended to contact a legal advisor or insurance audit agent to help you out with the process. To get started, you can use these steps as a payroll audit checklist.

Review Your Employee List

Examine all employees reported on your payroll. Confirm that all these people are still working for you at that time of the audit. You might have an issue if your payroll lists more employees than you have on staff. Payroll theft is committed more commonly than many employees realize. You may also have failed to deduct a dismissed employee’s salary from the payroll. 

Analyze Figures and Statistics:

Payroll looks like just a bunch of numbers – pay rate, hours worked, overall pay for the year, withheld taxes – but are some of the most important payroll statistics. 

Analyze each employee’s wage level to ensure that you paid them the right amount. Make sure the pay rate is current and corresponds to the employee’s history. Authenticate that you adjusted the pay rate on the relevant dates if you offered the employee a bonus or a salary increase.

Examine the employee’s working hours. Was it true that they worked those hours during the pay cycle? Does what’s documented in your time and attendance program fit what’s documented in your payroll system? Did you provide non-exempt employees with overtime pay? 

Check If Timelines Are Correctly Labeled

The majority of employers provide time off for their workers, with most offering paid time off (PTO) for full-time or part-time employees. If you offer vacation time, make sure you or your staff labelled the time correctly while running payroll. 

You’ll be able to tell when an employee performed and when they didn’t. If you provide a fixed number of paid vacation days, deduct it from the employee’s unused vacation days. Mark all time off as either holiday, personal, sick, or bereavement leave, or whichever labels you want.

Reconcile Your Payroll

After that, take a peek at the payroll payments records. Check your payroll totals against other financial records to make sure they’re right. If there’s a difference, look at your records carefully to figure out what’s going on. Your payroll reports should be reconciled with your bank statements. 

Compare what was deducted from your bank to the sums reported in your payroll reports. To make bank reconciliation simpler, consider setting up a dedicated payroll account. 

Confirm Taxes, Remittance Documents Are Correct

Verifying the validity of your job taxes is another crucial phase in the payroll audit process. Check that withheld the right amount of taxes from each employee’s paycheck. You must deduct federal wages, Social Security, and Medicare taxes from your employees paychecks. 

In some states, you will have to withhold state and local income taxes as well. Also, double-check that the tax sums remitted are correct.

Preparation Helps With A Smooth Audit

Remember that each company has unique requirements, so no two payroll audits would be alike.

Payroll accuracy is unquestionably one of the most important employer obligations. And even if you use a dependable payroll management system, there’s still the possibility of human error. You may make a mistake when entering numbers, forget to include an employee’s pay increase, or forget to delete a terminated worker from your payroll system.

Conducting a payroll audit is critical in combating these possible issues. It also reduces the issues you may have when it comes time to do a payroll audit for insurance. You can ensure that your Worker’s Compensation premiums won’t suddenly increase if you have accurate payroll records and report them regularly.

Jackson & Jackson Insurance Agents and Brokers offer commercial and business insurance in California with over 80 years of experience serving the San Dimas, Glendora, and LaVerne business communities.

We offer all lines of group health insurance that can provide you with a choice of health insurance providers based on your needs to see what works best for your business.

 

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Are you ready to save time, aggravation, and money? The team at Jackson & Jackson Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

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