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TMK Risk Management Inc. dba Kallman Insurance Agency

By Thomas M Kallman

Your Workers Compensation policy is subject to audit every year. Your gross payrolls are reviewed to determine your premiums for Workers ‘ Compensation insurance coverage. Gross payroll includes total remuneration for services performed, including: Wages, Overtime (straight time portion), Bonuses, Commissions (including 1099 commissions), Holiday and Vacation Pay, Sick Pay, Incentive Plans, Piece Work , Auto Allowances (except expense reimbursements), Housing Allowances (for certain class codes), Savings Plan (401 K) Employee Contributions.

Audits are not just a question of classifications; remember the auditors are paid by the insurance companies. They are always biased and seek to find additional premium on behalf of the comp providers. Do not automatically accept the results of an audit. Too often, discounts, credits, exclusions and classifications are listed incorrectly. In addition, experience modifications can be wrong due to incorrect data or extremely high reserves.

Earnings records for each individual should be organized to include overtime payments, the employee’s job classification and total remuneration. State law allows the premium portion of overtime payment to be excluded from total payroll for determining premiums. When included in your policy, the earnings of executive officers, partners, and sole proprietors must be assigned to the specific classifications for the work they perform. State law specifies an earnings minimum and maximum for these salaries when determining premiums. The insurance company representative will look at the following records during the Premium Audit process:

PAYROLL including Monthly and Quarterly totals, Work classification totals, Overtime.

INDIVIDUAL EARNINGS including Type of Work performed, Gross pay totals both monthly and quarterly; Overtime totals both monthly and quarterly.

CASH DISBURSEMENT AND JOB COST JOURNALS Monthly totals by account, including: Subcontractors, Casual Labor , Contract Labor.

VERIFICATION AND BALANCING including Employers Federal Tax Return Form 941 (Quarterly), State Unemployment Tax Return (Quarterly), General Ledger, W-2 Statements, 1099 Statements, Financial Statements.

CONTRACTORS LICENSE AND CERTIFICATES OF INSURANCE including License from each subcontractor and Certificate from each subcontractors.

If your company hires subcontracting companies which have not purchased Worker ‘s Compensation insurance for their employees, insurance laws require that your policy must provide coverage for theses employees should they suffer any work-related injury or illness while on your premises or job site. Even more important is the issue of a contractor ‘s license. State law demands that unlicensed subcontractors must be considered employees of the hiring contractor.

An agreement or written contract with the subcontractor releasing you from such Worker ‘s Compensation coverage would not be sufficient under the law. Even if the subcontractor may have accident and health insurance policies, you would still be liable for workers ‘ compensation coverage for the subcontractor ‘s employees while on your job. The answer is to obtain a copy of the subcontractor ‘s license and a certificate of Workers ‘ Compensation insurance from the subcontractors before any work begins. The insurance company representative will require this proof of insurance and insurance during the audit process. Otherwise, you must include the subcontractor ‘s payroll along with your payroll to determine your actual premium costs, which could be substantially higher.

Thomas Kallman is President of TMK Risk Management Inc dba Kallman Insurance Agency at PO Box 266736, Weston, Florida 33326. The phone is 954-389-5897 and the website is Your inquiries are always welcome.

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