Workers’ Comp Audit Tips for Your Policyholders

Workers’ compensation audits don’t have to be stressful. With a little preparation and the right documentation, your policyholders can sail through audit season without issue. As an agent, you’re the first line of support. And at Kansas Builders Insurance Group, we want to make it easy for you to help your insureds stay informed and prepared. Below are key reminders and tips you can pass along to make their audit process smoother and more accurate. 

Corporate Officers & Owners 

Corporate Officers: 

By default, corporate officers are included in coverage. If they own 10% or more of the business, they can choose to exclude themselves by filing a K-WC 50 form with the state. If they do so, please send notification to KBIG so the policy can be updated for the audit. Officers with less than 10% ownership must be included and cannot opt out. For those included, payroll will be rated using a minimum of $1,100 and a maximum of $4,500 per week, effective 1/1/2025. 

Sole Proprietors, Partners & LLC Members: 

These roles are automatically excluded unless they elect to be included. If they opt in, their payroll is set at $57,900 annually (as of 1/1/2025), and a K-WC 113 form should be completed and sent to KBIG.  

Agent Tip: Review ownership percentages with your insureds. Confirm any elected exclusions are documented and filed properly. 

Payroll Inclusions and Exclusions 

Included in Payroll:

• Wages, bonuses, commissions 
• Overtime (included at straight-time rate) 
• Employee contributions to retirement, savings and cafeteria plans (via payroll deduction) 

Excluded from Payroll: 

• Holiday, vacation, and sick pay (KS-specific exclusion) 
• Tips and dismissal/severance pay 

Agent Tip: Encourage your insureds to maintain a breakdown of these items by employee. Proper documentation can prevent unnecessary premium charges. 

Subcontractors & Independent Contractors 

Subcontractors:

If your insured doesn’t collect a valid certificate of insurance (COI) for each subcontractor, that subcontractor’s payroll will be added to your insured’s during the audit. 

Independent Contractors (No Employees): 

They may exempt themselves from carrying workers’ comp, but only by filing a signed, notarized Affidavit of Exempt Status—on the approved Kansas Department of Insurance form—before any work begins. These affidavits must be renewed annually, and copies should be kept for the auditor. 

Agent Tip: Remind your insureds to keep a file with updated COIs and affidavits for each subcontractor and independent contractor. 

Class Codes 

If employees perform more than one type of work, their payroll can be divided across multiple class codes, but only if your insured tracks the actual hours and wages per code and per project. No estimates or percentages are allowed. 

Some class codes—such as Clerical (8810), Outside Sales (8742), Construction Jobsite Sales (8720) and Executive Supervisor (5606)—cannot be split with other codes. 

Agent Tip: Ask your insureds if their business has changed or added services in the past year. Make sure all applicable class codes are listed on the policy before the audit. 

Supporting Your Clients Through Audit Season

You’re a trusted advisor to your insureds, and a little proactive guidance can make a big difference. Here are a few key ways you can help: 

• Confirm officer/owner inclusions and file any necessary K-WC 50 forms 
• Ensure subcontractor COIs and affidavits are collected and retained 
• Encourage payroll documentation by employee and class code 
• Notify us of any operational changes that could impact class codes 

Helping members stay protected and in compliance is what we’re here for. If you or your insureds have questions during audit prep—or need help reviewing documentation—don’t hesitate to reach out to our underwriting or audit team.