Class Codes, Owner Caps & Overtime: 3 Ways a Workers’ Comp Audit Overcharges You

Subcontractors cause most surprise bills, but plenty of contractors quietly overpay for the opposite reason: nobody checked the auditor’s math. Three places it hides.

1. Class-code misclassification

Your premium is payroll × a class rate, and rates vary enormously by trade — a higher-risk code can cost many times a clerical one. Two failure modes:

• The auditor defaults unclear work to the governing (highest) class.
• An employee doing genuinely lower-risk work is coded too high.

A verbal explanation won’t move an auditor. A written job description with time breakdowns, project records, and a supervisor sign-off will — and in NCCI states you can request a formal classification review.

2. Owner / officer payroll caps

Owners and officers can usually be capped at a state minimum/maximum, or excluded entirely where allowed. A common overcharge is the auditor adding a full owner salary into the governing class at face value. Know your state’s cap and check the number against it.

3. Overtime “excess”

In most states only the straight-time portion of overtime is premium-bearing — the extra half of time-and-a-half is excluded. Quick check: total overtime pay divided by 3 is roughly the excludable excess. If your payroll records don’t separate overtime out, you can get charged on the full amount. (PA, DE, UT, and NV include full overtime — confirm your state.)

Read your audit worksheet

When the audit results come back, don’t just pay it. Look at the class codes used, whether owner payroll was capped, and whether overtime excess was removed. These are recoverable dollars — sometimes thousands.

Want help spotting these before and after audit? Start with the exposure calculator, then join the early-access list — the full tool reconciles class codes, owner caps, and overtime alongside your subcontractor coverage.