Learn How to Track Workers' Compensation in QuickBooks
QuickBooks Tips to Make Workers' Compensation Audits Easier
If you have employees, then you may be familiar with workers' compensation. Worker's compensation, or workers' comp, is regulated by each state. Most states will require employers to undergo workers' comp audits annually to verify that you, as the employer, are paying the correct amount of premiums into your state's workers' comp fund. You will find a few tips to help you maintain records for your workers' comp records within QuickBooks below, but first, it will help if you have a better understanding of the worker compensation system.
What Is Worker's Compensation?
Workers' compensation is insurance. Workers' comp is designed to ensure that your employees are provided with adequate wage replacement and medical benefits if they are injured in the course of employment. You, as the employer, benefit because, in exchange for having workers' comp, your employees give up their rights to sue for the tort, or wrongful act, of negligence. Therefore, employees receive assured but limited coverage and give up some rights for recourse, which is why the worker compensation system is known as "the compensation bargain."
QuickBooks and Workers' Compensation
QuickBooks has a few tools that can help you with your worker comp audit. You can use QuickBooks to help you organize your workers' compensation information, pull together the information quicker and reduce the premiums you pay. However, don't start with the expectation that QuickBooks will save you money on your worker comp premiums because although it happens, it is rare. QuickBooks is far more likely to help you organize yourself than save you money when it comes to workers' compensation. To get started:
- Turn on QuickBooks workers' comp feature: You can track your Workers Comp by turning on the workers' comp feature in QuickBooks. Go to company preferences and turn on the workers' comp feature. This feature will only take effect from the date you set; you cannot track information retroactively. Therefore, if you are setting up your workers' comp feature in the middle of the year, you will not capture all the information that you need for a workers' comp audit. You will only have captured part of the information in that year.
- Enter worker comp codes in QuickBooks: After turning on the workers' comp feature in QuickBooks, you will be able to enter the worker comp class codes for your small business. You can find these codes on the list provide your worker comp insurance company. From the Menu Bar in QuickBooks, select List > Workers Comp List. Then, you can fill in the information in the screen that will appear below. Next, enter your experience modification factor.
- You can then either assign a code to an employee in the employee record. Workers' comp premiums are based on the type of work an employee performs for you. If you have employees that perform multiple types of work for you, you will need to enter this information in those employees' timesheets. Assigning an employee code in the employee records will result in an error in a portion of an employees' time if he or she performs multiple job types.
- Create memorized workers' comp reports: If you have workers' comp audits annually, your auditor will probably request the same reports year after year. In this case, you can customize your workers' compensation reports and memorize them so that you do not have to re-create them each year. To do this, you should create a group in the Memorized Reports list. Then, run a report and memorize it and be sure to put it in the workers' comp group. You can run the group of reports at once by going to Process Multiple Reports and selecting the workers' comp group.