News Flash
How Payroll Misreporting Harms the Workers' Comp System and Your Business
Running a business means staying on top of a lot—especially your payroll records and workers’ compensation insurance. But some companies try to cheat the system by misreporting payroll. This is called insurance premium fraud, and it’s a serious issue. Not only can it hurt your business, but it also harms the entire insurance industry, putting honest employers at risk.
What Is Payroll Misreporting?
Payroll misreporting means giving false payroll information to your insurance provider. Some companies do this by lowering reported wages or using the wrong employee classification codes. Others might avoid listing 1099 employees or use incorrect class codes (also known as classification codes). These payroll mistakes lead to lower workers' compensation premiums, which is illegal.
This kind of fraud creates problems across the board—from inflated medical expenses to rejected workers’ comp claims and increased insurance premiums for other businesses.
The Real Cost of Payroll Fraud
When companies cheat, everyone pays. Your insurance carrier might charge more to cover losses caused by policy-based workers' comp fraud. Plus, your experience modification rate (or Experience Modification Rate Factor) could skyrocket based on your claims history, even if the claims came from poorly handled employee records.
Missed steps in your payroll process—like not updating employee classifications or using outdated payroll software—can cause payroll reporting errors and payroll discrepancies. These errors affect your payroll calendar, lead to tax penalties, and could even result in legal action.
And yes, payroll misrepresentation can land you in trouble with the Department of Labor, US Department of Labor Wage and Hour Division, and violate federal and state payroll tax requirements or Fair Labor Standards Act guidelines.
How Underreporting Hurts Workers and the System
If a worker has a work-related injury, they count on your workers’ comp insurance to cover their medical treatment, medical evaluations, and even disability payments. But when payroll is underreported or employees are misclassified, the injured worker may be denied the help they deserve. This damages employee morale, employee retention, and overall employee experience.
Worse, underreporting leads to workers' compensation payments being delayed or denied—and puts your business at risk of regulatory penalties and even lawsuits.
What If You Use a Staffing Agency?
You still need to protect your business. If a staffing agency submits a CheckMyCert.org fraudulent insurance certificate, you could be on the hook for uncovered injuries. That’s why Certificates of Insurance (COIs) must be verified. Failing to do so may transfer liability to your business under workers’ compensation laws.
California's payroll audit enforcement in Sacramento is getting tougher. Agencies are being reviewed for fraud, and audits are digging into payroll management, employee reimbursements, and payroll allocation practices.
Don’t just assume that a certificate is real—check it. With CheckMyCert.org, you can verify any Certificate of Insurance for free and privately. No sales calls, just answers.
Final Thoughts
Workers' comp fraud prevention starts with honest reporting. When you lie about payroll or job roles, you're not just risking fines or a failed insurance audit—you’re risking your business's future.
If you’re still unsure about your staffing agency or the accuracy of your COI, let CheckMyCert.org help. Our team is made up of compliance, insurance, and labor experts who know how to spot fraud fast. Stop the risks before they start. Verify your staffing insurance certificates today.
News Flash
How Payroll Misreporting Harms the Workers' Comp System and Your Business
Running a business means staying on top of a lot—especially your payroll records and workers’ compensation insurance. But some companies try to cheat the system by misreporting payroll. This is called insurance premium fraud, and it’s a serious issue. Not only can it hurt your business, but it also harms the entire insurance industry, putting honest employers at risk.
What Is Payroll Misreporting?
Payroll misreporting means giving false payroll information to your insurance provider. Some companies do this by lowering reported wages or using the wrong employee classification codes. Others might avoid listing 1099 employees or use incorrect class codes (also known as classification codes). These payroll mistakes lead to lower workers' compensation premiums, which is illegal.
This kind of fraud creates problems across the board—from inflated medical expenses to rejected workers’ comp claims and increased insurance premiums for other businesses.
The Real Cost of Payroll Fraud
When companies cheat, everyone pays. Your insurance carrier might charge more to cover losses caused by policy-based workers' comp fraud. Plus, your experience modification rate (or Experience Modification Rate Factor) could skyrocket based on your claims history, even if the claims came from poorly handled employee records.
Missed steps in your payroll process—like not updating employee classifications or using outdated payroll software—can cause payroll reporting errors and payroll discrepancies. These errors affect your payroll calendar, lead to tax penalties, and could even result in legal action.
And yes, payroll misrepresentation can land you in trouble with the Department of Labor, US Department of Labor Wage and Hour Division, and violate federal and state payroll tax requirements or Fair Labor Standards Act guidelines.
How Underreporting Hurts Workers and the System
If a worker has a work-related injury, they count on your workers’ comp insurance to cover their medical treatment, medical evaluations, and even disability payments. But when payroll is underreported or employees are misclassified, the injured worker may be denied the help they deserve. This damages employee morale, employee retention, and overall employee experience.
Worse, underreporting leads to workers' compensation payments being delayed or denied—and puts your business at risk of regulatory penalties and even lawsuits.
What If You Use a Staffing Agency?
You still need to protect your business. If a staffing agency submits a CheckMyCert.org fraudulent insurance certificate, you could be on the hook for uncovered injuries. That’s why Certificates of Insurance (COIs) must be verified. Failing to do so may transfer liability to your business under workers’ compensation laws.
California's payroll audit enforcement in Sacramento is getting tougher. Agencies are being reviewed for fraud, and audits are digging into payroll management, employee reimbursements, and payroll allocation practices.
Don’t just assume that a certificate is real—check it. With CheckMyCert.org, you can verify any Certificate of Insurance for free and privately. No sales calls, just answers.
Final Thoughts
Workers' comp fraud prevention starts with honest reporting. When you lie about payroll or job roles, you're not just risking fines or a failed insurance audit—you’re risking your business's future.
If you’re still unsure about your staffing agency or the accuracy of your COI, let CheckMyCert.org help. Our team is made up of compliance, insurance, and labor experts who know how to spot fraud fast. Stop the risks before they start. Verify your staffing insurance certificates today.
