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Preparing for an Onsite Audit: Documents and Policies HVAC Contractors Should Keep

An onsite premium audit can be a costly surprise for HVAC contractors in the USA — especially in major markets like Houston, TX or Los Angeles, CA. Auditors will validate payroll, classification, subcontractor use, and safety practices. Proper documentation and written policies reduce downtime, limit retroactive premium adjustments, and protect your bottom line. This guide lists the specific documents, policies, tools, and state considerations HVAC contractors should have ready for an onsite audit.

What is an onsite premium audit? (Short primer)

An onsite premium audit is a field review conducted by your insurer (or their auditor) to verify payroll, employee classifications, subcontractor status, and exposure bases used to calculate workers’ compensation and liability premiums. For a detailed walkthrough, see What to Expect During a Premium Audit: A Guide for HVAC Contractors.

Core documents to have on-site (and retention periods)

Auditors expect clean, organized records. Keep originals or verified copies accessible onsite or via cloud access.

  • Payroll records

  • Tax & employment forms

    • W-2s, 1099s, Form 940, state unemployment filings.
    • Use to verify proper worker classification (employee vs. independent contractor).

  • Certificates of insurance / policies

    • Workers’ Compensation declarations page, General Liability, Commercial Auto, Umbrella — including policy numbers and carrier contact.
    • Subcontractor COIs with named-insured endorsements where required.

  • Job contracts & invoices

    • Signed client contracts, change orders, and final invoices by job.
    • Helps substantiate job codes, project durations, and subcontractor usage.

  • Time cards / crew logs

    • Daily time sheets, job reports, or GPS logs showing on-site labor allocation.

  • Payroll distribution to job (job cost reports)

    • Job-cost breakdowns tying wages to job sites — essential if you use job codes for premium allocation.

  • Safety & training records

    • OSHA 300 logs, training certificates, toolbox talk notes, OSHA citations and corrective actions. OSHA requires retention of injury records for 5 years.
      https://www.osha.gov/recordkeeping

  • Equipment & vehicle logs

    • Vehicle mileage logs, maintenance records, equipment purchase/lease agreements.

  • Subcontractor agreements

    • Signed contracts and proof of subcontractor insurance (COIs and endorsements).

Quick reference table: Document, Why it matters, Retention

Document Why auditors request it Typical retention
Payroll registers + 941s Verify payroll base 4+ years (IRS)
W-2 / 1099 Classification validation 4+ years
COIs / policies Subcontractor & coverage proof Duration of contract + claims period
OSHA 300 logs Injury history and claims 5 years (OSHA)
Job contracts/invoices Verify job classification & scope 4–7 years (depending on state)

Policies HVAC contractors should maintain and present

Auditors not only read documents — they assess whether your company has formal policies that mitigate risk and support reported payroll/classification.

  • Written payroll classification policy
  • Safety policy and written injury prevention program
    • OSHA-aligned written safety policies, PPE requirements, and return-to-work plans.
  • Subcontractor vetting & insurance acceptance policy
    • Criteria for accepting subcontractor COIs and verifying coverage limits and endorsements.
  • Record retention policy
    • Where records are stored, access controls, and retention schedule (IRS/OSHA compliance).
  • Payroll & job-costing procedures
    • How payroll is recorded, approvals for overtime, and job allocation steps.

Tools, software, and sample costs (to stay audit-ready)

Digitizing and centralizing records reduces errors and speeds up audits. Common, widely used tools and their typical 2024 pricing:

Investing in these tools can cost between $50–$300/month for small HVAC firms, depending on seats and integrations, but saves time and reduces audit risk. For software focused on service/field management, contractors often use platforms like Jobber or ServiceTitan (prices vary — ServiceTitan typically starts several hundred dollars/month and targets larger operations).

State considerations: Texas vs California (what differs)

  • Texas (e.g., Houston, Dallas)
    • Texas employers are generally subject to workers’ comp only if they opt in (state not mandatory), but many contractors carry policies voluntarily. Expect auditors to scrutinize employee-vs-contractor classification and payroll reported for policy premium.
  • California (e.g., Los Angeles)
    • California has unique classification practices enforced by the WCIRB and stricter contractor/employee tests (ABC test). Injury reporting and claims management are scrutinized carefully; expect more frequent follow-up documentation requests. For California-specific WC rules, consult the Department of Industrial Relations.
      https://www.dir.ca.gov/dwc/

Adjust your documentation for state nuances — auditors will check state filings, payroll taxes, and local licensing.

What to expect during the onsite visit — checklist

  • Auditor ID and scope of audit (dates, policies, audit year).
  • Request to review payroll, timecards, job invoices, and COIs.
  • Interviews with HR/payroll personnel.
  • Verification of vehicles/equipment and job sites.
  • Timeline: Onsite 1–3 days typical for small firms; complex multi-year audits can take longer.

Prepare a 1-page audit packet (digital + hard copy) with the most-requested items to expedite the process:

  • Policy declaration pages
  • Payroll summary by month
  • Job-cost summary linking payroll to job codes
  • Subcontractor COI binder
  • OSHA 300 (if applicable)

For more comprehensive preparation items, consult the Audit Checklist: Documents, Logs and Proofs Every HVAC Contractor Should Maintain.

Common audit pitfalls — and how to avoid them

  • Missing or inconsistent job codes — enforce a single job-code policy and train staff.
  • No subcontractor COIs or missing endorsements — require COIs before engagement.
  • Time cards not tied to job invoices — implement daily crew logs or GPS job-tracking.
  • Casual payroll adjustments not documented — maintain change-order logs and approvals.

If you need deeper guidance on recordkeeping, see Recordkeeping Best Practices to Pass an Insurance Audit for HVAC Companies.

Final onsite audit checklist (printable)

  • Policy declaration pages (Workers’ Comp, GL, Auto)
  • Payroll register and Form 941 (audit year)
  • Employee timecards and job allocation
  • W-2s and 1099s and subcontractor agreements
  • COIs for all subcontractors with required endorsements
  • OSHA 300/301 logs and training records
  • Job contracts, change orders, final invoices
  • Vehicle mileage and equipment logs
  • Written policies: payroll classification, safety, COI acceptance, retention schedule

Preparing these documents and policies will reduce audit friction, limit costly retroactive adjustments, and demonstrate sound risk management to carriers. If you manage records digitally, ensure secure, auditable access during the onsite visit — auditors expect verifiable, timestamped information from recognized payroll and accounting systems.

External resources referenced

Internal resources for next steps

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