Workers Compensation premiums are based on payroll. Throughout the policy period, the insured will pay an estimate of what they think the cost will be. At the year’s end, the insurance company will perform an audit and ask for payroll records. The insurance company will calculate if you have paid more than the amount shown on your policy or less. You may be asked to pay an additional premium or you may receive a refund. This is a mandatory process, and failure to comply with the audit will result in the cancellation of your policy.