diff --git a/cmd/virtwork/main.go b/cmd/virtwork/main.go
index 21fd7e0..407da5b 100644
--- a/cmd/virtwork/main.go
+++ b/cmd/virtwork/main.go
@@ -530,9 +530,18 @@ func runE(cmd *cobra.Command, args []string) error {
 		})
 	}
 	if err := g.Wait(); err != nil {
+		for _, wlID := range auditWorkloadIDs {
+			_ = auditor.UpdateWorkloadStatus(ctx, wlID, "failed")
+		}
 		return fmt.Errorf("creating VMs: %w", err)
 	}
 
+	// Build VM-name → workload-component mapping for readiness tracking
+	vmToComponent := make(map[string]string, len(plans))
+	for _, p := range plans {
+		vmToComponent[p.vmName] = p.component
+	}
+
 	// Wait for readiness
 	if cfg.WaitForReady {
 		timeout := time.Duration(cfg.ReadyTimeoutSeconds) * time.Second
@@ -543,6 +552,7 @@ func runE(cmd *cobra.Command, args []string) error {
 			timeout, constants.DefaultPollInterval)
 
 		failures := 0
+		failedWorkloads := make(map[string]bool)
 		for name, err := range results {
 			if err != nil {
 				logger.Error("vm readiness check failed",
@@ -554,6 +564,9 @@ func runE(cmd *cobra.Command, args []string) error {
 					Message:     fmt.Sprintf("VM %s failed readiness check", name),
 					ErrorDetail: err.Error(),
 				})
+				if comp, ok := vmToComponent[name]; ok {
+					failedWorkloads[comp] = true
+				}
 			} else {
 				_ = auditor.RecordEvent(ctx, execID, audit.EventRecord{
 					EventType: "vm_ready",
@@ -562,6 +575,13 @@ func runE(cmd *cobra.Command, args []string) error {
 			}
 		}
 		if failures > 0 {
+			for comp, wlID := range auditWorkloadIDs {
+				if failedWorkloads[comp] {
+					_ = auditor.UpdateWorkloadStatus(ctx, wlID, "failed")
+				} else {
+					_ = auditor.UpdateWorkloadStatus(ctx, wlID, "created")
+				}
+			}
 			return fmt.Errorf("%d of %d VMs failed; %w", failures, len(vmNames), ErrReadinessCheck)
 		}
 		logger.Info("all VMs ready", slog.Int("vm_count", len(vmNames)))
diff --git a/docs/audit-schema.md b/docs/audit-schema.md
index 35c97b4..fbc154c 100644
--- a/docs/audit-schema.md
+++ b/docs/audit-schema.md
@@ -135,7 +135,7 @@ Indexes: `started_at`, `namespace`, `status`, `run_id`.
 | `has_data_disk` | INTEGER NOT NULL | 1 when `DataVolumeTemplates()` is non-empty |
 | `data_disk_size` | TEXT | NULL when `has_data_disk = 0` |
 | `requires_service` | INTEGER NOT NULL | 1 for multi-VM workloads (network, tps) |
-| `status` | TEXT NOT NULL | `pending` → `created` (after VM create succeeds) → `failed` |
+| `status` | TEXT NOT NULL | `pending` → `created` (after all VMs succeed) or `failed` (on VM creation or readiness error) |
 
 Indexes: `audit_id`, `workload_type`.
 
diff --git a/internal/audit/audit_test.go b/internal/audit/audit_test.go
index da1db32..9b5b4b5 100644
--- a/internal/audit/audit_test.go
+++ b/internal/audit/audit_test.go
@@ -562,3 +562,60 @@ var _ = Describe("NoOpAuditor", func() {
 		Expect(a.Close()).To(Succeed())
 	})
 })
+
+var _ = Describe("Workload status transitions", func() {
+	var (
+		auditor *audit.SQLiteAuditor
+		ctx     context.Context
+		execID  int64
+		wlID    int64
+	)
+
+	BeforeEach(func() {
+		ctx = context.Background()
+		var err error
+		auditor, err = audit.NewSQLiteAuditor(":memory:")
+		Expect(err).NotTo(HaveOccurred())
+
+		cfg := &config.Config{Namespace: "test-ns"}
+		execID, _, err = auditor.StartExecution(ctx, "run", cfg)
+		Expect(err).NotTo(HaveOccurred())
+
+		wlID, err = auditor.RecordWorkload(ctx, execID, audit.WorkloadRecord{
+			WorkloadType: "cpu", Enabled: true, VMCount: 1, CPUCores: 2, Memory: "2Gi",
+		})
+		Expect(err).NotTo(HaveOccurred())
+	})
+
+	AfterEach(func() {
+		Expect(auditor.Close()).To(Succeed())
+	})
+
+	It("defaults to pending on insert", func() {
+		db := auditor.DB()
+		var status string
+		err := db.QueryRow(`SELECT status FROM workload_details WHERE id = ?`, wlID).Scan(&status)
+		Expect(err).NotTo(HaveOccurred())
+		Expect(status).To(Equal("pending"))
+	})
+
+	It("transitions to created on success", func() {
+		Expect(auditor.UpdateWorkloadStatus(ctx, wlID, "created")).To(Succeed())
+
+		db := auditor.DB()
+		var status string
+		err := db.QueryRow(`SELECT status FROM workload_details WHERE id = ?`, wlID).Scan(&status)
+		Expect(err).NotTo(HaveOccurred())
+		Expect(status).To(Equal("created"))
+	})
+
+	It("transitions to failed on orchestration error", func() {
+		Expect(auditor.UpdateWorkloadStatus(ctx, wlID, "failed")).To(Succeed())
+
+		db := auditor.DB()
+		var status string
+		err := db.QueryRow(`SELECT status FROM workload_details WHERE id = ?`, wlID).Scan(&status)
+		Expect(err).NotTo(HaveOccurred())
+		Expect(status).To(Equal("failed"))
+	})
+})