‘Pay-as-You-Go’ Workers’ Comp

Pay-as-you-go workers’ compensation insurance bases your premium on actual payroll, helping ensure your workers’ compensation insurance rate is more accurate. It’s increasing in popularity in the business world because it reduces upfront costs and eliminates outdated payment methods.

 

With pay-as-you-go workers’ comp, you’re less likely to pay too much throughout the year – or have a premium adjustment at the end of the policy term due to underreported payroll.*

 

With pay-as-you-go workers comp, you work with your existing payroll service provider and/or tax administrator to pay a single bill each pay period. This way, you’re combining your workers’ comp premium with your payroll in one easy bill. You're essentially making your insurance expense a payroll expense.

 

Be aware you may lose direct control and knowledge over the true costs of your workers' comp coverage if you use the pay-as-you-go payment method.

 

Pay-as-you-go workers comp is simply another way of making your premium payments. With traditional workers’ compensation insurance, your premium is based on estimated payroll. You also typically need to make a bigger down payment with a traditional workers’ comp insurance plan.

 

Remember, pay-as-you-go workers’ comp isn’t different insurance and it doesn’t replace your workers’ comp insurance or your responsibility to pay premiums and collect/issue certificates of insurance from subcontractors, etc. Your coverage must still be provided through a state-approved workers’ comp insurance carrier or approved self-insured source.

 

One of the biggest advantages is the ability to avoid a large, cash flow-killing down payment upfront. You can get workers' compensation insurance with little money down and pay your premium in smaller amounts spread over the course of the year.

 

With traditional premiums, you may have to put down a 25% deposit (based on your estimated annual payroll). From there, you'll still make monthly premium payments. This can affect your business' operating cash. It's important to remember pay-as-you-go workers' compensation insurance doesn't mean it's a zero down payment insurance plan. You'll have to pay some cash up front, just not as much as a traditional plan.

 

Since a traditional workers' compensation payment plan uses estimated payroll to generate payment amounts, pay-as-you-go means your premium payments are more accurate since it's based on your actual payroll. So, if your business has less employees than the prior month, your premium amount would be lower.

 

No, having pay-as-you-go workers' comp doesn't prevent your business from having an audit. Remember, this isn't a type of insurance policy. You're still getting workers' compensation insurance, you’re just paying for it differently. So, your workers' comp policy details work the same as a business owner under a traditional payment plan.

 

Un workers compensation audit verifies your business' payroll. It determines if your payroll and class codes are accurate and ensures your sub-contractors had workers' comp coverage during the audit period. Your insurer can conduct an audit by phone, mail or in person.

 

Not all payroll companies and insurance companies offer pay-as-you-go workers’ comp. Contact your current insurance provider and payroll bureau to find out if pay-as-you-go is available for you.

 

 

Última actualización: 23 de mayo de 2024

 

* Most carriers require a premium audit for workers’ compensation policies.

 

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