What Is Pay-As-You-Go Worker’s Compensation Insurance?

What Is Pay-As-You-Go Worker's Compensation Insurance?

The type of business notwithstanding, every business owner wants to make their working environment as safe as it can be for their employees. However, the challenge is whether your business is a high-risk industry or a relatively safe office setting, your employees could fall sick or sustain an injury while at work. Since such accidents and work-related injuries occur when least expected, the labor laws in 49 of the 50 U.S. states require businesses to have workers’ compensation insurance to protect their employees.

Running a small or medium-sized business in today’s business climate requires all hands on deck. This is where pay-as-you-go workers’ comp insurance benefits you. Pay-as-you-go workers’ compensation insurance will help you save time and money that can be redirected towards growing your business.


Understanding Pay-As-You-Go Workers’ Compensation Insurance

Pay-as-you-go workers’ compensation is an innovative insurance payment plan that makes costs more manageable, calculates and accurately manages premiums, and aligns your business’s premium payments to payroll cycles. Since payments will be based on your actual payroll, paying for your workers’ compensation coverage as you go means real-time payment of premiums.

With lower down payments and no upfront costs, pay-as-you-go will improve your business’s cash flow because costs are more manageable through accurate and timely payment of premiums. Each time you’re running payroll, pay-as-you-go connects with your payroll data and ensures that the insurance premiums for every pay period are disbursed.

Under traditional workers’ compensation plans, the workers’ compensation premium is estimated depending on what an employer expects their payroll to be for the upcoming year. At the beginning of a policy year, business owners make payroll estimates and pay lump sum workers’ compensation premiums.

When the policy year ends, the difference between how the projection of a business’s gross wages and the actual figures are calculated. A business is on the safe side if it overestimates its final premium. If the final premium exceeds the projections, additional payments will be required. If the final premium is lower than the projections, a return premium will be distributed to the business.


How Pay-As-You-Go Payment Workers’ Compensation Insurance Works

As a business owner looking to have your bases covered should any employees sustain an injury or illness while on the job, investing in workers’ compensation insurance to protect employees is a smart move. Rather than paying these premiums on annual payroll estimates, your business can automate the billing process with a pay-as-you-go payment plan.

A pay-as-you-go workers’ compensation plan will enable your business to pay workers’ compensation premiums more accurately by basing premiums on actual payrolls each pay cycle. Payroll integration and self-reporting make this billing option seamless since your premiums will be calculated and paid directly to the insurance carrier when your payroll is processed.

By paying your workers’ compensation insurance as you go:

  • Your premiums are based on real-time payroll compensation.
  • Your workers’ compensation insurance removes audits from your to-do list.
  • You pay your workers’ compensation premiums during a payroll period.
  • Your business’s workers’ compensation insurance liability is spread out throughout the year.
  • Your workers’ compensation plan can be routinely folded into your payroll services.


Who Needs Workers’ Compensation Insurance?

All businesses with employees must navigate workers’ compensation. In most U.S. states, purchasing workers’ compensation coverage for your employees is a legal requirement. Businesses risk administrative penalties they fail to comply with local laws and government regulations.

To safeguard your employees’ well-being and your overall workplace safety, your business needs to have workers’ compensation coverage for its employees before work-related illnesses or injuries occur.  Workers’ compensation coverage applies to events occurring only after the policy is purchased so any workplace injuries or illnesses that occur before your policy is activated, your business will be financially liable.

Key elements affecting workers’ compensation requirements for your business include:

  • Number of Employees: Upon hiring its first employee or reaching a certain number of employees, states will require businesses to purchase workers’ compensation coverage.
  • Location: Familiarize yourself with the workers’ compensation laws of each state your business operates, as each state has its own workers’ compensation regulations.
  • Payroll Costs: States tie coverage requirements to payroll in different ways.
  • Type of Business: Unless they have hired employees, it is not mandatory for sole proprietors and some partnerships to purchase workers’ compensation insurance in most states.


Benefits of Pay-As-You-Go Workers’ Compensation Insurance

For most businesses, the fact that you do not need to pay your premium upfront makes a pay-as-you-go workers’ compensation an ideal solution to the lump sum payments associated with traditional workers’ compensation. Additional benefits include:

  • Eliminate Premium Financing: You do not have to obtain premium financing if you choose to pay workers’ compensation insurance premiums as you go since your monthly bills are more manageable.
  • Pay Accurate Premiums: Because your premiums under a pay-as-you-go plan is based on your actual payroll, you do not end up overpaying premiums and leaving less money for business operations.
  • Automate Workers’ Compensation Payments: Integration between your payroll provider and insurance company simplifies things since your payments are automatically taken out of your account, making missed payments outdated.

Pay-as-you-go workers’ compensation provides numerous benefits to your business. Small and medium-sized business owners can experience the full benefits of pay-as-you-go workers’ compensation insurance by integrating their pay-as-you-go workers’ compensation insurance payment plan with payroll services.

If you’re looking to streamline business operations by integrating your pay-as-you-go workers’ compensation insurance payment plan with your payroll, contact Avitus Group for a consultation.


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