Workers’ compensation coverage is a must in doing business today. It protects your business and employees from lost wages and health care costs in the event an employee suffers a work-related injury or illness. But it does come with some downsides. 

Having to shell out payments for requisite workers’ compensation premiums can put a real strain on your business’s cash flow. Based on payroll estimates, these premiums can create large variances in the payment amounts month after month, wreaking havoc at year-end reconciliation time. As a result, many businesses have turned to pay-as-you-go workers’ compensation as an option for more effective cash-flow management. 

What is It?

A pay-as-you-go workers’ compensation solution is a premium payment plan that allows employers to pay their premiums based on actual payroll figures, not estimates. The premiums are determined by changes to your number of employees and your payroll data throughout a 12-month span. Instead of paying a lump sum at the beginning of their coverage period, employers enrolled can pay their premiums incrementally during each payroll cycle. Employers have the option of reporting the payroll data to their insurers themselves or integrating workers’ compensation with their payroll service to automate payments. 

The Benefits 

A pay-as-you-go solution does not change the cost of workers’ compensation, but it does often result in more accurate premium payments. When estimates are made, an employer could end up owing money to the insurer at the end of the coverage period or be owed money that their business could have used throughout the year. 

Leveraging a traditional workers’ compensation premium payment program could require anywhere from 25% to 100% of the total premium to be paid at the start of coverage. With a pay-as-you-go solution, employers are able to spread their payments out over the course of the year using real-time payroll data instead of annual estimates. Generally, this means businesses are less likely to experience cash-flow shortages as a result of over or underpayments. 

Partnering for the Cause 

When payroll is integrated with workers’ compensation, the monthly premiums are automatically deducted, saving time, easing administrative burdens and reducing the chance of missed or late payments and policy cancellations. 

We partner with multiple insurance carriers to offer pay-as-you-go workers’ compensation insurance, which allows clients to pay their workers’ compensation premiums each payroll cycle using real-time payroll data and carrier rates. Contact us today to learn more.