Pay As You Go Workers’ Compensation Programs
The payment of a large annual lump sum or even quarterly payments for workers’ compensation insurance coverage is an expense many companies find difficult to budget for. The cost of workers’ compensation coverage based on an estimate of annual payroll at the inception of the policy year can create problems for small businesses with fluctuating staffing needs. Often the small business does not know what their payroll will be over the next 12 months. This problem has lead to several workers’ compensation insurance companies creating “Pay As You Go” programs for the companies they insure.
PAYGO Workers’ Comp Benefits:
In a Pay As You Go Workers’ Compensation program, there are various benefits for the employer.
Some of the benefits include:
Eliminating or greatly reducing the down payments
Eliminating premium financing
Eliminating checks to write
Reducing premium audit risk
Reduced premium adjustments when premium audits do occur
Improved cash flow by adjusting premiums to payroll changes
Possible lower overall cost of work comp coverage
How Does the Program Work:
A Pay As You Go program is often set up in conjunction with the payroll program of the employer. In the Pay As You Go program we utilize, InsurePay, the employer or payroll provider reports each week (or bi-weekly) the pay for each employee combined with the classification code for the employee. The premium is then calculated for the employer using actual payroll amounts. This eliminates the large lump sum payments, making the workers’ compensation insurance premium an expense the employer can budget. It also greatly reduces the carrier’s need for a premium audit at the end of the policy year.
The workers’ compensation carriers offering a Pay As You Go program use real-time payroll data that is transmitted to them by an authorized or approved payroll processor. The InsurePay system calculates the premium based on the payroll reported, and the job classifications. To collect the premium, InsurePay uses an electronic funds transfer from the employer’s bank account to their bank account. The computer’s calculations for the workers’ compensation carrier will include not only the gross wages paid to each employee, but also add in vacation pay, bonuses, commissions and other forms of compensation. The computers are also programmed to exclude overtime pay (in most states). State specific exceptions are included in the programming.
The insurance brokers who offer a Pay As You Go program will often promote it with promises of special features like:
Quick quote process
Easy payroll set-up
Multiple insurance companies to chose from
Low or no premium deposits
Ability to place high risk businesses
Simplification of business by combining payroll process
and workers comp payroll record keeping
Work comp certifications for sub-contractors
Eliminates hassle-filled audits
A Pay As You Go insurance program can make payment for work comp insurance easier for the employer. Real time premium computation is the future of workers’ compensation and our staff knows the best plans and has more options than anyone in this arena.