What PayGo Means in Workers' Comp

Payroll-Based Premium, or PayGo, is a pricing model in workers' compensation insurance where the premium is calculated based on the client's actual payroll, rather than an estimate. This means the client pays premium with each payroll run, based on the payroll actually paid. If their payroll goes up, their premium increases. If it goes down, they pay less. This model is designed to be more transparent and fair, particularly for businesses with fluctuating payrolls.

When you're speaking with clients, it's important to clarify that PayGo isn't a new product, but a new way of charging for the same coverage. The key difference is the billing frequency and the method used to determine the premium amount each time.

How PayGo Works in Practice

Under a PayGo model, the client’s payroll file is sent at the client’s own payroll frequency, often by its payroll company. The premium for that run is calculated from the payroll and then collected by ACH, or, with some carriers, billed by the carrier itself. The policy is still audited at the end of the term, but because premium has followed actual payroll all year, the big catch-up bill that payroll growth causes at audit is avoided.

This system is especially beneficial for businesses with seasonal or variable payroll, such as construction or hospitality. It also helps new businesses that may not have a clear sense of what their annual payroll will look like.

Benefits of PayGo for Your Clients

PayGo offers several advantages that your clients may find appealing. First, it provides better cash flow management. Clients pay as payroll is paid instead of a large deposit up front, though deposits, fees and payment terms vary by carrier. Second, it avoids the large audit bill that payroll growth can create at the end of the term. Finally, it enhances transparency and trust, as clients can see exactly how their premiums are calculated each month.

When you're explaining PayGo, be sure to emphasize these benefits. Clients are often looking for a more predictable and manageable way to handle their insurance costs.

How to Implement PayGo in Your Agency

Implementing PayGo doesn't require a complete overhaul of your current workflow. Cennairus works with Audit1, which runs the pay-as-you-go service: the payroll file goes in at the client’s payroll frequency and the premium for each run is calculated from it, with carriers that support pay-as-you-go. Your agency can focus on client service while the platform manages the logistics.

It's also important to make sure your clients understand how to submit their payroll data. You may want to provide them with a template or guide to ensure accuracy. This will help prevent delays or errors in processing their premiums.

For more information on how your agency can streamline its workers' comp process, visit the workers' comp section of our site.

Challenges and Considerations

While PayGo offers many benefits, it's not without its challenges. One potential issue is ensuring consistent and accurate payroll reporting from clients. If a client fails to submit their payroll on time or provides incorrect data, it can lead to delays or overcharges. It's important to set clear expectations with clients and establish a reliable process for payroll submission.

Another consideration is the impact on your agency's revenue. Since PayGo is billed with each payroll run, it may affect your cash flow compared to traditional billing. Ask how and when commissions are paid under your agreement; on Cennairus, the agency is paid its commission under the broker agreement. Existing users can log in to their account.

Why PayGo Is Worth Explaining

Many business owners have never heard of PayGo, yet it fits how many businesses run today. Companies are looking for more flexibility, transparency, and control over their insurance costs. PayGo provides all three. It also suits businesses with unpredictable payroll patterns.

For agencies, PayGo is a way to differentiate themselves in a competitive market. It shows clients that your agency is proactive about finding innovative and client-friendly solutions. If you're looking to expand your services, consider offering PayGo as part of your workers' comp offerings. You can start by visiting the registration page to learn more about how your agency can offer this model.

The Future of Workers' Comp Pricing

As the insurance industry continues to evolve, PayGo represents a shift toward more customer-centric pricing models. This trend is likely to continue, especially as technology makes it easier to automate payroll tracking and premium calculation. Agencies that embrace these changes will be better positioned to meet the needs of their clients and stay competitive in the market.

By offering PayGo, you're not just providing a new billing option — you're helping your clients manage their insurance in a way that fits their business. It's a win for both parties. For more insights into the workers' comp market, check out our blog index for other articles on the topic.