Pay-as-you-go workers’ comp is becoming more common for small to mid-sized business owners. This system is becoming increasingly popular as it offers several benefits over traditional workers’ compensation insurance.
In this blog, we’ll explore how to pay as you go workers comp works, the benefits it provides to employers, and how to determine if this payment system is right for your business. Continue reading the article below to learn more.
What is Pay As You Go Workers’ Comp?
Pay-as-you-go workers’ comp is a system that allows employers to pay their workers’ compensation insurance premiums based on their actual payroll each pay period. Rather than paying a lump sum at the beginning of the policy period, employers pay smaller, more manageable premiums each time they run payroll.
This technology calculates the workers’ compensation insurance premiums based on employee wages and deducts the appropriate amount from the employer’s bank account each pay period.
Benefits of Pay As You Go Workers Comp
Pay-as-you-go workers’ comp offers several benefits over traditional workers’ compensation insurance, including:
- Cash flow management: With pay-as-you-go workers’ comp, employers pay lower premiums each pay period rather than a lump sum at the beginning of the policy period. This can help with cash flow management, especially for seasonal or fluctuating payroll businesses.
- Accuracy: Pay-as-you-go workers’ comp premiums are calculated based on current pay period wages, making it more precise than traditional workers’ compensation insurance premiums based on estimated payroll.
- Reduced audit risk: Traditional workers’ compensation insurance requires an annual audit to determine if the employer has paid the correct premium. With pay-as-you-go workers’ comp, no yearly audit is needed, which reduces the risk of audit penalties.
- Flexibility: Pay-as-you-go workers comp offers more flexibility than traditional workers’ compensation insurance, as employers can add or remove employees from the policy at any time, rather than waiting until the end of the policy period.
Determining If Pay As You Go Workers Comp Is Right For Your Business
Pay-as-you-go workers’ comp may be suitable for your business if:
- Your fluctuating payroll: If your business has a seasonal or fluctuating payroll, pay-as-you-go workers’ comp can help with cash flow management.
- You want more accurate premiums: Pay-as-you-go workers’ comp premiums offer more precise amounts than traditional workers’ compensation insurance premiums.
- You want to reduce audit risk: With pay-as-you-go workers’ comp, no annual audit is required, which reduces the risk of audit penalties.
- You want more flexibility: Pay-as-you-go workers’ comp offers more flexibility than traditional workers’ compensation insurance, as employers can add or remove employees from the policy anytime.
Add Pay as You Go Workers’ Comp to Your Business Operations
Pay-as-you-go workers’ comp offers several benefits over traditional workers’ compensation insurance, including cash flow management, accuracy, reduced audit risk, and flexibility. If your business has a fluctuating payroll, wants correct premiums, intends to minimize audit risk, or wants more flexibility, pay as you go, workers comp may be proper for you.
Consult a licensed insurance agent to determine if this payment system is appropriate for your business.
