How many times have you found out you overpaid your workers’ comp premium, or worse, been hit with a huge audit bill on your workers’ compensation? What if you could pay monthly the exact premium you owe based on the actual payroll dollars you paid out that month? No more, no less. You might be eligible for a program like this. For this blog, it’s called several different things, but let’s talk about payroll reporting or pay-as-you-go workers comp.
One area of insurance we focus specifically on is worker’s compensation. From one man shops to businesses with hundreds of employees, we’ve built insurance programs for each level of your business.
Mon and more of the workers’ comp insurance companies we partner with are becoming more flexible with how you pay your workers’ comp premiums. The way you are probably used to is estimating your payroll, and paying a monthly or annual premium based off that best guess. This can lead to paying too much or getting slapped with a huge audit bill at the end of the year.
A growing trend within the industry is something with several names depending on the insurance company such as: Payroll Reporting, PrecisePay, Pay as you go, and so on.
Pay-As-You-Go Workers’ Comp Can Be More Cash Flow Friendly
In it’s simplest form it’s more cash flow friendly because you’re paying your workers’ comp premium based off the actual payroll your business paid last month.
Some months are busier for your business than others, right?
You know when your slow season or slow periods are. During those slow times, you probably have to be a little more careful with your expenses, right? You want to keep your bottom line in check.
This payment method allows you to structure your workers comp payments in a way to match up with those busy and slow seasons. Now this is assuming your payroll is lower during your slow season, but again the benefit here is you are paying workers comp premium dollars based on the actual payroll for your business last month.
How Does Pay-As-You-Go Workers’ Comp Work?
So how does it work?
Let’s go over if you handle your payroll and insurance. You log in to your account each month, report your payroll for each assigned class code, and then it generates how much premium you owe that month. You set your payment information up when you create your account. So once you know how much you owe, you click “pay now” and you’re done.
Does your payroll company or CPA handles this part of the business? We help them get set up, but the process is still the same. Someone logs in, inputs your payroll for that month for each class code, and pays the premium. There are no hoops to jump through or extensive reports and calculations to submit.
What Pay-As-You-Go Workers’ Comp Doesn’t Do
This has no impact on your coverage. Your workers’ comp coverage stays the same. This is simply a different method for paying your premium.
Will I Still Get Audited?
Yes, you still may get audited. The good news is that as long as you provided accurate payroll information throughout the year, your audited premium should be very close, if not exact, to what you paid throughout the year. We all know what that means…no huge audit bill from the workers comp company saying you owe an additional premium. If you need more information on audits we have additional videos and blogs on the audit process.
Is This Right for My Business?
It depends, right? Let’s go over the basics so you can decide.
Some of the industries this payment method makes the most sense for are truckers, contractors, auto dealers, and restaurants.
If your payroll is the same every month with little fluctuation, you may want to stay with standard payment plan. As you know, these options are typically it be monthly, quarterly, etc, and they involve no payroll reporting. You estimate your payroll at the beginning of the policy year, and pay your premium based on that. You then get audited and there’s either no change, you get an audit bill saying you owe more, or you receive a refund check.
Most of our companies have a minimum premium threshold on this. Typically, your workers’ comp premium must be $10,000/year or higher to qualify for this. Always ask your agent, but if you pay less than $10,000/year, you may not be eligible for this program.
Not every workers’ comp insurance company offers this payment method. Just because they don’t offer this payment method doesn’t mean they aren’t the right insurance company for you. They may be a company with specific knowledge and tools for your niche business.
If your payroll fluctuates throughout the year, and you pay more than $10,000 annually, then it is worth at least having the conversation with your agent about pay-as-you-go workers comp.
Next Steps
If you own a business and have employees in Kentucky, and have more questions about your workers’ comp insurance program, give us a call at 606-679-6311 or email me at asheridan@rbisomerset.com. Check out our other videos for your business.
We look forward to working with you.
