A pay-as-you-go workers’ comp solution is a premium payment plan that often allows employers to pay their workers’ comp premiums based on actual payroll figures, not estimates. It is not insurance coverage in itself, nor does it replace an employer’s existing policy. Businesses that use pay-as-you-go must still purchase workers’ comp that meets all state requirements. Pay-as-you-go workers comp is simply an alternative way of making your premium payments. It’s not different insurance, and it doesn’t replace your worker’s comp insurance or your responsibility to pay premiums, collect/issue certificates of insurance from subcontractors, etc. Your coverage must still be provided through a state-approved workers comp insurance carrier or approved self-insured source.

 

 

Due to its dynamic nature, this system allows a more accurate, simplified payment plan for businesses. Those with high employee turnover rates are its biggest beneficiaries, especially those in the hospitality, janitorial, and construction industries.

The system can be achieved in one of two ways:

 

Whichever system is implemented, pay-as-you-go worker’s compensation insurance is a concept that can be implemented easily and reap its many benefits at once. It’s available to every business with private workers’ compensation insurance.

 

The only exceptions are the monopolistic states and territories. These are states that control workers’ compensation exclusively, excluding any options for private insurance, which include North Dakota, Ohio, Washington, the U.S. Virgin Islands, and Puerto Rico.

 

If that option is available, here are five good reasons to consider switching to pay-as-you-go workers’ compensation immediately.

 

Consider a business that has 15 employees, earning a combined $1.2 million a year. If the compensation coverage rates are $1.2 per $100 of wages, this amounts to an annual lump-sum payment of $14,400.

 

Even to a healthy business, having to pay such a sum at once strains cash flow. While a business can opt to make a down payment of about 25% of the full amount and clear the rest in installments, the amount is still unmanageable for many small to mid-sized businesses (SMBs).

 

According to JPMorgan Chase, most SMBs have a daily cash flow of between $219 and $957, which is why most end up taking out premium financing resulting in additional unnecessary costs down the line.

 

With pay-as-you-go, you still make a small down payment, but the rest is distributed through the rest of the year based on your monthly payroll. This makes it far more manageable and eliminates the need for external financing. In addition, employers won’t need to tie up a lot of your business cash and can divert it to more urgent needs.

 

The traditional workers’ compensation system requires you to make projections based on how you expect your business to perform and grow that year. This is an intensive, unreliable process prone to error. If you make mistakes or your business experiences a significant change, you have to wait until the end-year audit to correct it.This workers’ compensation insurance system is based on your monthly payroll. As such, the premiums you pay are accurate and can be varied as your business changes.

 

Monthly premiums are predictable and simple, no matter how many employees come and go. Plus, the incremental changes make it easy to correct over or underpayments in time.

 

It is easy for insurance premium deadlines to creep up on you. This is especially true when you don’t have the money to make payments in time and continue postponing payments.

 

You might think that pay-as-you-go workers’ compensation introduces more deadlines for you to miss, but it makes it easier for you to meet deadlines. By integrating it into your payroll system, premiums can be remitted on time whenever you process your payroll, eliminating the time and frustration and allowing you to refocus on other things.

 

At the end of every year, executives are oftentimes rushing around to complete audits, meet compliance requirements, and beat various deadlines. The traditional system doesn’t make things any easier, given that you have to dig up payroll and employment records that might be out of date. At the same time, you have to be sure that you have accounted for every employee who worked for your company during the year or face potential penalties. In some states, contractors and subcontractors are also treated as employees, which means that they also need coverage and a certificate of insurance.

 

Pay-as-you-go workers’ compensation insurance simplifies this process. Since you are dealing with short-term periods (weeks vs months), there is less likelihood of missing something and attracting penalties. It also means that the end-year audits become much easier to conduct.

 

Administrative tasks become an enemy to your growth when they threaten your most precious resource: time. Time spent on repetitious, mundane tasks takes away from the amount of time and energy spent on growing the business.

 

Pay-as-you-go workers’ compensation is a great way to make sure that your time is free of non-revenue-generating duties. While pay-as-you-go workers’ compensation insurance can simplify your payroll process and taxes, savvy business executives also outsource payroll management. This step radically helps simplify, strengthen, and grow business by freeing up resources.

 

 

Because staffing agencies have such a unique employment model, they require specialized attention when it comes to their workers’ compensation insurance.  However, with ongoing maintenance of employee information and careful work placements, it’s possible to maximize the coverage offered by workers’ compensation insurance for staffing agencies and keep it cost-effective.

 

Staffing agencies work by retaining a diverse pool of workers that they contract out to different companies when a temporary position opens up.  Usually, once the worker has fulfilled their contract with the company, they are available for the temporary staffing agency to place in a new position.

 

Usually, a staffing agency is responsible for providing workers’ compensation benefits for the workers they contract out.  The main challenge that agencies face is that the number and types of employees working for them are constantly changing.  This can make it difficult for agencies to secure comprehensive workers’ compensation insurance coverage.

 

Because the pool of employees is constantly in flux, staffing agencies often deal with employee misclassifications and inaccurate payroll reporting.  Both of these issues can have costly effects on their workers’ compensation insurance.  Because agencies send off different workers to fulfill various roles, it can be difficult to track these employees and ensure that they are classified under the correct job code.  Additionally, as agency workers often leave to work steady jobs, the number of people employed by the staffing agency can change day-to-day.  To manage their workers’ compensation costs and needs, staffing agencies must regularly update their employee classifications and payroll data.  They should also consider securing coverage via “pay-as-you-go” workers’ compensation programs.  These programs automatically adjust staffing agencies’ premiums based on monthly or quarterly payroll information.  Enrolling in this type of workers’ compensation program helps agencies scale their coverage and costs to fit their actual needs.

 

Staffing agencies can also manage their workers’ compensation costs by minimizing their risk of employee injuries.  Because agencies send their workers to different companies and job sites, they cannot manage their employees’ working environments. However, agencies can do their best to ensure that they only place workers in safe situations. Before contracting a worker out, the agency should carefully vet the company seeking their services. Staffing agencies should verify that the company offers comprehensive health and safety training programs, enforces strict safety protocols, and has an updated emergency plan in place. Additionally, the agency should inspect the workplace for any obvious OSHA violations or on-site hazards. The agency should only agree to place an employee with the company if they are sure that the work environment is safe for their workers. Taking these safety measures is an important part of managing a temporary staffing agency’s workers’ compensation risk.

 

 

There is no need to use an outdated and inflexible method for paying for your workers’ compensation insurance. Check with your insurer or payroll specialists today to see if pay-as-you-go is an option for you. You will save time, effort, and endless headaches if you adopt this flexible and effective method for paying for your workers’ compensation policy.

Reach out to us ASAP!