What is Pay as You Go Workers Comp?
The pay-as-you-go method allows you to pay your workers’ compensation premiums based on your actual payroll and exposure risk, instead of the budgeted payroll you believe will be accurate for the year. This helps eliminate surprises during your workers’ comp audit. These surprises can include additional premiums owed. Example: Let’s say that your expected 2023 payroll is $200,000. Your annual workers’ compensation insurance policy premium will be based on your $200,000 payroll. During the year you may have experienced some growth and/or rewarded a few employees with promotions. This fortunate situation increased your 2023 payroll to $500,000. You will now owe an additional premium on the difference ($300,000) to the insurance carrier for the year. Pay as You Go Workers Comp will eliminate this possibility that your company would otherwise have with traditional workers’ compensation insurance.
What are some of the benefits of Pay-As-You-Go Workers’ Compensation Insurance?
Ultimately the decision to choose between going the pay-as-you-go alternative route or the traditional lump sum payment route comes down to which method works best for your company. Here is why pay-as-you-go is a good alternative for many business owners.
Large annual lump sum payments can deteriorate your business budget and eat into your business cash flow.
Calculating your workers’ comp can be difficult to predict. Pay-as-you-go calculates your rate each payroll cycle. Traditional workers comp premiums are based only on estimates. With Traditional workers’ compensation, you have to project what your payroll will be for the year.
Pay-as-you-go premiums are based on your actual payroll. This ensures that you pay an accurate premium. This method will prevent your business from over or underestimating your premium amounts. This will simplify the auditing process.
Using pay-as-you-go prevents you from forgetting to pay your premium. Your provider will automatically collect your premium each payroll. www.mcmginc.com