The Advantages of Workers’ Comp “Pay as You Go”

If you own a business, then you already know the intricacies of workers’ compensation, and the audit process. Workers’ Compensation is a financial support system established under law to provide income, medical care, and rehabilitation to employees for illness, injury, or death arising out of, and during, their employment whether the employee was at fault.  These benefits are claimed by the employees (or their dependents) as a matter of right and the employer cannot resort to any legal defense.  Amount paid as compensation is based on the salary of the employee (also on the number of his or her dependents in some jurisdictions) and is usually subject to a specified maximum.

The traditional method of paying for a workers’ compensation policy involved hefty upfront costs that were an estimation based on the forecasted payroll.  Whether collected quarterly or on an annual basis, these costs can cripple a small business.  Additionally, most businesses categorized as a “small business” may have a need for a varying sized work force, making forecasting that much more difficult.  Then comes the end of year audit, which is another costly and time consuming procedure.  The annual premium audit determines your company’s actual workers’ compensation premium, which can vary greatly from the original estimate.  With this model, it is possible for an employer to be hit with substantial costs associated with the policy and taxes owed.

Consequently, the “pay as you go” or “PayGo” policy has become more and more popular, with insurance companies recognizing the challenges and costs associated with running a small business.  Each insurance company has its own cost structure, but they are all rooted in the same ideas of saving time and cutting costs.  Most PayGo policies have a nominal upfront fee, as compared with the traditional model.  And now the premium is calculated in real time, in conjunction with a payroll provider.  Here at Charlotte Payroll, our software is cloud-based, with all data transmitted in real-time.  We have partnered up with several PayGo providers in order to assist our clients with their workers’ comp policy reporting.

The way PayGo works, is a payroll provider reports the payroll to the insurance company either to coincide with the payroll period of the client or on a monthly basis.  Now, the insurance provider has the actual payroll amounts to base the premium on, so no more guessing.   Also, with the elimination of considerable upfront payments and policy audits, you can focus on running your business and re-allocating those funds to help grow the business.

We have a team of dedicated professionals ready to assist you with all your payroll, time and attendance, and HR needs. We offer a full in-the-cloud experience that maximizes efficiency. Our SaasHR platform can be tailored for any size business to run on any device. Process payroll in minutes with our solution so you can get back to running your business.