Why You Should Consider Pay-As-You-Go Workers’ Comp for Your Business

Many small to medium-sized business owners struggle with the rigid structures of traditional workers’ compensation insurance, which often requires large upfront payments and intricate administrative processes. These traditional models can significantly strain a business’s cash flow and operational efficiency.

Our focus at Whirks is on simplifying insurance processes, making them more adaptable and aligned with your business’s operational needs. We specialize in pay-as-you-go workers’ compensation, a model designed to streamline how you manage this essential coverage.

This article will explain how switching to a pay-as-you-go workers’ comp plan can help you manage cash flow, save your company money, and eliminate administration headaches for your team.

What is Pay-As-You-Go Workers’ Compensation?

Pay-as-you-go workers’ compensation is an insurance model that allows businesses to make premium payments based on their actual payroll figures during each pay period, rather than estimating annual payroll at the beginning of the year. This method offers several distinct advantages that can help streamline operations and maintain financial stability.

1. No Need to Pay Upfront 

Pay-as-you-go workers’ compensation does not require you to pay a premium upfront or file any paperwork for approval. You sign up for your policy and don’t start paying your premiums until you’ve processed your first payroll.

2. No Need to Pay Claims

If your employees accidentally injure themselves on the job, you will not be responsible for paying their medical bills or lost wages until they do have an existing claim with your insurance provider.

Why Consider Pay-As-You-Go Workers’ Compensation?

There are many advantages to pay-as-you-go workers’ comp, including:

• No upfront deposits or payments
• Simplified administration
• No more year-end premium surprises
• Helps reduce your availability of capital
• Take advantage of monthly payments
• Offers you complete flexibility

The Benefits of Pay-As-You-Go Workers’ Comp

Simplified Administration

When the dust settles, your administrative costs will be significantly reduced:

• No more year-end premium surprises
• No more underwriting and claims processing headaches
• No more recordkeeping hassles and billing expenses
• No more reporting on employees’ health insurance benefits (which means zero compliance costs),
• No more auditing of your workers’ compensation program to ensure that it’s compliant with state laws and regulations;
• And most importantly—no more policy changes!

In a Pay-As-You-Go solution, your payroll processor completes this work on your behalf: filing your payroll reports, completing your year-end audit, as well as handling any questions you have when a potential claim arises. Most businesses have to have workers’ comp insurance, but many don’t realize the amount of paperwork that goes along with it.

No More Year-End Premium Surprises

If you’re a small business owner, chances are the last thing you want to think about at tax time is how much you owe for workers’ compensation insurance. If you’re a seasonal business, you don’t want to overpay an estimate of your workers’ comp at the beginning of the year, only to be way overpaid because you didn’t hire as many seasonal staff as the year prior.

Pay-As-You-Go Workers’ Compensation keeps things simple by charging a monthly fee with no annual renewal required—so there are no surprises at the end of the year!

No More Waiting Until Year-End to Pay Your Workers’ Comp Premiums

With traditional Workers’ Comp plans, paying by installment means waiting until December 31st or January 1st before your premiums become due and payable in full. Sometimes, this results in large lump sum payments due immediately if taxes have not been paid on those earnings received during that period. No one likes getting hit with hefty, unexpected bills!

No More Guessing How Much You Will be Charged Each Month

Paying your insurance every payroll process means you will pay based on the exact amount of gross payroll you’ve paid year to date.

You can also manage expectations based on what has already been paid so far this year rather than having something happen unexpectedly out-of-pocket like an unexpected bill from an illness (or worse!).

Helps Reduce Your Availability of Capital

In the same way, paying a premium on total gross payroll paid each pay period will increase your amount of working capital each month. Paying out a small premium every month ensures that your available capital is increased rather than reduced.

Flexibility of Monthly Payment Options

One of the biggest advantages of pay-as-you-go workers’ comp is that you can start with a small monthly, semi-monthly, or bi-weekly payment and then later increase it as much as you want.

This means that if you don’t have a lot of cash on hand at first but still want to protect yourself from workers’ comp claims, this option is perfect for you.

If something happens in the future that would cause your business to go under (like an injury or lawsuit), it doesn’t matter because the insurance company will pay out everything owed. This saves employers from having to worry about losing their money when they need it most.

Who Should Opt for Pay-As-You-Go Workers’ Comp?

Let’s face it: the unpredictable nature of your business may make you want to consider Pay-As-You-Go Workers’ Compensation.

Small to Medium Businesses and Startups

For startups and smaller businesses managing tight budgets, Pay-As-You-Go Workers’ Comp offers a viable solution to maintain necessary coverage without compromising on financial flexibility.

If you’re unsure of how many employees will work for you in the near future, this can be a great option for protecting them as they perform their duties.

Businesses with Seasonal Workers or Variable Employee Count

If your company is seasonal and experiences high turnover during certain times of the year, then Pay-As-You-Go Workers’ Comp can keep costs low while providing protection when needed. You won’t have to worry about paying premiums that might not be necessary at those times.

If your business is growing rapidly and hiring new employees every month (or even weekly), the Pay-As-You-Go option allows companies like yours to lock down rates so that they aren’t paying more than what they need at any given time.

Is Pay-As-You-Go Workers’ Compensation Right For Your Business?

Pay-As-You-Go Workers’ Compensation is an excellent option for businesses of all sizes, especially those with an ever-changing work environment. Deciding whether pay-as-you-go workers’ comp is right for your business involves evaluating your company’s specific needs. By providing a flexible, transparent insurance solution, pay-as-you-go workers’ comp can help you maintain adequate coverage without the financial unpredictability of traditional policies.

Payroll providers who offer workers’ comp insurance have the expertise and experience required to find the best possible policy at an affordable price AND manage the administrative burden of workers comp. For example, they can help you choose between a traditional or well-known brand name policy and a niche provider that offers a more comprehensive plan at an attractive rate.

Workers’ Comp that Works for You

At Whirks, we’ve seen that Pay-As-You-Go Workers’ Compensation can be a huge benefit for companies. It offers benefits like simplifying administration, no upfront deposits required, eliminating yearly premium surprises, and providing complete flexibility. In addition to these benefits, it also helps you save time by not having to worry about filing claims or sending in paperwork every month or quarter.

If your company is looking for an alternative solution to its workers’ compensation insurance needs, this may be the right option for you. If you’re considering this for your business and want to know more about integrating it with your payroll system, check out our guide on how to transfer your workers’ comp policy to a new payroll provider.