5 Reasons to Switch to Pay-As-You-Go Workers' Compensation Insurance
Pay-as-you-go workers’ comp billing options, including Westfield Pay As You Go, offer a more flexible alternative. Premiums are calculated using actual payroll data and are paid automatically each time you run payroll. This keeps workers’ comp payments more accurate and easier to manage throughout the year.
What Is Pay-As-You-Go Workers’ Compensation Insurance?
For many employers, pay-as-you-go billing simplifies workers’ compensation payments and provides better visibility into ongoing costs. That’s because these options connect your payroll and workers’ comp systems, combining premium calculations and payments into a single, streamlined process. It can reduce the need for manual updates and help keep workers’ comp payments aligned with your workforce in real time.
Pay-As-You-Go Workers’ Comp vs. Traditional Billing
While the coverage may be the same, how your premium is calculated and paid will vary depending on which billing option you choose. Here are a few key differences between pay-as-you-go and traditional workers’ comp plans:
Premium Calculation
Traditional plans are typically based on estimates of annual payroll. Pay-as-you-go billing uses actual payroll information collected each pay period.
Billing Frequency
Traditional plans may bill monthly, quarterly, or in annual installments. Pay-as-you-go billing breaks premium payments into smaller amounts tied to each payroll run.
Upfront Costs
Traditional plans often require a sizable down payment at the start of the policy. Pay-as-you-go options usually eliminate the need for a large initial payment.
Premium Adjustments
Traditional plans are reconciled through a workers’ compensation premium audit at the end of the policy term, which may lead to additional charges or refunds. With pay-as-you-go billing, premiums adjust automatically as payroll changes, helping reduce the need for major year-end corrections during the audit process.
Top 5 Benefits of Pay-As-You-Go Workers’ Compensation Insurance
Choosing the right billing option for your workers’ compensation coverage can make a meaningful difference in how you manage payroll, budgeting, and year-end reporting. Here are five key benefits of pay-as-you-go workers’ comp policies that highlight why many employers are moving away from traditional workers’ comp plans.
Benefit 1: No Large Down Payments
Traditional workers’ comp policies often require a large upfront deposit based on estimated payroll. Pay-as-you-go plans typically eliminate this initial payment, letting you start coverage without tying up cash in a large lump sum. However, there may still be small monthly admin fees associated with this payment option.
Benefit 2: Improved Cash Flow
By spreading premium payments throughout the year and syncing them with actual payroll, pay-as-you-go billing helps you avoid sudden expenses. This can be especially helpful for businesses with tighter margins or fluctuating staffing levels, making it easier to manage your budget and maintain steady cash flow.
Benefit 3: Accurate, Real-Time Billing
Since pay-as-you-go plans calculate premiums using actual payroll information each pay period, the risk of over- or underpayment is reduced. This real-time approach ensures you only pay for the coverage you need.
Benefit 4: Automated Payments
With pay-as-you-go plans, your payroll and workers’ comp premium payments are automatically deducted each payroll cycle. This integration simplifies the payment process, reduces manual work, and minimizes the risk of missed or late payments. Automation also eases the administrative burden on your HR and finance teams, enabling them to focus on other priorities.
Benefit 5: Streamlined Audits
Traditional workers’ comp plans often require a year-end audit to reconcile estimated premiums with actual payroll. This process can lead to unexpected charges or refunds that disrupt budgeting. While you’ll still need an audit with pay-as-you-go billing, your premiums adjust automatically with each payroll run, reducing the need for major audit corrections. This helps minimize surprises at the end of the policy term and makes the audit process smoother and more predictable.
Is Pay-As-You-Go Workers’ Compensation Insurance Right for You?
Pay-as-you-go workers’ comp plans can benefit small business owners and larger employers alike. This payment plan is especially well-suited for businesses with seasonal fluctuations or changing staffing levels. Industries like hospitality, restaurants, construction, food processing, and crop farming often find value in the flexibility this billing method provides.
If your payroll changes often or you’re looking for a simpler way to manage workers’ compensation payments, this option may be a good fit. Contact your agent to get started with Westfield Pay As You Go.