The following is a guest blog post by Brian Barrett,
Area Sales Manager at PrimePay.
An easy way to improve the cash flow for your business is simply to change how you pay for your workers’ compensation insurance. By switching to a “pay as you go” workers’ comp program, your premium is paid over the course of a year according to your payroll processing schedule and is based on your exact payroll figures. For example, a business on a weekly payroll frequency would spread their annual premium payment out over 52 payments. Workers’ comp insurance is required by law for most states and is a direct function of payroll.
Does Actual Versus Estimated Really Matter For Workers’ Comp Insurance?
If your business is not utilizing a pay as you go program, a large down payment is usually required to get the policy started and then payments are made on a quarterly basis. The policy is based on estimated payroll figures for the year and often includes a lengthy audit at the end of the policy. This year-end audit compares your actual payroll figures to the estimated amount which in turn can result in a hefty adjustment to make the policy whole.
3 Main Benefits of a Pay As You Go Program
Switching your workers’ comp insurance policy to a pay by pay program provides three main benefits for businesses including…
- Improving your cash flow by spreading out the payments over the course of the year according to your established payroll frequency. This frees up money to re-invest in your business that normally would have gone to the insurance company.
- Often eliminating the lengthy audit and sizable adjustment at policy end since your policy is based on actual payroll numbers and is adjusted accordingly throughout the policy year.
- Helping to streamline your business operations by eliminating an extra check you need to send out since the premium payments are automatically deducted from your account.