Pay as You Go Workers Comp Insurance

By: Brian Robertson, CIC, CRIS

Brian Robertson specializes in advising commercial and residential developers, home builders, remodeling contractors, trade contractors, and landscaping contractors.

What is “Pay as You Go” workers comp insurance?

Pay as you go workers comp (PAYG) is an insurance billing option that relies on your company’s real-time payroll to calculate your workers’ compensation premiums. Each pay period, business owners can share their payroll data with their insurance company. (Depending on your payroll provider and the pay-as-you-go option you select, it may be possible to automate this process. Otherwise, someone on your team can share it manually.) Your company will then alert you of the bill and automatically withdraw the amount. Easy, right? Our clients like PAYG because it helps them manage cash flow and stay on track with insurance bill paying.

What are some potential benefits of switching to this model?

The PAYG model offers several major benefits. These include:

  • No large down payments required (Annual plans, by contrast, often require a big upfront deposit.)
  • More accurate premium payments (Paying as you go minimizes your risk for audit adjustments and surprises at the end of the year.)
  • Better cash flow (If your business is seasonal, some carriers will let you forego payments during slower months.)
  • Fewer late fees (For many owners, it’s easier to automate and pay monthly than to come up with a big lump sum.)

Where can I buy pay as you go workers comp?

Here at C&S, we work with half a dozen carriers that offer this model. Call us at 508.339.2951 for more info. We can help you evaluate the different companies and the details of their plans. Some, for example, may already have partnerships with your current payroll provider, which makes it easier to automate the uploading of your weekly or bi-weekly payroll.

What are some potential downsides?

If you can find a PAYG program that already partners with your current payroll company, it’s a pretty easy switch. No obvious downsides.

If you can’t find a match, you may not like the extra legwork required to set up and maintain PAYG.

Option A would mean having one of your administrators upload payroll data manually each pay period. (Do you have a dedicated, responsible person to stay on top of this task?)

OR, Option B: you could switch payroll companies. Either way, there’s some change to endure.

Can any business elect to buy Pay as You Go workers comp coverage?

Yup. The option is available for businesses of all sizes and (most) types. Doesn’t matter how many people you employ or the amount of your weekly payroll.

That said, the companies that offer this billing option don’t write workers’ comp for every class code. It’s possible your coverage needs may not be a fit for one of these companies, based on the type of services you provide. Give us a ring (508.339.2951) to find out if you align with any PAYG carriers.

My payroll company already handles workers’ comp. So I’m all set, right?

Errr, we wouldn’t recommend leaving your workers’ comp to the payroll company. For one thing, this means you’re paying them a commission that you don’t need to pay. But more importantly, your payroll company isn’t exactly the most knowledgeable workers’ comp partner. As a middleman to the insurance company, they may not be communicating the specifics of what you do and who is doing it. We’ve seen cases where clients were abruptly canceled (due to payroll company errors), and left to replace their WC coverage within 30 days.

You’re much better off with a MA workers’ comp expert team.  Feel free to give us a call or stop in during our business hours.

Ask the right questions before choosing a MA commercial insurance agent.
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