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Pay-As-You-Go Workers’ Compensation

By June 10, 2020 June 17th, 2020 Personal Insurance
Blog Injured Man Filling Insurance Claim Form

Payrolls are fluctuating for many businesses during the COVID-19 Pandemic. Business owners have both less predictable income and less predictable expenses due to state and local guidelines for conducting business, supply chain interruptions, and new ways of working and delivering products or services to customers, among other factors. Planning a monthly budget for expenses has become more challenging than ever.

Impact of COVID-19 on Workers Compensation in 2020:

  • Workers compensation claims have decreased in recent months for some businesses with workers unemployed, furloughed or working remotely
  • As workplaces reopen, claims are predicted to increase in the fall of 2020 due to:
    • Increased number of workers returning to the workplace
    • Potential exposure to COVID-19 in the workplace resulting in a claim
    • Some states are enacting legislation to automatically cover COVID-19 exposure for workers compensation claims for some categories of employees such as health care workers and law enforcement

When life is predictable, traditional Workers Compensation products budgeted in equal payments over 12 months are manageable for many businesses. Traditional payment plans calculate your annual premium based on the previous year’s payroll. The total premium is divided over 12 months and your monthly payment does not fluctuate. If your payroll is lower than expected, then you get a refund at the end of the year. If it is higher than expected, you get a bill for the increased audit premium.

Pay-As-You-Go Workers Compensation offers flexibility because it enables businesses to adjust the monthly payment for Workers Compensation based on the previous month’s payroll. By reporting payroll monthly, large audit fluctuations are minimized. Audits are usually billed as a separate expense. And unlike a traditional payment plan, there is no large down payment.

What is Required:

  • Automatic payment by electronic transfer (EFT).
  • Submit expense and loss constants upfront.
  • Submit payroll census and earnings information or use a third party payroll company

Depending on the insurer, setting up Pay-As-You-Go is available to new customers or at renewal.  Some carriers may have a minimum annual premium required.  You will be required to submit payroll data for every payroll period within 24 hours of processing payroll.

When unexpected events and economic uncertainty make life less predictable, then a Pay-As-You-Go Workers Compensation Product may be the better choice for your business.

Quick Review: Workers Compensation protects both business owners and employees after work-related injury or illness occurs, by providing medical care, lost wages, and more to employees and by protecting business owners from expensive civil litigation. Workers compensation is required by law and should be in place for full-time, part-time, seasonal and temporary employees.