Enhancing Business Efficiency with Pay-as-you-go Plans

In Wisconsin, workers’ compensation insurance is mandatory unless your business meets the requirements for self-insured status. This insurance is important for both employers and employees. Employers are protected from lawsuits for medical care compensation, lost wages and damages while employees are assured of getting the medical care they need and other benefits in case of job-related injuries.

Managing Workers’ Compensation

Every aspect of payroll processing, including compliance with workers’ compensation, takes up time and resources. However, a new method of processing premiums for this insurance can make compliance easier. The pay-as-you-go program is an alternative method of making scheduled payments on workers’ compensation premiums. Coverage will still have to be provided by an insurance carrier approved by the state, but this program has certain features that could make processing more efficient and improve cash flow in the process.

Typically, when businesses sign up for a workers’ comp insurance policy, a hefty down payment is required up front. For startups and small businesses with limited resources, this can strain the budget and may lead to cash flow problems.

With the pay-as-you-go plan, the insurance policy is purchased with minimal or even no down payment required upfront. Premium payments are scheduled in manageable amounts and spread out throughout the year.

Advantages of the Pay-as-you-Go Plan

For budgeting and cash management purposes, spreading premium payments over a defined period is a sound strategy. Without the down payment requirement, which is usually 25 percent of the total annual premium, buying a workers’ comp policy will not result in a spike in expenses for the period.

The pay-as-you-go program should be integrated with payroll processing because premiums are based on actual payroll instead of estimated amounts. The trouble with estimates based on annual payroll is that when the base amount is underestimated, your company will have to pay the difference at the end of the year. On the other hand, over-payment of premium due to payroll overestimation or misclassification of employees is not the best use of your cash. Since premiums are based on actual payroll, monthly and quarterly audits may be waived.

Under the pay-as-you-go plan, premiums are calculated every pay period, and payments are debited automatically to eliminate the need for check preparation and processing. With this system, premiums are paid on time, avoiding finance charges and the extra work-hours needed to manage premium payments the traditional way.

How to Take Advantage of the Pay-as-you-go Plan

If your payroll processing is already outsourced, make sure to ask your provider about opting into a pay-as-you-go plan. Many providers are set up to implement the plan through partnerships with workers’ compensation insurance carriers.

For instance, we have collaborated with the industry’s most reliable carriers, Hartford and E-Comp, to provide clients with affordable workers’ compensation coverage. Through these two carriers, iPS clients can take advantage of the business efficiencies created by being on a pay-as-you-go plan for workers’ compensation insurance.