A “NEW” Way to Pay for Workers Compensation Insurance
By Mitchell Zucker
Payrollogist at PayPros, Inc.
What Is Workers’ Compensation Insurance?
Workers’ compensation insurance(WC), sometimes called workman’s compensation insurance, workers’ liability insurance, workers’ comp insurance or employers’ liability insurance, covers your employees’ medical expenses and at least some portion of their lost wages if they are injured on the job. It can also protect a business from lawsuits and other financial liabilities.
Who Needs Workers’ Compensation Insurance?
Most states require businesses to carry Workers’ Compensation insurance by law. If you have employees, you probably need it as part of your overall business insurance strategy. Make sure to consult a qualified insurance broker to identify your specific exposure.
Why is a Payroll Company discussing Workers Compensation Insurance?
Some payroll companies, including PayPros, Inc., have worked closely with insurance carriers offering workers compensation insurance to create a different way to pay for this insurance. More and more payroll companies even directly sell insurance. See below for why that may not be a good idea for your company.
Purchasing workers’ compensation insurance and making installment premium payments can be time consuming and altogether painful. Many clients are faced with installment fees, large up-front premiums and the ongoing concern of making timely payments. Also, many have to contend with large additional or return premiums at audit.
WC is a function of total payroll. Historically, and commonly, WC is like most insurance policies. There is a big down payment, or deposit, required, and then a few more payments need to be made. WC differs from most insurances in that at the end of the policy period, there is an audit to verify payroll amounts and classification codes of covered employees. As mentioned above, the audits often result in large additional premiums, or conversely, return of premiums at audit.
Since payroll companies have the knowledge of payroll data, many have created processes to report that data automatically and seamlessly to the carriers.
Pay As You Go; Pay As You Owe; Pay As You Payroll Options
The newest way to pay for WC, which may be called Pay As You Go, Pay As You Owe, Pay As You Payroll or many other names, is a method of payment available to most businesses* which offers the following benefits:
• No deposit required
• Improved cash flow
• No invoices – No checks to write
• Simplified audit process
• Better control over your business
This methodology reduces client’s time and effort in many ways. No deposit required makes it easy to bind coverage, and seamless premium payments (based on actual payroll), offers cash flow benefits throughout the policy. This type of solution helps a payroll client budget more effectively by staying current and on top of their workers compensation premium payments. No more large down payments to make. No more checks to write. Pay exactly what is owed each pay period based on actual payroll.
*If you are in your states high risk pool, this option may not be available. Consult an expert to check your status.
Why you should NOT purchase Workers Compensation Insurance from a Payroll Company
Workers Compensation, as well as most insurance products, is complex and best left to experts. Many payroll companies now directly sell WC, health insurance, 401(k) plans and more. Although there are benefits to a single point of contact (in theory) to a business, in our experience, the design, implementation and support of these multifaceted products is best left to specialists. For instance, we have seen other payroll companies mis-classify employees for WC purposes, or sell a product which doesn’t fit the client perfectly exposing you to unnecessary risk. Utilizing a broker is highly recommended to make sure that you are getting the best, most accurate, coverage at a fair price.
Recommended Action Steps
To identify if Pay As You Owe is an option for you, please consult your property and casualty insurance broker or your payroll company.
Who Is PayPros, Inc.?
PayPros, Inc. is a team of dedicated professionals whose unique passion for personalized service offers our clients unparalleled quality and reliability in the treatment of their payroll and payroll tax requirements. Exceptional service is a core commitment from each associate within our organization and it flows through every aspect of our business. We are experts in Payroll, and that is all we sell. However, we facilitate the movement of data and/or money through our best-of-breed technology to many of our clients’ vendors such as insurance carriers and/or brokers, CPA’s, Bookkeepers, 401(k) administrators and more…
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