Florida mandates that nearly every business entity carry workers compensation insurance. For small companies, this requirement creates a significant burden. The regulations are complicated and paying the annual insurance premiums disrupts cash flow. Every step of the process distracts the employer from their passion for running their business, redirecting their focus to addressing workers comp requirements.
There is an easier way.
Pay as You Go Workers Comp
Under the traditional workers’ comp insurance structure, employers pay a large initial down payment. Premiums are set based on anticipated or estimated gross payroll wages. This estimated premium is paid to the insurance company on a scheduled basis, usually quarterly. At the end of the policy, an audit is conducted to determine if you underpaid this insurance and if so, the insurance company collects the outstanding amount due. This bill can be a significant and unexpected expense. Of course, the audit may show that you overpaid your insurance, but this means that needed monies were diverted from cash flow and into an unnecessary expense.
Pay as you go workers comp eliminates all of these issues. Here is how it works:
- There is no initial down payment.
- You pay premiums during the actual pay period. It doesn’t matter if you pay employees weekly, bi-weekly, or every two weeks, every time your payroll is run, you make a premium payment.
- These payments reflect actual employee wages rather than an estimated payroll. You can’t over or underpay your premiums and there is no audit.
Benefits of Pay as You Go Workers Comp
With this system, you are only paying premiums based on actual wages, which makes it easier to budget and manage. Other benefits include:
- Improved Cash Flow. Workers compensation premiums are spread out over each payroll period, which makes budgeting easier and keeps cash available for your business. You only pay for what you need in any specific pay period so your expenses exactly match your operations.
- This system allows you to match premium payments to your exact employment levels for the pay period. The premium amount will adjust up or down with your staffing needs. This accuracy combined with flexibility means that you never pay a penny more than necessary.
- Elimination of Lump Sum Payments. Since you literally pay as you go, you no longer face annual or quarterly lump sum payments. Rather than putting money aside to meet this large expense, you have a smooth cash flow process with real-time expense payments.
- Automated Workers Comp Payments. Nearly every insurance company that offers pay as you go coverage can also automatically collect your premiums with each payroll and debit your bank account. This is one less thing to remember and one less task to manage.
Most small to mid-size businesses find that the pay as you go workers comp system best meets their needs and saves them time and money. Curious to learn how pay as you go workers comp could benefit your business? Call Applied Business Solutions at (855) 792-2808 to speak with one of our experts. Ready to dive in? Request a free quote. At Applied Business Solutions, we help employers focus on being employers while we handle the rest.