Workers’ Comp Payments Options: What’s Right for You

As personal consumers, we have countless purchase options right at our fingertips. Looking for the lowest price or the most competitive interest rate? Chances are you can find a financial option that works best for you. Luckily, business owners have similar flexibility when it comes to paying for their workers’ compensation insurance – a detail that is sometimes overlooked.

What policyholders might not know is that there are different options available for making workers’ compensation payments to help accommodate individual business needs. Each option comes with its own benefits and drawbacks.

The two most universally known models for workers’ compensation payments, also referred to as workmans’ comp, are annual payments and pay-as-you-go.

Annual Payments

This is when a workers’ compensation insurance policy is paid in full as a 100 percent down payment. Payments continue annually as full, lump sums. Parting ways with that much capital at once might not be feasible for all businesses, but policyholders who choose this option are usually eligible for a discounted rate.

From a clerical perspective, opting for annual workman’s comp payments may make it easy to keep track of the transactions. The lump sum payment ensures uninterrupted and continuous coverage for the full year term, so small business owners needn’t worry about possible policy changes affecting the payment they’ve already made because policy changes are reconciled at the end of the policy year during the premium audit.

The obvious drawback to annual payments is paying out that much money at once. As a small business owner, unexpected financial burdens could occur at any moment, where extra cash flow might be needed for unplanned expenses. While annual workman’s’ comp payments ensure steady and uninterrupted coverage, for some small business owners, such as those with seasonal employees or an ever-changing headcount, that arrangement may be too rigid.

Pay-As-You-Go

Considering worker’s compensation premiums can cost thousands of dollars, depending on the size of the company and other factors, an annual payment may not work for everyone. That’s why more and more carriers, like EMPLOYERS, are offering pay-as-you-go options. This allows policyholders to schedule payment periods, according to their specific business needs, and gives them added flexibility to carry workers’ compensation insurance on their terms.

With a pay-as-you-go premium payment program, business owners make smaller, more frequent premium payments by paying each payroll period. Payment programs such as EMPLOYERS’ PrecisePay calculate the workers’ compensation premium based on a business’s actual payroll figures and employee classifications each time payroll is processed and submitted.

Another added benefit lies in the flexibility of payments if a policy term changes during the year. With pay-as-you-go, business owners reserve the right to tweak their policy throughout the year, which will in turn affect the amount of payments that are due in real-time. In contrast, if a policyholder is enrolled in annual payments and experiences a change in their headcount throughout the year, any additional costs or money owed back to the policyholder will be settled with the insurance provider at the end of the policy year.

Workers’ compensation payments needn’t take a “one-size-fits-all” approach, which is why different models exist to help policyholders find an arrangement that works best for their business. Small business owners should talk to their insurance agent about flexible payment terms available through their insurance carrier. Small business owners should also stay in touch with their agent throughout the year to stay up-to-date on how payment terms might change. When it comes to workers’ compensation, the payment model can be just as important to your business as the policy itself.

EMPLOYERS is committed to helping small businesses operate safer, more efficient work places. Contact EMPLOYERS® today to learn more about our cost-effective workers’ compensation insurance, including PrecisePay, our pay-as-you-go option available to select policyholders.