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Benefits Of Pay-As-You-Go Workers' Compensation

What Is Workers' Compensation?

Workers’ compensation is a type of insurance that covers lost wages and medical expenses if an employee becomes sick or injured. Under some circumstances, the coverage will also include death benefits and rehabilitation support.

What Is Pay-As-You-Go Workers’ Compensation?

Pay-as-you-go workers' compensation insurance calculates premiums using payroll in real-time. The result being that employers can access more accurate payments.

Traditional workers’ compensation payments have businesses pay a lump sum upfront, and many end up overpaying throughout the year. As Zenefits puts it, ‘Pay-as-you-go workers’ comp alleviates the inaccuracies and cash flow burdens that often accompany traditional workers’ comp payments.’

How Does Pay-As-You-Go Workers’ Compensation Work?

Pay-as-you-go workers' compensation is based on your payroll runs. For example, if you pay your employees monthly, you’d figure out the premiums per monthly payroll. Using this system, employers can calculate exactly how much money is due for that period.

A traditional workers' compensation policy works a little differently. Usually, employers are required to pay a lump sum to their insurance provider. This payment typically represents about 25% of the employee's estimated earnings for that policy year. The employer is required to pay the remaining premiums either quarterly or monthly.

Pay-as-you-go workers' compensation works differently from traditional workers' comp insurance, but your responsibilities are exactly the same. As The Hartford explains, ‘It’s not different insurance, and it doesn’t replace workers comp insurance or your responsibility to pay premiums.’ Both traditional workers comp and pay-as-you-go insurance are purchased through licensed insurance providers.

Do All Businesses Need Workers' Compensation Insurance?

Yes! If your business has 1 employee or more, you need workers' compensation insurance.

What Does Workers' Compensation Insurance Cover?

Workers’ compensation insurance covers four different benefits:

Medical Benefits

If employees are injured on the job, or they experience a work-related illness, workers' compensation covers associated expenses. These medical costs might include medications, physical therapy, doctor visits, or management techniques for chronic pain.

Disability Benefits

If an injured member of staff can no longer work, disability benefits can cover their wages or part of their wages. The wage replacement will be calculated based on the disability, state regulations, and employee earnings. Depending on the extent of the disability, the benefits may be temporary or permanent.

Rehabilitation Benefits

These benefits are designed for injured workers with permanent disabilities. When permanent disabilities prevent an employee from returning to their job, rehabilitation benefits support employees in gaining new skills. These benefits might cover vocational training, job placements, learning materials, skills assessments, and tuition.

Death Benefits

If a staff member dies because of a work-related incident, workers’ compensation insurance pays benefits to any dependents, such as the employee’s children or spouse, for example. These benefits can also cover funeral expenses or loss of income.

What Are The Benefits Of Pay-As-You-Go Workers' Compensation?

There are many benefits of pay-as-you-go workers' compensation.

No Upfront Payments

Unlike traditional workers’ comp policies, you don’t have to make an upfront payment. With the pay as you go option, you can keep more money, and improve your cash flow. When you’re required to make large yearly payments, this can negatively affect your budget.

No More Guesswork

Using a pay-as-you-go policy, you won’t have to provide an estimate and risk inaccuracies. The premium is based on your payroll data in real-time, whether bi-weekly or monthly.

Adjust To Changing Needs

When you opt for a pay-as-you-go plan, you can make adjustments along the way. Pay-as-you-go ends up being a more flexible plan. For example, when employees leave or join the company, you’ll be able to adjust your plans accordingly.

Simple Audit Procedure

Any money you’re required to pay is based on your payroll. This way, you can ensure that your premiums are accurate. When your premiums are accurate, you’re less likely to provide incorrect estimates. As a result, your audit procedures will be more simple.

Avoid Missing Deadlines

With a pay-as-you-go plan in place, it’s easier to stick to deadlines. Employers can easily set up automated payments to stay on track. When you integrate your premiums and your payroll system, you can simplify the payment processes.

What Must The Employer Do When An Employee Becomes Injured?

When an employee reports an injury, the company needs to notify their insurance carrier and file a report with the State. The insurance carrier will assess the claim, while communicating with medical providers, the injured worker, and the employer. Once a claim has been accepted, they will direct the worker to a medical provider for treatment and support.

What Types Of Injuries Are Not Covered Under Workers’ Comp?

Certain types of illness and injury will not be covered under a workers’ compensation policy. These include:

  • Self-inflicted injuries.
  • If the injury occurred while the employee was committing a crime.
  • If the individual violated company policy, and was injured as a result.
  • If the staff member was not working when the injury occurred.

What Is The Dispute Procedure?

If there is a dispute, the employee can file a Claim Petition. Alternatively, they can apply for an informal hearing with the Division Of Workers’ Compensation.

Find Out More

To find out more about workers' compensation insurance, contact the Calhoun Agency. With the Calhoun Agency, businesses can access many types of insurance, including workers’ comp, property insurance, liability insurance, and commercial umbrella. To protect your business interests and assets, it’s important to have the right insurance policies in place.

The Calhoun Agency can answer any further questions you have about workers’ compensation insurance.