As a business owner, you’re probably very familiar with workers’ comp insurance. However, despite this being a requirement for most businesses (especially in California!), most employers only know of “traditional” workers’ comp policies. On the flip side, many employers are less familiar with “pay-as-you-go” workers’ comp programs.
So, what are these plans and how do you know if they’re right for your business? Read on to find out!
Employer Responsibilities
Let’s start with the basics. All employers are covered by the Occupational Safety & Health Administration (OSHA). Depending on where your business is located, either federal OSHA requirements or state-run OSHA programs will apply to you.
However, no matter which state you’re in, employers have the responsibility to provide a safe workplace. A few specific responsibilities that contribute to that include:
- Ensuring the workplace is free from serious hazards.
- Finding, correcting, and reducing safety hazards and health problems.
- Providing safety training in a language and vocabulary that workers can understand.
- Displaying OSHA posters from the Department of Labor informing employees of their OSHA protections.
- Recording and reporting work-related injuries annually (for certain employers).
Insurance Requirements
While general safety requirements are set by OSHA, it’s actually state law that requires Workers’ Comp Insurance. And these requirements vary from state to state. For example, in California, workers’ comp insurance is mandatory for all employers, even if the company only has one employee. Meanwhile, Georgia requires most employers with three or more employees to have workers’ comp insurance.
Additionally, the manner and method of coverage also varies from state to state. However, regardless of which state you’re in, the consensus is that the employer must fund their workers’ comp insurance as a cost of doing business. (Meaning, they can’t pass this along to employees!)
Beyond this, employers typically must post a notice to employees from their insurance carrier with information on the coverage and the employees’ right to claims. You’ll also need to provide injured employees with a workers’ compensation claim form within 24 hours after the employee has given notice of an on-the-job injury or work-related illness.
Traditional Workers’ Comp
With a traditional workers’ comp policy, premiums are estimated based on projected payroll. Additionally, there is usually a minimum premium deposit of 25% upfront.
To keep payments and projections accurate, employers must also complete monthly or quarterly audit reports. And at the end of the policy year, the employer will undergo a more extensive on-site or phone audit.
At this time, you will need to pay any additional premium due, or the carrier will issue a refund for any premium amount that has been overpaid. (Chances are, this is all very familiar to you and your business!)
Pay-As-You-Go Workers’ Comp
On the other hand, pay-as-you-go workers’ comp programs integrate with payroll to do just that: “pay as you go.” They typically don’t require a deposit or down payment. And instead of estimating an annual premium, premiums are calculated on actual payroll in each payroll cycle.
Because of this, there are no monthly or quarterly audit reports to complete. And instead of the strenuous audit at the end of the policy year, additional documentation, and the possibility of more money due, the process is simplified due to the payroll integration. There is little or no additional audit paperwork, and less risk of an audit adjustment.
Which is right for you?
Wondering which option is best for your business? If your business is relatively small or has fairly predictable staffing, you may opt for a traditional workers’ comp plan. However, if you always dread your annual workers’ comp audit or have less predictable staffing, it may be time to consider a pay-as-you-go workers’ comp plan.
We have a number of workers’ comp partners who integrate with our system to provide pay-as-you-go programs. Interested in learning more? Let us know here to have a member of our team reach out with more information! And don’t forget to follow us on Facebook, Twitter, and LinkedIn for even more business tips & news!
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