Workers Compensation: Why Pay-As-You-Owe Policies are going self-reporting regardless of payroll service

Pay-as-you-Owe (PAYO) is fast becoming a premium structure for modern workers compensation policies. Since payrolls shrank and grew dramatically over the past eight years, business has demanded a way to smooth out workers compensation payments to more perfectly reflect current operations.

Wild swings between estimated premium and actual audited premiums have been an issue for agents as well. Large return premiums mean large return commissions. When an audit affects last year's commission earnings and then the current year is adjusted accordingly, the agent loses two times the reduction in one year. A financial burden proving too much for many agencies.

The many advantages to PAYO include:

1. Cash flow for the insured.

2. Premium payments align with pay periods or monthly.

3. Pay electronically, online.

4. Available at relatively low premium levels.

5. Easier audits

6. Reduction of audits with disproportionate changes in premium.

7. Easier for agents to monitor changes in operations.

Of course, insureds enjoy better cash flow when they can tie premium payments to current operations. Agents appreciate PAYO too. It's much easier to catch wild swings in the size of operations, and therefore, the appropriateness of coverage or plan design for the insured.

PAYO premiums produce reliable commissions. The agent can count on that premium to be earned. The agent can budget accordingly.

One of the biggest sources for client disgruntlement has been audits. Sometimes because of the size of the audit, but usually the timing of both the audit and the additional premium demand are inconvenient.

Any seasonal business, or business with uneven, or maybe unpredictable payroll benefits from PAYO. Business that moves among states, like a road crew for a musician, or a professional sports team, benefits by paying the correct state rate when picking up local labor. In effect, each pay period is a mini-audit.

Can PAYO benefit your business? Probably so. 

Need insurance for You, Your Family or Your Business?
We can match you to a qualified, local insurance expert!
Further Reading
Seasonal employees add value to your company and remain an asset for your business. You may wonder, though, if you must provide these temporary employees with Worker’s Compensation. Understand the law and your responsibility to your employees as you ...
Workers' compensation premium calculations begin with payroll, either estimated or audited. But for the purpose of this discussion, let's assume perfect knowledge of the annual payroll amount and sources. Regular payroll is divided into classif...
As advocates of disclosing the costs of employee benefits to the employees, workers' compensation premiums are often ignored. Why? It's difficult to give a specific cost per employee since the premium is part fixed cost and part variable to their wag...
The economy and the economics of labor is moving towards more independent contractors and fewer employees. Health benefits, and who pays for them, is leading the way. The Affordable Care Act (ACA) demands all citizens purchase health insurance. ...
Is everything possible being done to protect your company from the costly impacts of Workers Compensation claims? As an employer, you know that injuries will happen. However, this doesn't mean you shouldn't try to prevent them by knowing the dynamics...