For a small business, worker's compensation may prove to be a significant financial obstacle to tackle. Down paying large sums of money based on an estimate of your payroll may create stress in the future when cash liquidity is needed. That is why the "Pay As You Go" workers compensation option was created. It helps small businesses flourish while maintaining proper coverage for their employees.
What are the main differences between traditional workers compensation and "Pay As You Go" workers compensation?
Traditional workers compensation:
1) Substantial down payment based on your estimated payroll.
2) Few large payments throughout the year.
3) Annual audit to check if you paid more or less then what was necessary. Depending on that, you may get money back or need to pay even more after you pay the next year's down payment.
Pay As You Go Workers Compensation:
1) Significantly smaller down payment.
2) Each payment will be tied to your payroll run.
3) If you pay your staff weekly, you pay your workers compensation weekly based on each payroll run.
During seasonal up and downs, the amount you pay for workers compensation goes up and down with your wages, and this blends in a lot easier with your cashflow.