1. Do I have to Carry Workers’ Compensation Insurance?
2. And how do I avoid those audits?
Workers’ compensation insurance is a state-mandated program that provides medical benefits and wage replacement to employees when they are injured on the job, or come down with a work-related illness. It is not one-size-fits-all. Each state has its own programs and laws that govern how workers’ comp actually works.
Even though workers’ comp programs vary from state to state, they exist to help injured or sick employees regardless of who is at fault—the employer, employee, a coworker, a customer, or vendor—when that injury or illness is job-related.
There are exceptions to every rule, though, and they apply to worker’s comp as well. It does not cover an employee if their injury is due to intoxication or illegal drug use. They may deny coverage for self-inflicted injuries; injuries obtained during the course of committing a crime; when the employee is not on the clock (keep in mind that eligible work-related injuries can take place off-site); and when an employee injury is due to violating company policy.
Employers benefit from workers compensation insurance, too. It limits the risk of injured employee(s) suing your company. Prior to 1911 and the establishment of workers comp, business owners could face financially devastating penalties and fines under the tort system. Under today’s system, workers comp limits the employer’s obligations, ensuring their costs are more affordable and predictable. Even if you grumble every time you sign that check, in the long run it can benefit you tremendously.
2. Have you considered a Pay-as-You-Go policy?
Yes, we answered a question with a question. But have you looked into a pay-as-you-go policy? It could make a huge difference to your company’s financial well-being.
Workers’ comp premiums are typically based on an estimate of actual payroll at the policy year’s end. For instance, if you’ve projected an annual payroll of $100,000 but end the year with a gross payroll of $145,000, your company will receive a premium audit bill covering the additional $45,000. Making matters even more complicated, additional premiums come into play when the number of your employees and/or their pay scale increases or if overtime pay is higher than anticipated.
That could end up being a big chunk o’ money that you hand over to the insurance company. Under pay-as-you-go plans, each payroll determines the premiums. The carrier then accepts payment via automatic deposit. Gone is the guesstimate approach to calculating annual payroll. Say good-bye to large upfront payments and finance charges. Virtually avoid that dreaded quarterly or year-end audit and subsequent chunk o’ money. Budgeting is simplified and you can optimize cash flow management. [Insert big sigh of relief here.]
Worker’s Comp paired with Payroll
Insurance companies may claim to have a pay-as-you-go structure, but if you don’t involve a payroll company, there is still manual work for the employer. The only way to truly have an efficient pay-as-you-go workers compensation offering is to have your payroll service be the driver of this option. Journey Employer Solutions offers exactly this, and what’s unique about Journey in this industry is they can manage pay-as-you-go workers compensation policies with carriers (such as Pinnacol) that traditionally won’t work directly with payroll companies. This is a win-win for their clients, and everyone else involved! In addition, Journey can still work with your local insurance broker, they don’t need to be cut out your policies.
If, however, they do select you for an audit, insist on getting the work papers once the audit is over. Carefully review the work papers and compare them to your records to ensure payroll computation allocates payroll of different employees correctly and overtime is properly adjusted. Journey can always help assist you in any audit, because if you’re with Journey’s pay-as-you-go and payroll service, your audit will be a breeze!
Journey Employer Solutions is your resource for Payroll, HR, and Workers’ Compensation needs. We’re here to make your life easier, so please do not hesitate to reach out to your payroll specialist or your local Journey ownership team for assistance with insurance needs. We’ll set you up correctly, and introduce you to an amazing insurance broker you can trust!