Pay as You Go

If you carry workers' compensation coverage, you probablyknow about additional premiums-that often whopping lump sumdue at the end of your policy period when the insurer conducts anaudit to calculate what your final premium actually should be.Paying that lump sum can be a significant cash-flow headache,especially for growing or seasonal operations that can'tprecisely predict what their payrolls will be a year in advance.But there is a solution.

A growing number of insurance companies and payroll services areteaming up to offer automatic direct payment of workers'compensation insurance premiums as part of regular payrollprocessing. The treatment for premiums is similar to the way taxesare handled, calculating them based on the actual payroll using acomplex process that considers job classifications, claims recordsand other factors, and then remitting them with each payroll run.The result is that you won't have any audit surprises or largelump sum payments either upfront or at the end of the policyperiod, says Robert King, director of workers' compensationproduct development for Fireman's Fund Insurance Co. in Novato,California. You also won't have any refunds due to inadvertentoverpayments.