According to The Iowa Orthopedic Journal, workers compensation insurance in its basic form can be dated back as far as 2050 BC from ancient Sumeria and similar forms of compensation are seen in Greek, Roman, Arab and Chinese law to compensate those with work related injuries.
The concept of Workers Compensation is not some new scheme that came out of nowhere, however the concept has evolved considerably over the years and especially in the last century.
The changes you see are the compensation provided for certain injuries to help workers regain from losses back to where they were before their injuries. And also to more modern strides to increase workplace safety and injury prevention. These two areas will always be up for debate and will fluctuate by state in how they will be enforced and handled, however a modern issue workers comp insurance companies are trying to help with is the concern with collecting insurance premium for these policies.
With regard to the modern form of Workers compensation we know of today in the United States, employers are responsible for providing workers compensation when they have a certain number of employees, but more importantly they can be held liable for injuries which take place on the job and are work related. In some industries, this creates a very large expense for employers and the insurance companies, which provide this coverage for them.
With high costs, brings expensive premiums and can put significant strains on an employer’s bottom line. The insurance industry has found ways to evolve and find new ways to make this more accommodating to employers as they can.
Payment options are better now as carriers help spread out the cost of premium over several payments which can ease cash flow issues for employers. Unfortunately, workers compensation premium is based directly off the amount of payroll your company pays out, and because of this the insurance companies provide end of year audits to make sure they have collected the correct premium based on estimated payroll. When an employers payroll fluctuates significantly, this can sometimes cause large audit discrepancies and puts further burden on the employers.
One of the newest concepts which was previously only available through leasing companies is the Pay-As-You-Go Workers Compensation plan. This option has become available for individual employers as well through companies like The Hartford, Employers, Guarantee Insurance Company, and Zurich.
Whereas most payment plans require 10-25% of premium up front plus taxes and fees, Pay As You Go workers comp reduces startup costs by requiring only the necessary taxes and fees at policy inception, and then payroll is reported per pay period while premium is paid based on the reported payroll.
This option lowers the start-up amount for a policy and minimizes the risk of large end of year audits. Plans vary in design but the basic idea is reporting and paying premium based on the actual payroll. It is often beneficial to have a professional payroll service like PaySmart Payroll to provide your payroll services as the workers compensation reporting is actually included in their service. Other companies might charge a fee for this service, but some bureaus, such as PaySmart, do not.
See if you business qualifies for Pay As You Go workers compensation today.