I was told by my liability agent that switching my pay as you go workers comp to them would save me a lot of money. I’ve been paying $7k a year with pay as you go, based on my payroll. Now, I’m still paying $7k a year, but I just received an additional $2k bill. I’m wondering if there’s normally a big difference between pay as you go and a regular workers comp policy?
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Did the $2k come from an audit? Because in my experience, work comp audits are almost never accurate on the first try. I’ve had to dispute them because they’ve messed up something in their calculations.
@Rin
No, it’s not an audit. I’ve had workers comp with Hartford for a long time, using pay as you go. The $2k charge is based on last year’s payroll.
Clancy said:
@Rin
No, it’s not an audit. I’ve had workers comp with Hartford for a long time, using pay as you go. The $2k charge is based on last year’s payroll.
Was there an explanation for the $2k charge? Workers comp should be calculated based on a percentage of your payroll. So the price should be pretty similar between the two types of plans.
It could be that your NAICS code got more expensive. Maybe it’s an audit claiming you didn’t report enough payroll, or they might have included a contractor who should have been covered.
@Rin
No, it’s just a bill that came to me over the holidays. It’s the same carrier, but I switched agents and went from pay as you go to a regular policy. My payroll hasn’t changed. They didn’t audit me, they just switched my plan. And the agent apparently lied when they said I’d save a lot by switching.
Clancy said:
@Rin
No, it’s not an audit. I’ve had workers comp with Hartford for a long time, using pay as you go. The $2k charge is based on last year’s payroll.
It sounds like your audit was just finished and found more payroll than what was estimated last year. Did you hire more people or give pay raises? Or maybe use independent contractors who weren’t insured?
Pay-as-you-go and traditional policies should result in about the same premium, since both are based on your actual payroll. The benefit of pay as you go is that you pay the additional amount over the year, instead of getting hit with a big bill at the end. Most of my clients are on traditional policies, but I tell them it’s good to overestimate the payroll a little to avoid surprises during the audit. Then we set up 10-month payment plans. Some clients even get refunds after the audit.
@Tully
No, none of that applies. My payroll is the same, and I just switched agents and went from pay as you go to a regular policy. The amount is basically the same, just with a larger bill instead of payments based on each payroll.
@Clancy
As a broker with lots of experience in workers’ comp, something seems off here. You should review the audits from 2022-2024, your Xmod history, and your policy docs from 2022-2025. If I were your broker, I’d go over all these details to find out what caused the increase. Not all brokers lie, but it’s worth figuring out the reason so you can be prepared and maybe avoid this in the future.
I’ve been on pay as you go for four years. No issues at all. It’s much more accurate than using estimates. My audits have been about $400 off each year, with a $1.4 million payroll.
Dane said:
I’ve been on pay as you go for four years. No issues at all. It’s much more accurate than using estimates. My audits have been about $400 off each year, with a $1.4 million payroll.
Pay as you go isn’t estimated; they process my actual payroll every two weeks.
@Clancy
This doesn’t make sense. Are you saying you just switched, and the new bill is $2k more than last year, or did you get a $2k bill after finishing a policy? Business insurance is never paid upfront. You pay an estimated premium, and then they audit the policy at the end of the term to adjust it. If you got a $2k arrears on pay as you go, it might be because your payroll was misclassified, or you didn’t report everything. If next year’s policy costs $2k more, that’s pretty standard right now. Or maybe it’s because you’re not on payroll and the new agent thought they’d see savings.
Pay as you go shouldn’t cost more. The benefit is that if your payroll changes throughout the year, you can pay more when it’s high and less when it’s low. This helps you avoid a big bill at audit time. But in the end, the total cost should be about the same either way.
You don’t save money, you just reduce the risk of a large year-end audit bill. If your audit came out that much higher, someone probably made a mistake in reporting.