In the residential cleaning industry, it is difficult for many business owners to anticipate payroll 12 months ahead of time.
Workers’ Compensation Insurance is required by law for businesses in most states. It provides employees with coverage for some lost wages and medical costs that accrue from injuries occurring on the job. Employers benefit from Workers’ Compensation Insurance by not having to face litigation for most injuries that occur as a part of normal business operations.
Now, in the residential cleaning industry, it is difficult for many business owners to anticipate payroll 12 months ahead of time. Pay-as-You-Go workers’ compensation is designed with this in mind. With a Pay-as-You-Go option, business owners are able to lower the start-up costs for workers’ compensation coverage. It allows employers to pay their insurance premiums monthly instead of in one large sum.
There are many great benefits to this method of payment. The three most beneficial are:
- Pay-as-You-Go has lower up-front costs.
- Pay-as-You-Go allows businesses to pay their workers’ comp premium monthly.
- Pay-as-You-Go prevents most audits
Normalize Your Cash Flow
Cash flow is important for any business, especially residential cleaning businesses. Pay-as-You-Go workers’ comp has significantly lower up-front costs, which frees up cash flow for your business.
With a traditional Workers’ Compensation Policy, 25% of the premium is due at the beginning of the term, then nine monthly payments are required for the rest of the premium. With a Pay-as-You-Go workers’ compensation plan, usually business owners get started for less than $500. Depending on your state, industry and the revenue of your business, this means a savings of several hundred if not thousands of dollars in up-front costs and allows your business to free up necessary cash for more immediate needs.
For growing maid services that are starting to bid on bulk-unit contracts, the benefits are even greater. If your business gets the contract, then your payroll may be significantly higher than if you do not. In a traditional plan, you have to pick the smaller or larger payroll and pay 25% of the premium. With the Pay-as-You-Go workers’ compensation plan, your business is able to handle the smaller monthly increase rather than a lump sum plan change fee.
Monthly Payments are Based on Monthly Payroll
Pay-as-You-Go workers’ compensation coverage also benefits businesses by allowing them to pay their insurance premiums monthly based on the actual rather than estimated payroll of their workforce. This is a great option for the residential cleaning industry because it allows them to pay a higher or lower premium each month based on their workload. If work is slow one month, then the workers’ compensation payment reflects that. If your business deals with irregular workloads, then Pay-as-You-Go may be a great option for helping you keep business costs in check.
Prevent Audits
Finally, business owners benefit from Pay-as-You-Go workers’ compensation coverage because it prevents audits from happening more frequently. Audits are done typically when the insurance carrier has reason to believe there is the possibility of over or underpayment of premium. Because the payroll and premium payments are automated monthly, there is less risk of over or underpaying the premium. This can eliminate the need for more than your annual audit. And even when you have an extra audit, the difference over or under is usually $50-$100. With traditional Workers’ Compensation plans, this difference can be several hundred, if not thousands of dollars.
There are many other benefits of Pay-as-You-Go Workers’ Compensation. Lowering up-front costs, allowing monthly payments based on payroll and preventing audits seem to be three benefits that clients frequently rave about. Unless your residential cleaning business has very regular man hours and has enough cash on hand to pay the upfront premium, Pay-as-You-Go workers’ compensation is a great program to help your business with their workers’ compensation coverage needs. The next time you are up for a renewal of your policy, Pay-as-You-Go is something you should strongly consider.
Mitchell Sharp is an In-house Marketing Associate for Workers’ Compensation Shop.com. Formed in 2005, Workers’ Compensation Shop.com is an independent commercial insurance agency licensed in all 50 states.
