Financing Work Comp Options
Pay as you Go Work Comp Plans
Most of Work Comp Staffing Solutions workers compensation programs are offered with “pay-as-you go” payment plans. For example, with the PEO or EOR work comp options, work comp fees are paid on a weekly or monthly basis, and are directly related to the amount of payroll processed the previous week or month. This is one of the big benefits to using an EOR or PEO program. With private carrier policies, state fund or captive programs, usually a 30% down payment premium is required upfront. Then the staffing company is required to make monthly installments to the insurance company based on annually projected payroll/ work comp figures. This cash flow arrangement usually is fine if your payroll/sales are flat or increases during the course of your policy term. But if your payrolls fall, these pre arranged monthly payments can become a cash flow burden.
Work Comp Premium Deductibles
Many PEO, EOR, State fund and Private Carrier programs offer reduced comp rates if the staffing company assumes a per claim deductible. The work comp industry sometimes calls this “putting skin the game.” The deductible amount may vary from $500 to 100K per claim– depending on the size of the premium, and type of risk/codes– as well as the staffing companies work comp history. For example, if an employee has an accident, and the accident costs the insurance company $5,000, and the deductible is $500 per claim, then the staffing company pays the first $500 of the claim. The workers’ comp insurer pays the remaining $4,500 of the claim. Alternatively, if your employee’s accident results in $500 worth of comp costs (or less), the staffing company will pay the entire workers’ comp claim.