Glossary · PA Workers' Comp

Pay-As-You-Go Workers' Comp

A billing arrangement where workers' comp premium is calculated and paid each payroll cycle based on actual wages, reducing upfront deposits and audit surprises.

Definition

Pay-as-you-go (PAYG) workers' compensation is a premium payment method where employers pay premium with each payroll cycle based on their actual payroll for that period, rather than making a large upfront deposit based on estimated annual payroll.

Pay-As-You-Go Workers' Comp: Cash Flow Benefits and How It Works in Practice

Traditional workers' comp policies require an upfront deposit — typically 25–33% of estimated annual premium — at policy inception. For a business with $300,000 in annual premium, that's $75,000–$100,000 due upfront.

Pay-as-you-go eliminates or dramatically reduces the upfront deposit and aligns premium payments with actual cash flow from payroll. This is particularly valuable for seasonal businesses, rapidly growing businesses, and businesses with variable payroll.

PAYG billing is typically administered through payroll integration — the workers' comp premium is automatically calculated when payroll is run and remitted directly to the carrier. Many payroll providers offer direct PAYG integration with carriers.

A significant secondary benefit of PAYG is reduced audit surprises: because premium has been paid based on actual payroll throughout the year, the year-end audit typically results in smaller adjustments.