Workers’ compensation is a crucial part of any small business—no matter what type of industry you’re in. Having workers’ comp insurance in place helps protect your employees as well as your company in the event that someone gets injured on the job.
Financial protection for your employees means that—whenever necessary—medical bills, rehabilitation costs, and lost wages will be covered, eliminating any added stress when recovery should be the priority. For your business, financial protection means that you won’t be forced to pay out of pocket for an injury or illness that occurs as a direct result of the work your employee does.
Owning a small business typically means there’s less manpower and fewer resources than there is at a larger corporation. This can be tricky when considering the time and effort that goes into administrative tasks like workers’ compensation and payroll processing.
Let’s take a look at what it means to integrate workers’ compensation into your payroll system and when that might be a good idea for you, your employees, and your business.
What does traditional workers’ compensation look like?
Workers’ compensation is required by law in most states, and traditional plans can either be purchased through the state itself or from a private insurance company. Premiums are typically based on your industry, the number of employees you have, and your annual payroll.
At the beginning of each year, you’ll pay an estimated premium amount to cover the entire year. At the end of the year, your insurer will perform an audit to calculate exactly what’s owed—whether that means you paying the difference or the insurance company reimbursing you.
While this isn’t necessarily an issue for large companies, small businesses may not have the overhead to make it work financially—which is where other workers’ comp solutions may come into play.
What are other workers’ comp solutions for small businesses?
If you own a small business, you’ll know that your resources—like time and money—are precious. As opposed to paying one lump sum upfront, merely estimating your payroll costs for the year, you might consider a pay-as-you-go worker’s compensation program.
Pay-as-you-go programs can be incredibly flexible, tailored to your company’s specific needs. For instance, if you typically employ workers on a project-by-project basis, a pay-as-you-go program will allow you to utilize coverage solely for the period of time your workers need it. This means you won’t be paying for coverage during those periods between jobs.
Another benefit is—as the name suggests—you’ll be paying as you. You won’t need to have the funds right away to pay for an entire year’s worth of coverage. You simply pay for what you need when you need it.
What does it mean to integrate workers’ comp and payroll?
When you have limited time and manpower as a small business owner, you might consider working with a professional employer organization (PEO) for support with your administrative tasks. From payroll and tax filing, to workers’ compensation and HR services, PEOs can step in to handle all of the daily necessities of your business while allowing you to focus on what you do best.
So what exactly does it mean to integrate workers’ compensation into your payroll system? Integrating the two is simply automatically calculating your workers’ comp premiums each time you run payroll. This can be particularly helpful when the number of workers you have is constantly shifting based on projects or contracts.
With an integrated workers’ compensation and payroll system, you won’t have to worry about overestimating your premiums and paying too much upfront, nor will you have to worry about underestimating and owing an unexpected amount of money at the end of the year.
Integrating workers’ comp into payroll is a great way to streamline your processes and eliminate any uncertainty or stress during audit season.
Integrating workers’ comp and payroll for your small business
Small business owners typically have a lot on their plate. When you work with a PEO for your administrative needs, you can save valuable time and money in the long run. Integrating workers’ compensation into payroll can help simplify the admin side of your business and create more space for you to focus on growing your business.
