Comparison
Pay-As-You-Go vs. Annual Premium Workers' Comp
Pay-as-you-go workers' comp bills premium each pay period based on actual payroll, usually through a payroll integration, while a traditional annual premium is estimated upfront and reconciled in a year-end audit. Both structures can be offered by carriers quoted through our agency.
Traditional workers' comp billing starts with an estimate of the coming year's payroll, priced by class code, and collects premium upfront or in scheduled installments based on that estimate. At the end of the policy term, the carrier conducts a premium audit comparing actual payroll to the estimate and issues either an additional bill or a refund, depending on whether payroll ran higher or lower than projected.
Pay-as-you-go billing changes the timing rather than the underlying rate: premium is calculated from actual payroll each pay period, typically through an integration with the employer's payroll system, and paid in smaller installments that track real payroll as it happens. This generally results in a smaller true-up at audit time, since premium has already been tracking actual payroll throughout the year rather than an estimate made months in advance. Several carriers, including The Hartford, Travelers, AmTrust, and Pie, offer a pay-as-you-go option.
The options
Pay-As-You-Go
Premium calculated from actual payroll each pay period, usually via payroll-system integration.
Pros
- Smooths cash flow by tying premium to real payroll rather than an estimate
- Typically reduces the size of the year-end audit adjustment
- Can be easier for seasonal or variable-payroll businesses to budget for
- Reduces the need for a large upfront deposit
Cons
- Requires a payroll-system integration or manual reporting each pay period
- Not every carrier or every class of business offers it
- Still subject to a final audit reconciliation in most cases
Best for
- Businesses with seasonal, variable, or hard-to-predict payroll
- Employers who want to avoid a large upfront premium deposit
Annual (Estimated) Premium
Premium is estimated upfront for the policy term and reconciled in a year-end audit.
Pros
- Predictable installment schedule set at the start of the policy
- Widely available across nearly all carriers and class codes
- Simple to budget for businesses with stable, predictable payroll
Cons
- Requires an upfront deposit based on an estimate, which can be inaccurate
- Year-end audit can result in an unexpected additional bill if payroll grew
- Less responsive to mid-year changes in staffing
Best for
- Businesses with stable, predictable payroll throughout the year
- Employers who prefer a fixed installment schedule set in advance
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Side by side
| Feature | Pay-As-You-Go | Annual (Estimated) Premium |
|---|---|---|
| How premium is calculated | From actual payroll each pay period | From an upfront estimate of annual payroll |
| Billing frequency | Tied to each payroll run | Fixed installments set at policy inception |
| Requires payroll integration | Usually, yes | No |
| Size of year-end audit adjustment | Typically smaller | Can be larger if payroll changed |
| Upfront deposit | Usually smaller or none | Often required |
| Best fit | Variable or seasonal payroll | Stable, predictable payroll |
| Availability | Offered by a growing number of carriers | Available from nearly all carriers |
The bottom line
Pay-as-you-go and annual premium billing are two ways of paying for the same underlying workers' comp coverage, not two different types of coverage. Businesses with seasonal or unpredictable payroll often prefer pay-as-you-go because it reduces the risk of a large year-end true-up bill, while businesses with stable payroll may not see much practical difference between the two. Since not every carrier offers pay-as-you-go for every class of business, it's worth asking specifically when comparing quotes.
Frequently asked questions
Does pay-as-you-go change what my workers' comp policy covers?
No. It only changes how and when premium is billed; the underlying coverage terms are set by the policy, not the billing method.
Do I still get an audit with pay-as-you-go billing?
Often yes, though the adjustment is typically smaller since premium has already been tracking actual payroll throughout the year.
Is pay-as-you-go available from every carrier?
No. It's offered by a number of carriers, including several quoted through our agency, but availability can depend on your state, industry, and payroll system.
What do I need to set up pay-as-you-go billing?
Most pay-as-you-go programs require connecting your payroll system to the carrier or a payroll-integration provider so premium can be calculated each pay period.
Is pay-as-you-go cheaper than annual premium?
Not necessarily cheaper overall; it mainly changes the timing and predictability of payments rather than the total premium owed for the same payroll and class code.
Last reviewed · Reviewed by Provident Financial Group licensed agents
Compare up to 10 carriers in minutes.
One application goes out to every carrier we can access for your class of business. You get a ranked comparison you can review and purchase online — with a licensed agent available whenever you want one.
Mon–Fri, 8:00am–6:00pm ET · Independent agency licensed in 23 states