What Is Pay As You Go Workers’ Comp? A Complete Guide for Business Owners

Pay As You Go Workers’ Comp is one of the most searched workers’ compensation billing options for business owners who want better cash flow control and fewer end-of-year surprises. Instead of paying a large deposit based on estimated annual payroll, Pay As You Go billing calculates premiums based on actual payroll. With RPM, the payroll data flow and payment process are fully managed, so premiums are calculated and paid automatically each pay cycle, and the right amount is collected when it’s due.

This guide explains what Pay As You Go workers’ comp is, how premiums are calculated, what changes (and what does not), how audits fit in, and how to choose the right model for your business.

What Is Pay As You Go Workers’ Comp?

Pay As You Go workers’ comp is a workers’ compensation premium billing method where your premium is calculated using actual payroll rather than an annual estimate.

With traditional workers’ comp billing, many businesses pay:

• A large upfront deposit based on projected payroll
• Monthly installments based on that estimate
• A final adjustment after the carrier’s premium audit

With Pay As You Go billing, premiums are calculated and collected with each payroll run instead of being based on estimates and reconciled at audit time.

What changes and what stays the same

What changes

• When premiums are calculated (each payroll run instead of once per year)
• How premiums are collected (smaller payments aligned to payroll cycles instead of large upfront deposits)
  

What stays the same

• Your workers’ comp policy is still issued by your insurance carrier
• Your carrier still determines rates, class codes, and underwriting rules.
  Audits still happen (though Pay As You Go helps reduce surprises)

How Pay As You Go Workers’ Compensation Works

1) Your payroll is connected

The process starts by linking your payroll provider and current insurance carrier. RPM handles the setup, so you can stay focused on running your business.

2) Premiums are calculated from actual payroll

Each pay period, premiums are calculated based on your payroll and sent to your carrier, so premiums stay aligned with what you are actually paying in wages.

3) Premiums are paid and remitted on an ongoing schedule

Premiums are collected each payroll run as part of the Pay As You Go process, and RPM manages the collection and remittance to the carrier so payments stay accurate and consistent.

4) Smoother Audits, with fewer surprises

Pay As You Go helps keep premiums aligned with payroll during the year, which can reduce large corrections at year-end. Audits are still required by Carriers, but RPM helps both the audit process and result be more seamless. 

Why Business Owners Choose Pay As You Go Workers’ Comp

Better cash flow control

Pay As You Go can reduce or eliminate large upfront premiums and replace large deposits with smaller, per-pay-period payments that keep more money in your business.

Premiums align more closely with payroll reality

Because premiums are calculated from actual payroll reports, you pay what is owed when it is owed, with less guesswork involved.

Less admin burden with RPM

Not all Pay As You Go is created equal. Pay As You Go can be easy or frustrating depending on how it is set up. RPM’s fully managed approach removes manual reporting steps and keeps the process moving with human support at every step.

Pay As You Go Models (and Why the Model Matters)

This is where many business owners get surprised: Pay As You Go is not one universal experience. Here are a few examples of different models:

1) Fully managed by RPM

This is the RPM model. We handle the payroll data for you every pay period, and payments directly with your carrier. For business owners, this is the simplest option because it’s hands-off and supported by real people.

Why business owners increasingly choose fully managed:

• Easier to use
• More accurate with less audit risk
• Less time spent on reporting and follow-ups

2) API integration (payroll system talks directly to the carrier billing system)

In an API model, your payroll system communicates directly with your carrier’s billing system. This can be efficient, but it often depends on whether your payroll provider and carrier support that specific connection.

Common downsides we see in the market:

• Limited payroll provider support (70%+ of  systems simply aren’t compatible).
• Bad payroll data can lead to inaccurate workers’ comp reporting and billing.
• No visibility to mistakes – until the audit bill comes. APIs don’t warn you if the payroll data isn’t lining up.
  

3) Self-reporting

With self-reporting, you (or someone on your team) log in and manually enter payroll data, typically every month. Self-reporting can work for very organized teams, but it adds a task you have to remember every pay cycle.

The risk is simple:

• Business owners are busy running the business, not manually reporting payroll. Delays can lead to late fees. 
• Mistakes can easily happen. Workers’ comp is complex, and it shouldn’t be one more thing you need to worry about. 
• Audit issues increase when data is late, inaccurate, or missing.

How Are Workers’ Compensation Premiums Calculated?

Workers’ comp premiums are generally calculated from:

• Payroll (wages) by class code
• Classifications (class codes) assigned to job roles
• Rates applied per class code (often per $100 of payroll)
• Experience modification factor and other policy variables
• Other state or carrier rating rules and fees

Pay As You Go does not change that formula. It changes when and how payroll is used for billing throughout the year.

Workers’ Comp Audits and Pay As You Go

What is a premium audit?

A premium audit is the carrier’s review of payroll and operations after the policy period to confirm the final premium matches actual exposure and risk.

Does Pay As You Go eliminate audits?

No, audit reviews are mandatory, but Pay As You Go helps reduce major discrepancies by keeping premiums aligned to payroll during the year. 

Why audited premiums can still change even with Pay As You Go

This is important, and it’s not talked about enough: even when payroll reporting is consistent, audits can still include other variables such as:

• experience modification changes
• fees or discounts
• officer minimums
• class code allocations and job duty changes

That’s why it’s helpful to have a process and support team that can walk through the audit findings with you, explain what changed, and help you respond appropriately.

Where RPM fits in

We offer audit reviews to our existing Pay As You Go customers to help make audit season more transparent and easier to navigate. That includes specialist guidance, review of payroll and class codes, and support communicating with carriers on audit findings. 

How to Know If Pay As You Go Workers’ Comp Is Right for Your Business

Pay As You Go is usually a strong fit if:

• Your payroll changes month to month or seasonally
• You want to reduce or avoid large upfront deposits tied to estimates
• You want to keep more cash in your business
• You want help with payroll reporting and audit support, instead of another admin task
• You want to avoid a big surprise bill at audit
• You’re tired of having to self report your workers comp every month
• You want added human support, answering all your questions 

FAQs

What is a payroll report, and why does it matter?

A payroll report is a document summarizing employee pay information for a specific period, including wages, taxes, deductions, and benefits.

In Pay As You Go workers’ comp, payroll reports matter because they drive:

• premium calculations
• class code allocations
• reporting accuracy
• audit readiness

What payroll is included in a workers’ comp audit?

Carriers generally audit policies to verify the payroll and job duties that drove the premium calculation. What counts as “payroll” can vary by carrier and state, but audits often look at:

• gross wages and salaries
• overtime and other compensation
• bonuses or incentive pay
• tips (in some cases)
• certain benefits or allowances
  

If you’ve ever been surprised by an audit bill, it’s usually because the policy was billed on an estimate and the audit revealed payroll or classifications didn’t match what was expected. Pay As You Go helps reduce that gap by using payroll throughout the year, not just at the end.

Ready to talk through Pay As You Go for your business?

Pay As You Go workers’ comp is the best option for business owners who want premium payments based on actual payroll, better cash flow control, and fewer end-of-year surprises. The biggest decision is not just “Pay As You Go vs traditional.” It’s also choosing the right Pay As You Go model.

RPM’s fully managed approach connects your payroll, calculates premiums with each payroll run, and manages the payment flow to your carrier, with real human support available through setup and audit season. 

Contact our team to get started today!