Yes. Your premium is based on an estimate of this year's payroll. If the real number is lower, ask the insurer to cut the estimate now instead of waiting for a refund after the year ends. Who this is for: contractors who lost a crew member, finished a big job, or slowed down for the season and are still paying on last year's payroll.
The short version
- Your premium is a deposit on an estimate. Real payroll is checked after the policy year ends.
- You can ask for a lower estimate in the middle of the year. Recent payroll reports are the evidence.
- Insurers usually agree, though some resist large cuts and would rather wait for the year-end check.
- If you overpaid, the year-end check returns the difference, but not below the policy's minimum premium.
- Pay-as-you-go plans solve this for good by billing on real payroll each pay period.
How does my payroll set my workers comp bill?
When the policy starts, you or your broker estimates the payroll for the year in each job category. The insurer multiplies that by the rate for each category and by your claims multiplier, and that is what you pay in installments. After the policy year ends, the insurer checks your real payroll (the premium audit). Pay more than estimated and you get an extra bill. Pay less and you get money back. See what a premium audit is.
The problem is timing. If your payroll dropped in month three, you keep paying on the old estimate for nine more months.
Can I get the estimate lowered in the middle of the year?
Yes, in most cases. Ask your broker for a change in the middle of the policy year, which brokers call a mid-term change. The insurer will want evidence: your latest quarterly payroll tax report, a payroll register by employee, and a note on why payroll fell and what you expect for the rest of the year. The insurer then issues a change to the policy (an endorsement), and your remaining installments drop. In North Dakota, Ohio, Washington, and Wyoming you buy from the state fund, which bills on the hours or payroll you report each period, so there is no annual estimate to cut. Report the lower figure on your next return.
Two cautions. Some insurers resist large cuts, especially late in the policy year, or when the new estimate looks lower than what you are actually paying out each week. And the year-end check is the final word, so if you land a big job later, ask to raise the estimate again. See understanding your premium audit.
What are my choices, and how fast does each one give me the money back?
| Option | When you see the money | Risk |
|---|---|---|
| Ask for a lower estimate now | Next installment | Cut too far and you owe it back after the audit |
| Wait for the year-end check | A few months after the policy ends | Installments you did not need to pay, and no refund below the minimum premium |
| Switch to pay-as-you-go | Every pay period, going forward | Needs a payroll service that reports to the insurer |
| Cancel and start a new policy | Not recommended | Cancellation penalties and a gap in your coverage history |
Are there minimums I cannot go below?
Yes. Every workers comp policy has a minimum premium. Illustratively it runs from a few hundred dollars to a few thousand, driven mostly by the highest rated job category on your policy and your state's rules, so a roofing policy's minimum is far higher than an office only policy's. The insurer keeps it even if your payroll drops to zero. Most states also add a small flat charge, the expense constant, that is fully earned and not refunded. Some states use a different fee, so check your own policy.
Will a smaller payroll change my rate?
No. The rate per $100 for each job category does not move in the middle of the policy year. One thing does move. Most states give a discount that grows with the size of your premium, so a smaller premium earns a smaller discount and your bill falls a little less than straight proportion suggests. Your claims multiplier usually does not move either. The exception is a revised multiplier from your state's rating bureau, which can arrive mid-year when a claim value is corrected and normally applies back to the policy start date. See the workers comp overview.
What if my payroll dropped because I switched to subcontractors?
At the year-end check, the auditor asks every sub you paid for a certificate of insurance, a one page proof of coverage. In most states, any sub who cannot show workers comp is added to your payroll, rated at the category for the work that sub did, not at your own trade rate. With no payroll records from the sub, the auditor charges on the full amount you paid, and a smaller share only where the sub supplied the materials or equipment with operators. So if those subs are not insured, the audit will put that money back. Read do I need workers comp for 1099 contractors?
What this looks like in real life
Illustrative example. It is typical of what we see and is not a promise of how any specific situation would be handled.
The setup: A concrete contractor in California estimated $900,000 of payroll at an illustrative $12 per $100, for a premium of $108,000 paid at $9,000 a month. In March a big project ended and four of the ten employees were let go.
What went wrong: The owner kept paying $9,000 a month, assuming the refund would come after the audit. By August the business was tight on cash and the owner was borrowing to cover the installments.
What it cost: Illustrative math: at $600,000 of payroll the premium should have been about $72,000, or $6,000 a month. The owner paid about $3,000 a month more than needed for five months.
The fix: The broker sent the insurer the two most recent quarterly payroll reports and a note about the finished project. The estimate was cut to $600,000, the installments dropped by $3,000 a month, and the account moved to pay-as-you-go at renewal.
Frequently asked questions
Q: Can I lower my workers comp bill if my payroll has decreased?
Yes. Ask your broker to request a lower payroll estimate and send recent payroll reports as proof. The insurer lowers the estimate and your remaining installments, and the year-end check settles the final number.
Q: What proof does the insurer want to lower my payroll estimate?
Usually your latest quarterly payroll tax report, a payroll register by employee, and a short explanation of the drop. If you let people go or finished a project, say so.
Q: How long does it take the insurer to lower my installments?
Often one to three weeks once the insurer has your payroll evidence. Ask your broker to confirm the new installment amount in writing.
Q: Can the insurer refuse to lower my estimate?
It can. Some insurers resist large cuts or want to wait for the year-end check. A broker can push back with the payroll evidence, and the audit still returns what you overpaid.
Q: Will I get money back if I overpaid on workers comp?
Yes, after the year-end payroll check, usually a few months after the policy ends. The refund cannot take the premium below the policy minimum, and the flat charge is not refunded.
Q: My payroll went down because I use 1099 subs now. Will my bill go down?
Only if every sub carries their own workers comp and shows you proof. A sub without coverage is added to your payroll at the year-end check, rated at the category for that sub's work.
How Morrow helps
Morrow is a licensed independent commercial insurance brokerage that works with contractors and trades every day. Getting a contractor's payroll estimate corrected during the policy year, and moving accounts to pay-as-you-go, is routine work for us.
- Free contract review. Send us the contract or bid documents and we mark up the insurance section in plain English, whether or not you buy anything from us.
- Free, instant certificates. Clients issue their own certificates of insurance online in about a minute, any hour, any day, at no charge.
- Markets you cannot reach online. One application, shopped across many insurance companies for general liability, workers comp, auto, umbrella, and pollution coverage.
One more thing. This article is general information and is not legal advice or a statement of coverage. Your contract and your policy wording control in every case. Requirements vary by customer, by state, and by insurance company, so have a licensed advisor review your own contract and your own policy before relying on any of it.
Last updated: Reviewed by the Morrow commercial lines team. Last updated September 2026.