Gross up describes functionality where the application increases employees' gross earnings in order to pay them an exact net pay amount after tax withholdings.
For example, if you want to pay an employee a bonus of exactly $1,000 net, you could create a quick entry in Payroll > Pay Run Management for $1,000 by using a bonus earning code that has the gross up functionality enabled. In this example, the application automatically generates a gross up amount of $1,400.53 for this earning, which is the net of $1,000 plus federal and state tax withholding, which you can see at the top right of the following screenshot. After the taxes are deducted, the net pay amount at the bottom of the earning statement is $1,000, as illustrated in the same screenshot:
In this case, the application generates an extra amount of $400.53 to account for taxes, so that the employee receives exactly $1,000 in net pay.
If, on the other hand, the same bonus earning does not have gross up functionality enabled, the quick entry of $1,000 is displayed as such at the top of the earning statement, and the net pay after federal and state tax withholding is $745.24:
Key information about gross up:
- By default, the application calculates gross up to account for taxes. If needed, you can also configure the application to include garnishments and one or more post-tax deductions, and also exclude certain types of taxes from being covered by the calculation.
- You can configure gross up for individual earning codes, or for custom check templates. Gross up settings at the check template level always override those set at the individual earning level.
- For individual earnings, the application can calculate gross up as described above, or by using an override percent amount. This functionality isn’t available for check templates.
- When there are two gross-up earnings on the same payment, the application performs gross-up calculations for each earning individually, as if they were on two separate payments.
- By default, the application combines the employee's original earnings and the gross up amount into the single earning. However, you can configure the application to pay the gross up earning using a separate earning called the top up earning. A top up earning is required to accompany taxable benefit gross ups in order to supply the cash to withhold the calculated taxes from.
For more information, see the following topics: