Processing Gross-Ups
This topic provides an overview of gross-up processing and discusses how to:
Select processing options on the paysheet.
Override taxes for a gross-up.
Override deductions for a gross-up.
Use the gross-up process to create a check for an exact net amount, including zero net amounts, and have the system calculate the taxes and subsequent gross pay.
Gross-ups are processed along with all other paysheet transactions during on-cycle, off-cycle, or online check runs. If, during a normal on-cycle payroll run, you're processing a gross-up for an employee in addition to the regular check, you must create an additional check for the gross-up. All earnings included in the gross-up must be on a separate check; you cannot combine a gross-up with an ordinary check that's calculated gross-to-net.
Net Pay Gross-Ups
A net pay gross-up is paid with an earnings code that is set up with Add to Gross Pay selected on the Earnings Code - Taxes page.
For example, you might want to give an employee a bonus of 1000 CAD net pay. The system would gross up from the net of 1000 CAD by determining which tax method is specified for the earnings and calculating the gross based on the tax variables.
In a gross-up you are indicating, in effect, that the company is paying all employer and employee taxes. That is, the employee is getting an actual net bonus of 1000 CAD, as opposed to 1000 CAD minus taxes.
Zero Net Gross-Ups
A zero net gross-up is paid with an earnings code that is set up with Add to Gross Pay not selected on the Earnings Code - Taxes page.
For example, you might award a vacation cruise worth 1,500 USD to the employee of the year. The 1,500 USD would be added to the employee's taxable wage base, but you would not want the employee to pay the taxes incurred on this additional income. You could do a zero net gross up that calculates the taxes on the 1,500 USD and the additional gross incurred by the employee as a result of the company paying the taxes.
Gross-Up Steps
These are the basic steps in running a gross-up:
Add a Paysheet page.
Enter tax overrides.
Enter deduction overrides.
Run the Pay Calculation process.
Run the Pay Confirmation process.
View results of the gross-up on the Review Paycheck pages.
Note: If you want 100% of Net Pay, Total Gross, Federal Gross or Percentage of Special Earnings to be taken as a before-tax deduction on a gross-up, add this entry as a One-Time deduction on the paysheet. Do not set the employee up for 100% before-tax deduction at the employee benefits enrollment level.
With gross-ups, you have a number of processing options with regard to taxes and deductions:
You can use any earnings code that you need.
It can be Regular, Bonus, Gifts, or any special earnings code that you've set up.
You can select any tax method.
The default tax method is usually annualized. (The earnings code itself may determine the tax method.) If you select either Annualized or Cumulative, the system uses the employee's federal and state marital status and number of exemptions.
For the U.S., if you select Supplemental or Special Supplemental, the system ignores the employee's filing status and uses the supplemental rates in the Federal/State Tax tables.
For Canada, the recommended tax methods to use would be Annualized or Bonus.
You can specify the exact tax period for the gross-up.
The system takes deductions automatically, unless you override them on the One-Time Deductions page.
These deductions will reduce the net pay.
The system may not be able to calculate additional tax amounts or percents.
When calculating gross-ups, the calculation program may go through several iterations to arrive at the requested net. If, after a number of attempts, the gross-up cannot be calculated, you receive an error message. To correct this situation, you should clear the additional tax amounts or percents on the Employee Tax Data pages.
Note: You can not override a tax amount using the Paysheet/Payline One-Time Taxes override pages. You can, however, stop a particular tax from being applied.
Example 1: Paysheet for a Net Pay Gross-Up
Access the By Paysheet - Paysheet page.
Select Gross-Up.
Use an earnings code that has Add to Gross Pay selected on the Earnings Code - Taxes page.
Enter the amount to be grossed up.
To enter the tax periods, pay frequency, and tax method that you want to use, select Additional Data.
If the tax method desired is already defined on the earnings code, it is not necessary to enter it in the Additional Data page.
If you're ready to pay the employee, select OK to Pay.
Note: (CAN) The gross-up process for Canada considers only legislated deductions (both employee and employer contributions) when determining gross pay. Nonstatutory deductions (both employee and employer contributions) are deducted from the desired net pay unless deductions taken is set to None.
Example 2: Paysheet for a Zero Net Gross-Up
Access the By Paysheet - Paysheet page.
Select Gross-Up.
Use an earnings code that does not have Add to Gross Pay selected on the Earnings Code - Taxes page.
Enter the amount to be grossed up.
Select Addl Data to display a page where you can select the appropriate tax method.
If you're ready to pay the employee, select OK to Pay.
Access the One-Time Taxes page.
Determine what taxes you want grossed up. By default, the system attempts to take all taxes normally associated with the employee. You may indicate only what taxes not to take. You cannot indicate an override amount, additional amount, or refund amount.
Access the One-Time Deductions page.
The system takes deductions automatically from a grossed-up check unless you override them. So you must determine whether you want deductions taken from net pay. If you do not want any deductions taken, go to the By Paysheet - One-Time Deductions page and select None for deductions taken.
Note: If you want 100% of Net Pay, Total Gross, Federal Gross or Percentage of Special Earnings to be taken as a before-tax deduction on a gross-up, add this entry as a one-time deduction on the paysheet. Do not set the employee up for 100% before-tax deduction at the employee benefits enrollment level.