Understanding Gross-Up Processing

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:

  1. Add a Paysheet page.

  2. Enter tax overrides.

  3. Enter deduction overrides.

  4. Run the Pay Calculation process.

  5. Run the Pay Confirmation process.

  6. 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.