1. Implementing Payroll for the United States
  2. How the Payroll Process Calculates Net-to-Gross Earnings for the US

How the Payroll Process Calculates Net-to-Gross Earnings for the US

When you create an earnings element, you can indicate that it must pay a specified net amount.

Use this feature if you need to pay a person:

  • Guaranteed take-home pay (net) per payroll period

  • Bonus of a specified net amount

To create an earnings element, use the Elements task.

You can create a net-to-gross (gross-up) element for any recurring or nonrecurring earnings element using these primary classifications.

  • Standard Earnings

  • Supplemental Earnings

What Settings Affect Net-to-Gross Processing

You define which deductions the payroll process uses to calculate the gross amount from the specified net amount.

You must create the earnings element as a net-to-gross element by answering Yes to the Use this element to calculate a gross amount from a specified net amount? prompt in the element template.

In each element entry, you specify the limits of the net-to-gross processing this way.

  1. In the Net value, enter the value you want the employee to receive.

  2. In the To Within value, enter the allowed difference between the amount you want and the actual amount.

Note: If these values are the same across most entries, you can enter a default value on the element eligibility record.

How the Formulas Calculate the Gross Amount

Here's what happens when you run the formulas for net-to-gross processing.

  1. The predefined GLB_EARN_GROSSUP iterative formula takes these input values.

    • Net amount you want (Net input value)

    • Amount the net can differ from the goal amount (To Within input value)

  2. In the first run, the formula:

    1. Sets the lower gross limit to the goal net amount, and the higher gross limit to twice the goal amount.

    2. Runs a function to provide the first guess of the gross.

    3. Returns three values to the element's input values: low gross, high gross, and additional amount.

  3. The element's payroll formula runs. This formula:

    1. Adds the additional amount to the goal amount. This is create the gross amount.

    2. Returns the gross amount to the element's pay value for the payroll run to process.

  4. In the next iteration, the iterative formula compares the additional amount to the total value of the balances that are available for net-to-gross for this element entry.

    The additional amount must not differ from this balance total by more than the amount you specified in To Within.

    • If the additional amount equals the balance total, the iterative processing ends.

    • If the additional amount is above or below the balance total by an acceptable margin:

      1. Processing ends.

      2. The formula returns the remainder (additional amount minus balance) to the element's Remainder input value.

    • Otherwise, the formula runs the function to generate a better estimate for gross, using the remainder to determine by how much to change the guess. The formula checks the results in another iteration.

By default, these tax balances are included in the gross up processing.

  • City Withheld

  • County Withheld

  • FIT Withheld

  • Family Leave Insurance Employee Withheld

  • Head Tax Withheld

  • Medicare Employee Withheld

  • SDI Employee Withheld

  • SIT Withheld

  • SUI Employee Withheld

  • School Withheld

  • Social Security Employee Withheld

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