How do I calculate a gross-up wage for a supplemental or bonus check?

Checks

What is a gross up wage?

A gross up is an additional amount of money added to a payment to cover the income taxes the recipient will owe on the payment. For example, your organization may agree to pay an employee's relocation expenses plus a gross up to offset the expected income taxes that will be owed on the salary payment.

How does a gross up work?

A gross up payroll check works like a payroll check but in reverse. Usually, an employee is paid a gross payroll check amount and then deductions (such as taxes, retirement contributions, and Social Security) are withheld and the employee is paid the remaining amount as net pay.

Net Pay = Gross Amount - Deductions - Withholding

On a gross up payroll check, the net pay is determined and then the withholding and deductions are added to the net pay, in effect, increasing the gross amount.

Gross Bonus Amount = Net Bonus Amount / [1-(Total Tax Rate / 100)]

As a practice, a gross up check is often used for one-time payments, such as reimbursements or end of year bonuses.

Before you get started

You will need the net pay amount that will be paid to the employee.
You will also need to set the pay code for gross up wages. To learn more, see How do I set my default pay code for gross up earnings? (Checks)

Entering a gross up check

1. Open Connect Payroll > Employees > Enter Payroll Checks.

2. Use the Check Type box to select Payroll.

3. Use the Entry Mode box to select Single Check.

4. Use the Employee box to enter the employee name or number.

5. Use the gross up pay code and then enter the net amount on the check.

6. When you calculate the check, Payroll will add the withholding and deductions to the net amount.

Printing a gross up check

To print a gross up check, use the Payroll Check report. See How do I print payroll checks?

202005, 2020May26