Gross-Up

Gross-Up is a calculation where an employer increases an employee’s taxable payment (e.g., a bonus) to cover the tax liability, ensuring the net amount received matches the intended value.

1. What is gross-up?
   Answer: It is increasing a payment to cover the tax liability for the net amount.
   
2. When is gross-up used?
   Answer: It is used for bonuses, relocation allowances, or severance.
   
3. How is it calculated?
   Answer: It is calculated by dividing the net amount by (1 – tax rate).
   
4. What are the benefits for employees?
   Answer: It ensures they receive the intended amount after taxes.
   
5. What are the employer costs?
   Answer: It increases the total payout due to added tax coverage.