Gross-up Net pay calculates gross pay from net pay. Using this feature, you can start with the net pay you wish to give an employee. The system calculates the gross pay after considering all applicable taxes and deductions.
In what situations would Net to Gross up be useful?
Bonuses that you give to your employees might need to be grossed up. By doing so, you ensure that your employees receive a specific amount after taxes.
In another situation, a cash bonus or gift card paid outside of payroll that you want to gross up the amount. Since these bonuses and gift cards are required to be reported on the W2, this feature will calculate taxes based on the flat amount entered.
How to use the gross-up net feature in UZIO to derive the gross pay?
- The gross up feature is only available when you run the Special Payroll.
- Enter the pay frequency, pay period start date, pay period end date, and the pay date.
- Deductions or contributions are not applied by default. You can apply deductions or contributions by answering Yes if necessary and click continue.
- On the next screen, the system generates an employee grid with pay data based on the payroll inputs.
- The pay grid automatically populates the regular wages and hours for every employee. You usually run a special payroll for payments outside of regular payroll, so you can make all regular work hours and wages zero.
- But if you know the net pay for an employee and do not know the gross pay, then click on the Gross-Up Net icon to enable gross up and select the earnings for which to calculate the gross amount.
- Once clicked, you would need to select an earning for which you want to pay the fixed net pay amount. Bonuses, commissions, and other flat dollar taxable earnings are shown on the earnings list if they have been set up for the company. Earnings lists show paid flat dollar taxable earnings for example, Bonus, commission, etc. if set up at the company level will appear in this list. This earning list will also include non-paid taxable earnings like cash tips and gift cards if created at the company level that you do not want to be paid through the system but you wanted to record those payments on employees W2.
- Once Gross Up is enabled, a new column Net to Gross is added at the end of the grid but before the gross pay column. With this feature, you don't need another payroll if you have some employees whose net earnings need to be paid and others whose gross earnings you know. All such employees can be paid together in one pay run.
- The Net to Gross column can be used to enter the net pay for those employees whose gross wages are to be calculated. In the Net to Gross column, enter a non-zero value
- Zero will appear in all the other earning columns of the employee
- System will recalculate the Gross Pay based on the net pay entered.
- The remaining employees can be paid as normal and the Net to Gross column value can be left at 0.
- Once you click Continue, the system will calculate and display a summary of the pay run for your approval. As you can see, the net amount for the employee you selected is still the same, as is the gross pay you saw on the previous screen.
As another example, suppose you apply deductions and contributions to this special payroll and have employees who need net pay payments. In such a situation any deduction or contribution other than the 'Fixed Dollar' method is by default excluded from Net to Gross calculation. However, if needed, you must manually add them on the pay grid as a one-time amount through Edit Deduction or Edit Contribution, as applicable and click continue and the system will calculate and display a summary of the pay run for your approval.
Gross-up Net Pay Feature Limitations
There are instances in which the gross-up function may not produce the desired results. Following are some recommendations to make sure you pay your employees correctly when you use the gross-up feature
- When you are using for employees who live and work in different states and SIT doesn't apply in the work state, you should not check the supplemental flat rate on the special payroll or exclude these employees from net to gross calculation and run another special payroll without selecting the supplemental flat rate.
- When using this feature, any additional withholding for FIT and/or SIT should be removed.
- When using this feature for 2% shareholders of a S-Corp owner, do not apply deductions or contributions in the special payroll.