Setup Considerations: Gross-Up Calculations

This topic provides information for planning the gross-up calculation configuration for these payroll countries:

Canada

France

Ireland

The UK

The U.S.

You can use this topic to help make decisions when planning your configuration and use of gross-up calculations. It explains:

Why to set it up.

How it fits into the rest of Workday.

Downstream impacts and cross-product interactions.

Security requirements and business process configurations.

Questions and limitations to consider before implementation.

Refer to detailed task instructions for full configuration details.

What It Is

Gross up calculations enable you to calculate a gross amount for an earning, based on a defined net amount.

Business Benefits

Workday's gross-up functionality makes it easy to gross up calculations, by determining the appropriate tax rate, even in the case of progressive tax rates. This functionality ensures that you’re accurately covering all taxes when grossing up a payment amount.

Workday has optimized the gross-up algorithm for performance, making it easy to perform multiple gross-up calculations for a large population.

The gross-up calculation is also highly configurable, making it easy for you to adapt it to your needs.

Use Cases

You can use gross-up calculations to calculate taxes and other contributions for payments with a guaranteed net amount, such as:

Benefits in kind.

Bonuses.

Gift cards.

Hiring or relocation bonuses.

Questions to Consider

Questions	Considerations
How do you want to provide the net amount?	You can provide the net amount for gross ups through: Manual payments. On-demand payments. Payroll inputs.
Which taxes do you want to include in gross ups? (IRL, UK, USA)	When configuring a gross-up earning, the gross-up type determines which taxes Workday includes when calculating gross-ups. You can add other taxable pay component groups according to your tax requirements. You can gross up calculations based on: Employer and employee national insurance (NI) contributions only (UK). Tax only (UK). Both NI contributions and taxes (UK). Tax, PRSI contributions, or USC contributions, or all 3 (IRL). A company-specific percentage (USA). All taxes (USA). Specific combinations of Federal, State, OASDI, and Medicare (USA). For Payroll for the UK, as you can only gross up supplemental earnings, Workday automatically applies the supplemental tax rate.
In which order do you want Workday to process gross-up calculations?	When a worker has multiple gross-up earnings in the same pay calculation, you can define the order in which Workday processes them.
What is an acceptable tolerance for rounding in gross-up calculations?	By default, Workday accepts a maximum difference of 0.01 between the input and calculated net amounts. You can modify the gross-up tolerance. If the gross-up calculation produces a net amount within the tolerance, it stops calculating. For Payroll for Canada and the U.S., due to the defined tolerance, in some cases the input and calculated net amounts can be different. You can choose to reallocate the differences to a worker's withholding tax to result in accurate net results.
What kinds of earnings do you want to gross up?	For gross-up earnings, Workday returns the full gross amount including net plus taxes. As a result the net portion of the gross-up impacts a worker's net pay. For imputed earnings or benefits in kind, Workday recommends that you create: The gross up earning. An offset earning that deducts the net amount from a worker's net pay.
What other calculations do you use the net amount as input for? (CAN, USA)	If you want to use the net amount in other payroll calculations, add the Net Amount (for Gross Up) pay component related calculation to the: Gross Up: Net Amount [CAN] pay component group. Gross Up: Net Amount [USA] pay component group.
Which amounts do you want to display on the worker's payslip?	When you include a gross-up earning on a payslip configuration, Workday displays the gross amount. To display the net amount, you can create a memo earning based on the Net Amount (for Gross-Up) pay component related calculation. You can also use the Maintain Payroll Payslip Configuration task to display the Net Amount (for Gross-Up) related calculation.

Recommendations

Consider your performance requirements when configuring the number of gross ups per worker. You might experience longer calculation times if you include a large number of gross ups per worker. To ensure optimal performance, Workday limits the number of different gross-up earnings per worker to 4 for a payroll calculation. You can, however, have an unlimited number of net inputs for the same gross-up earning.

Requirements

Create separate gross-up earnings for each Payroll country.

For Payroll for the U.S, when configuring gross-up earnings, you must also set up supplemental taxation for the earning.

Limitations

Workday retroactive pay doesn't recalculate gross-up earnings.

You can't gross up an amount to cover retirement, benefit, or other voluntary or nontax deductions.

You can only gross up net amounts to cover all taxes. You can't gross up based on different taxes individually (CAN).

You can only gross up net amounts to cover all taxes and contributions. You can't gross up based on different taxes or contributions individually (FRA).

Create separate earnings for calculations to gross up and calculations not to gross up. You can't add gross-up amounts to an earning that isn't configured for gross-ups.

Workday doesn't support gross-up calculations for international assignments.

Tenant Setup

No impact.

Security

Domains	Considerations
Set Up: Payroll (Calculations - Payroll Specific) in the Core Payroll functional area.	Enables users to define: Which earnings to gross up, and which taxes to use in the gross-up calculation. The order in which to calculate multiple gross-ups. The tolerance for rounding in gross-up calculations.

Business Processes

No impact.

Reporting

No impact.

Integrations

You can use these web services to mass upload net amounts for gross-up calculations:

Import Payroll Input

Import Payroll Off-Cycle Payment

Connections and Touchpoints

Features	Considerations
Ongoing Multiple Work Jurisdictions (OMWJ) (CAN, USA)	Workday splits gross-up earnings based on a worker's OMWJ allocations. Workday generates a result for each work jurisdiction.
One Time Payments in Compensation	You can gross up one-time payment amounts by selecting a compensation element to which a gross-up earning is assigned.
Fair Labor Standards Act (FLSA) Calculations (USA)	When calculating a gross-up earning for a bonus that crosses multiple FLSA periods, Workday allocates the earning to the appropriate FLSA periods based on the coverage dates.

Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.