What is the best method for calculating gross-up?
There are a lot of options when it comes to calculating gross-up. Plus’s Director of Finance, Angela Sieber, will tell you what you need to know to find the best formula for your company.
Complete transcript: “Hello, I’m Angela Sieber, Director of Finance here at Plus Relocation Services and welcome to Relo Tip Tuesday. My question is, ‘What is the best method for calculating gross-up?’
The simple answer is it depends. Gross-up is a benefit that can be calculated in a variety of ways. Check out my other Relo Tip Tuesday on different methods of calculating gross-up for more information. In reality there is no best method for calculating gross-up. The best method for your company could depend on a variety of factors.
The first factor to consider is your company philosophy. If your company philosophy is one of cost containment, you may want to consider a flat supplemental method. It provides some contribution towards an employee’s tax liability. If your company philosophy is one of employee needs first, you may want to consider an inverse marginal method. That takes into consideration that the gross-up is also considered taxable income and uses the employee’s tax bracket.
Another factor to consider is the salary of your relocating population. If you are generally moving employees that fall into a twenty-five percent tax bracket, a supplemental rate may be best for you. However, if you are generally moving your executive population that fall into a higher tax bracket you may want to consider using the marginal tax rate.
The final factor to consider are your relocation policies. If you have a tiered relocation program you may want to consider tiering your gross-up methods. That way your entry level employee does not receive the same level of benefit as your executive.
Remember gross-up is a benefit and no method is more correct than another. There are several factors to consider when selecting the correct gross-up method for your company.”