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Bonuses - To gross up or not?

Telma Le Guen


Should bonuses come with a little extra boost?


Grossing up bonuses - like spot bonuses, sign-on bonuses, or relocation bonuses - means covering the taxes so employees receive the full intended amount.


But is it the right move?


Pros:


1. Employee Experience: Grossing up ensures a specific net amount is received, thus boosting satisfaction and goodwill.


2. Talent Attraction: For sign-on and relocation bonuses, grossing up can make your offer more competitive in tight talent markets.


3. Objectivity: It levels the playing field for employees in higher tax brackets, making the bonus impactful for all.



Cons:


1. Cost to the Company: Grossing up increases the organisation’s expenses.


2. Precedent Setting: Once you gross up one type of bonus, employees may expect the same for all bonus payments.


3. Complexity: Administering grossed-up payments requires more work for payroll and finance teams.



When Should Grossing Up Be Considered?


  1. Critical Talent Needs: Use grossing up for roles where attracting top talent is vital and the bonus is a key deciding factor.

  2. Relocation Bonuses: When moving costs are high, grossing up can reduce the financial burden for employees.

  3. Spot Bonuses for Exceptional Effort: To maximize the impact of recognition when spot awards are very low, ensuring the take home amount 'makes sense'.


Grossing up isn’t necessary.


When used strategically, it can enhance employee satisfaction and strengthen your value proposition.

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