Hands up all payroll officers! You know that amazing feeling you get when your boss tells you it’s bonus time (who doesn’t love some extra cash to pay off those pesky credit cards)? Then comes that sinking feeling when you’re given all bonuses as net amounts and so have to find that ‘spare’ time to calculate what the equivalent gross amounts should be before processing in the pay run? Bring on the tax tables, formulas and excel spreadsheets, with a smidge of eye rolling. Well, you can now file this nightmare under ‘a thing of the past’! Our Net to Gross Calculator removes all manual calculations and guesswork, thus saving payroll an inordinate amount of time.
Introducing our Net to Gross Calculator
The purpose of the Net to Gross Calculator is to automatically calculate what the equivalent gross amount should be based off a desired net amount. This calculation looks at an employee’s pay frequency, tax scale and any other earnings to be processed in that pay run.
The Net to Gross Calculator is available as an action within the pay run. Click on an employee’s name to expand their pay details, click on “Actions” and then “Calculate Gross Payment from Net”:
Once you’ve clicked on “Calculate Gross Payment from Net”, the following pop up will appear:
All you need to do is:
- Enter the desired net amount you want the employee to be paid;
- Select the appropriate pay category; and
- Click on “Add to Pay Run”.
In between steps 2 and 3, KeyPay will run the calculation for you!
The Net to Gross Calculator can be used for all pay category types. See examples below of the calculator in action.
Using the Net to Gross Calculator on fixed pay categories
Let’s process a bonus for a few employees. The employees are all to receive the same net bonus amount, being $1000.
We’ll start with Karina:
For Karina to be paid a net bonus amount of $1000, her gross bonus amount needs to be $1481.
Now we’ll do the same for Argon:
For Argon to be paid a net bonus amount of $1000, his gross bonus amount needs to be $1176.
Obviously you can see that Karina and Argon’s gross bonus amounts are different – this is simply because their tax scales are different.
Using the Net to Gross Calculator on hourly pay categories
Karina has worked additional hours, outside of her normal salaried hours, and the employer has agreed to pay her for these hours. The issue is that Karina cannot receive more than $1150 in net pay each week. Additionally, there is no obligation for the employer to pay these additional hours (salaried arrangements and all) and so there is no contracted minimum hourly rate to be applied for these additional hours.
Karina’s normal weekly pay is as follows:
Now we will add the additional hours:
- The desired net payment entered = $611. As Karina’s net earnings are already $539, we need to apply the difference between the two amounts needs as the desired net amount.
- The number of units = 4, being the number of additional hours Karina worked.
- The total gross payment is divided by the number of units entered to calculate the hourly rate of $226.25.
The results in the pay run are as follows:
This tool is also really useful for tax accountants, saving a lot of time and effort in the management of Div7a loans (or debit loans) which has typically been a trial and error process.
The Net to Gross Calculator is available within the pay run module and so is only accessible to admin (full access) users.