You give an employee a taxable benefit valued at €110. The employee pays Income Tax at 40%, PRSI at 4% and Universal Social Charge (USC) at 4.5% on the benefit.
The Pay As You Earn (PAYE), PRSI and USC for €110 will add 51.5% to the value: 100% - (40% + 4% + 4.5%) = 51.5%. The grossed-up amount is €110 x 100/51 = €213.59.
You must pay:
Calculating tax
Income Tax |
€213.59 @ 40% |
€85.44 |
Employee PRSI |
€213.59 @ 4% |
€8.54 |
USC |
€213.59 @ 5% |
€9.61 |
Employee's total liability |
|
€103.59 |
Employer PRSI |
€213.59 @ 10.85% |
€23.60 |
You deduct the employee's tax liability (€103.59) from the grossed-up amount (€213.59). The balance is €110 (the original benefit value).
Payroll software will do the grossing-up for you in most cases.