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 5% on the benefit.
The Pay As You Earn (PAYE), PRSI and USC for €110 will add 51% to the value: 100% - (40% + 4% + 5%) = 51%. The grossed-up amount is €110 x 100/51 = €215.67.
You must pay:
Calculating tax
Income Tax |
€215.67 @ 40% |
€86.26 |
Employee PRSI |
€215.67 @ 4% |
€8.63 |
USC |
€215.67 @ 5% |
€10.78 |
Employee's total liability |
|
€105.67 |
Employer PRSI |
€215.67 @ 10.85% |
€23.40 |
You deduct the employee's tax liability (€105.67) from the grossed-up amount (€215.67). The balance is €110 (the original benefit value).
Payroll software will do the grossing-up for you in most cases.