Taxation of benefit in kind

Payment of employee tax by the employer

An employer can choose to pay tax on a benefit on behalf of an employee. How this is done will depend on the nature and frequency of the benefit.

Calculating tax (grossing-up)

If an employer wants an employee to receive a benefit without affecting their net pay, the employer must increase the benefit amount entered in payroll. This increased benefit allows the employer to deduct the employee's rate of tax, leaving the employee with the original benefit value.

The increased benefit is called the 'grossed-up amount'. The grossed-up benefit amount, and the taxes paid by the employer must be included in the payroll of the employee. The employee will get credit for the Income Tax and Universal Social Charge (USC) paid and a Pay Related Social Insurance (PRSI) record for the contributions made.

The following example shows how this is calculated.

  • Example

    You give an employee a taxable benefit valued at €110. The employee pays Income Tax at 40%, PRSI at 4.2% and USC at 3% on the benefit.

    If you wish to pay the Income Tax, PRSI and USC on the employee's behalf, the €110 will represent 52.8% of the grossed up value: 100% - (40% + 4.2% + 3%) = 52.8%. The grossed-up amount is €110 × 100 ÷ 52.8 = €208.33.

    You must pay:

    Calculating tax
    Income Tax €208.33 @ 40% €83.33
    Employee PRSI €208.33 @ 4.2% €8.75
    USC €208.33 @ 3% €6.24
    Employee's total liability   €98.32
    Employer PRSI €208.33 @ 11.25% €23.44

    You deduct the employee's tax liability (€98.32) from the grossed-up amount (€208.33). The balance is €110 (the original benefit value).

    In most cases, payroll software will do the grossing-up for you.

Payment of employee tax on minor and irregular benefits

If an employer wants to pay the tax due on employees' benefits that are minor and irregular, they must arrange this with Revenue.

For further information about paying taxes on minor and irregular benefits for employees, please see Paying tax on employee's minor and irregular benefits.

Published: 16 December 2025 Print this page

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