Gross-up and nett tax
Most employees are paid a gross salary and bear their own tax. Where you have agreed a take-home figure instead, the employer absorbs the tax — and KAMI has to work backwards from the net to the gross that produces it.
Where: My Team › the employee › Payroll settings (wage type) You need: the rights to edit employee payroll settings
The three wage types
| Wage type | The agreed figure is | Tax is borne by |
|---|---|---|
| Gross | Gross pay | The employee |
| Nett | Take-home pay | The employer |
| Gross Up | Take-home pay, with the gross solved for | The employer |
Gross is the ordinary case and what most employees should be on.
Nett and Gross Up both mean you have promised someone a figure they will actually receive. The difference is in how the gross is derived, and it matters because tax on the additional amount is itself taxable — the calculation has to converge rather than simply add the tax on once.
⚠️ These are not payroll conveniences. A nett arrangement transfers an open-ended liability to the employer: if tax rates rise, your cost rises and the employee's pay does not change. Use it where a contract genuinely requires it, not to make an offer look tidy.
What appears on the payslip
The employer-borne tax does not vanish — it appears as an other payment, typed as Tax Gross Up. Where contributions are also absorbed, a Contribution Gross Up appears alongside it.
That visibility is the point: the payslip shows the true cost of employing that person, and the year-end reporting has something to report.
How to set it
- Open the employee in My Team and go to their Payroll settings.
- Set the wage type to Gross, Nett or Gross Up.
- Enter the wage — remembering that for Nett and Gross Up this is the take-home figure, not the gross.
- Recalculate any payslip that should reflect the change.
What Happens Next
- KAMI derives the gross required to deliver the agreed net, and the difference appears as gross-up other payments.
- The employee's take-home matches the agreed figure; the employer's cost is the gross plus absorbed contributions.
- Because tax is annual, anything that changes the annual estimate — a bonus, a mid-year change — changes the gross-up too. The employer's cost is not fixed for the year.
- Year-end reporting includes the grossed-up amounts, because they are income.
Tips
- Model the full-year cost before agreeing a nett salary. The headline is the net; the cost is the gross plus absorbed contributions, and it is materially higher.
- Check the first payslip line by line. Confirm the employee's take-home is exactly the agreed figure. If it is a few units out, the wage type or the wage figure is wrong.
- Do not mix wage types across a team doing the same job unless the contracts genuinely differ. It becomes very hard to compare cost or answer a pay-equity question.
- Re-examine nett arrangements when tax rates change. The employer absorbs the increase silently, and nothing flags it.
- Say which figure is which in the contract. "Salary of X" is ambiguous once nett arrangements exist, and the ambiguity surfaces at the worst time.
Troubleshooting / FAQ
Q: The employee's take-home is not the agreed figure. Check the wage type. If it is set to Gross, the agreed figure is being treated as gross pay.
Q: The gross-up amount changed although the salary did not. Tax is annual. A bonus or any change to estimated annual income changes the tax, and therefore the gross-up.
Q: What is the difference between Nett and Gross Up? Both mean the employer bears the tax. Gross Up solves for the gross that yields the agreed net, accounting for tax on the additional amount. Confirm which your contract intends before choosing.
Q: Should the gross-up show on the payslip? Yes. It is income, it is reportable, and hiding it would misstate the employee's earnings.
Q: Can we switch someone from nett to gross? Only if their contract allows it — it changes who bears the tax, which is a change to their terms.