What Is a Tax Gross-Up — and Why Most Companies Get It Wrong
When a company covers relocation costs, bonuses, or housing allowances for an employee, those payments are often considered taxable income. That’s where a tax gross-up comes in: it's an extra payment made by the employer to cover the employee’s additional tax burden—so they don’t end up with less money than intended.
Sounds simple, right?
The truth is, most companies get tax gross-ups wrong. And when they do, it creates compliance risks, budget issues, and employee dissatisfaction that could have been avoided.
Here’s what every HR, finance, and mobility team needs to know.
What Is a Tax Gross-Up?
A tax gross-up is when a company increases an employee’s payment to offset the taxes owed on a benefit or reimbursement. The goal is to “make the employee whole” so they don’t lose money due to tax implications.
Common examples of grossed-up items include:
Relocation reimbursements
Temporary housing stipends
Home sale closing costs
Lump-sum relocation bonuses
International assignment allowances
Let’s say you offer an employee a $10,000 relocation bonus. Without a gross-up, the employee might only take home $7,000 after taxes. With a gross-up, the company covers the tax so the employee receives the full $10,000 net.
Why Most Companies Get It Wrong
Tax gross-ups are easy to misunderstand—and even easier to miscalculate. Here’s where many organizations fall short:
1. Wrong Calculation Method
There are multiple gross-up methods (flat, inverse, supplemental, marginal), and using the wrong one can result in overpayment or underpayment.
Quick example: A flat 25% gross-up won’t be enough if the employee’s actual tax rate is 35%. That means they still owe—and you didn’t actually make them whole.
2. Missed Taxable Items
Not all benefits are taxed equally. Some companies gross-up moving expenses but forget about temporary housing, meal per diem’s, or travel reimbursements, leaving employees stuck with surprise tax bills.
3. Inconsistent Application
Gross-ups are often applied case-by-case, with no standardized policy. This opens the door to inequities, errors, and audit exposure.
4. Poor Communication
Employees are rarely told how gross-ups are calculated or what they’ll actually receive post-tax. That lack of clarity can lead to mistrust, confusion, and dissatisfaction during relocation.
Why Getting Gross-Ups Right Matters
It protects your employee experience.
No one wants to feel like they’re paying out of pocket for a benefit they were promised. Especially during a move, financial surprises cause stress and resentment.
It protects your company’s reputation.
Inaccurate gross-ups reflect poorly on HR and finance, especially when they lead to tax issues or complaints. Worse, they can harm your employer brand and retention.
It protects your compliance.
Inaccurate or inconsistent gross-ups can raise red flags with auditors or tax authorities—especially in cross-border or multi-state relocations.
How Orion Mobility Gets It Right
Orion Mobility’s Tax Gross-Up Services are designed to remove the guesswork, manual effort, and risk from your reimbursement process. We provide:
Accurate gross-up calculations based on employee tax profiles
Automated processing through our global payment platform
Support for complex scenarios including international tax jurisdictions
Standardized policies to ensure consistency and compliance
Transparent reporting and employee communication templates
Whether you’re grossing up relocation stipends, bonuses, or housing benefits, we help you get it right—every time.
What Happens When You Don’t Fix It?
Companies that don’t manage gross-ups properly face:
Frustrated employees
Surprise tax liabilities
Compliance risk
Budget overages
Lower relocation satisfaction scores
Don’t wait for a tax season surprise. The time to fix your gross-up strategy is now.
Final Takeaway
A tax gross-up is more than a math problem—it’s a trust problem.
Employees assume you’ve got it covered. And when you don’t, it damages the relationship. Getting it right shows that you’re proactive, fair, and committed to delivering on what you promised.
Ready to take control of your tax gross-up process?
Talk to our team about how Orion Mobility ensures accurate, compliant, and stress-free reimbursements—globally.