A tool utilized to determine the pre-tax amount needed to provide an employee with a specific after-tax payment, considering tax implications on bonuses. For example, if an employer wants an employee to receive a $5,000 net bonus, this calculation helps determine the total bonus amount that must be paid to account for federal, state, and local taxes.
This methodology ensures employees receive the intended payment amount, simplifies the administration of bonus programs, and can enhance employee satisfaction. Historically, such calculations were performed manually and were prone to error; however, the advent of specialized tools has automated this process, improving accuracy and efficiency.
