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Gross-to-net

  • 14-04-2005 6:36pm
    #1
    oscarBravo
    Technology & Internet Moderators Posts: 28,830 Mod ✭✭✭✭


    The missus does some book-keeping work for a couple of small businesses. Despite being in completely different sectors (hospitality/construction) they have one thing in common: a practice of paying employees "into the hand". This doesn't imply anything underhand like paying cash to avoid deducting tax; simply that they agree a bottom line figure with the employee, and then calculate how much gross pay is required each week to arrive at that figure.

    Is this a very widespread practice? It strikes me, frankly, as clinically insane. In effect, it means that the employer is paying the employee's tax bill. This has become particularly clear in situations where, for example, employees get tax refunds: they pocket the refund, and the employer keeps taking the hit. In another case, an employee transferred all tax credits to his/her spouse, which effectively doubled the employer's tax burden for that employee.

    Thoughts?


Comments

  • #2
    Beruthiel
    Moderators, Social & Fun Moderators Posts: 42,362 Mod ✭✭✭✭Beruthiel


    a very strange parctice and certainly not the norm


  • #3
    LoneGunM@n
    Closed Accounts Posts: 1,414 ✭✭✭LoneGunM@n


    oscarBravo wrote:
    The missus does some book-keeping work for a couple of small businesses. Despite being in completely different sectors (hospitality/construction) they have one thing in common: a practice of paying employees "into the hand". This doesn't imply anything underhand like paying cash to avoid deducting tax; simply that they agree a bottom line figure with the employee, and then calculate how much gross pay is required each week to arrive at that figure. Is this a very widespread practice? It strikes me, frankly, as clinically insane.

    It is the norm in the construction sector .... although it's not difficult to calculate a gross wage based on a net wage, it is a time consuming exercise.

    oscarBravo wrote:
    In effect, it means that the employer is paying the employee's tax bill. This has become particularly clear in situations where, for example, employees get tax refunds: they pocket the refund, and the employer keeps taking the hit. In another case, an employee transferred all tax credits to his/her spouse, which effectively doubled the employer's tax burden for that employee.

    Thoughts?

    I remember one set of accounts I was working on for a construction company ... there was 2 employees who were on virtually the same net annual wage, but when the gross was calculated, the married employee was on almost double that of the single person [which should be the reverse ... based on net wages], because the married guy had recognised the loop in the wage payments system by the company and transfered his portion of the married tax credit to his wife [keeping the minimum €1,040.00 - PAYE Tax Credit] for himself. He also declared his spouse as the dominant earner, thus meaning he only had a Tax Band of €19k, whereas his wife had the €37k. This resulted in him using the tax laws and wages system of the company to result in a vastly inflated salary ... it goes without saying that we immediately informed the director of the company of what was happening, to which he shrugged his shoulders and said that if he offered gross wages, he'd have no staff ... Vicious circle or what?


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