POWER WORD PLAY (A Word, Term, or Concept an Executive Ought To Know): TAX GROSS-UP

A tax gross-up payment is made by an employer to an employee for any tax liability or penalty an employee incurs because of income, benefits, or perks the employee receives from the employer.  This reimbursement by the employer is to make the employee whole concerning the employee’s compensation by ensuring the employee nets the full benefit of the compensation intended.  Employers have applied tax gross-up payments to compensation and perks ranging from severance payments to club memberships.  Corporate reform activists have criticized tax gross-ups and many companies have eliminated them.

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