PPh 21 Gross Up: Net, Gross and Tax Allowance Compared

A PPh 21 gross up is a tax allowance equal to the employee’s income tax, paid on top of salary so the tax comes out of the allowance rather than out of agreed pay. PPh 21 (Pajak Penghasilan Pasal 21, Income Tax Article 21) is the tax an employer withholds from pay for work.

Employer and employee can agree pay in one of three ways. On a gross salary the employee bears the tax. On a net salary the company bears it. A gross-up is a net salary with the tax shown on the payslip as an allowance. In every case the employer is the withholder, and calculates, withholds, pays and reports the tax (PMK 168/2023, a Minister of Finance regulation, Peraturan Menteri Keuangan, Articles 2(2)(a) and 20(1)(a)). What changes is who pays for it and what the payslip shows.

One month for an employee on IDR 51,827,997, TK/0 (Indonesian rupiah, salary only)

	Gross	Net	Gross-up
Salary	51,827,997	51,827,997	51,827,997
Tax allowance	None	None	13,777,062
Taxed income	51,827,997	65,605,059	65,605,059
PPh 21	9,847,319 at 19%	13,777,062 at 21%	13,777,062 at 21%
Borne by	Employee	Company	Company
Take-home	41,980,678	51,827,997	51,827,997
Company cost	51,827,997	65,605,059	65,605,059

The salary is the regulation’s own example (PMK 168/2023, Annex B, Part Two, I.4). The gross column applies the same monthly effective rate table to the salary alone. Contributions to BPJS (Badan Penyelenggara Jaminan Sosial), the social security programmes, are left out to keep the comparison clean.

Who bears the tax under each method

Gross. The tax is withheld from the agreed salary. The employee receives salary less PPh 21, and the company’s cost is the salary.

Net. The company promises take-home pay and pays the tax itself (PPh 21 ditanggung perusahaan). That tax counts as income too: in PMK 168/2023’s worked example, PPh 21 borne by the employer is a benefit to the employee (kenikmatan) and income subject to PPh 21 in that month, and the tax is calculated on a “full gross up” (Annex B, Part Two, I.4). Like other taxable benefits in kind, it is added to the month’s gross pay.

Gross-up. The company pays a tax allowance, tunjangan pajak, and the allowance is part of the employee’s income (Annex B, Part Two, I.5). In that example the allowance is a set amount and does not match the tax. A PPh 21 gross-up sets the allowance at exactly the tax, so salary plus allowance, less PPh 21, leaves the agreed net. Net and gross-up are worked out the same way and leave the employee the same take-home pay; they differ in how the tax is labelled, and so in what the annual slip shows.

Paying a consultant net of tax is a separate calculation; the withholding tax on services guide covers it.

How a PPh 21 gross up is worked out

Each month except the last tax period, a permanent employee’s PPh 21 is the monthly effective rate (TER, tarif efektif rata-rata) for the employee’s category, applied to gross pay for the month (PMK 168/2023, Article 15(1)(a); PP 58/2023, a government regulation, Peraturan Pemerintah, Article 2). The rate depends on gross pay, and gross pay includes the allowance, so the allowance cannot be read straight off the table. The working is: divide the net by one minus a candidate rate, then check that the result falls in that rate’s band.

The regulation’s own example is an employee in Category A (the TER category set by marital status and dependants) whose salary is paid on a net basis:

Description	IDR
Agreed net salary	51,827,997
Tax allowance gross less net	13,777,062
Gross for PPh 21 51,827,997 ÷ (1 − 21%), rounded down, inside the 21% band	65,605,059
PPh 21 21% × 65,605,059	(13,777,062)
Take-home	51,827,997

The same salary paid gross is taxed at 19%, because there is no allowance to lift it into a higher band. The PPh 21 effective rate tables list every band. Two things move the figure:

• Gross includes more than salary. Employer-paid BPJS work-accident, death and health contributions, and employer-paid health, accident, life, endowment and scholarship insurance premiums, are part of gross (Article 5(3)(d)–(f)), so they raise the gross the rate is applied to.
• The last tax period is recalculated. In the last tax period the year’s tax is worked out at the ordinary individual rates, and the month’s PPh 21 is the difference from what was already withheld (Article 15(1)(b) and (2)).

What the payslip and the BPA1 show

• Gross: PPh 21 is a deduction from salary.
• Gross-up: the tax allowance appears as income and PPh 21 as a deduction of the same amount, so the two cancel out.
• Net: salary and take-home are the same figure, before the employee’s own BPJS share.

Each year the employer issues the BPA1 (Bukti Pemotongan A1), the annual tax slip. The form has its own line for a tax allowance, line 2, Tunjangan PPh, and line 8 adds up gross income (PER-11/PJ/2025, a Director General of Taxes’ regulation, Annex A, as replaced by PER-12/PJ/2026). Under a gross-up the allowance sits on line 2. Under a net package the tax the company bore is a benefit, so it counts in gross income. Line 21 is the tax the employee credits in their own annual return.

What this means for you

Once PPh 21 is payable, a net or gross-up package costs the company more than paying the same salary gross, and the gap grows as pay moves into higher rate bands. Budget for the grossed-up figure, not the take-home. MAM’s payroll service runs net-pay packages, where the company bears the employee’s tax.

Settle which method applies, in the employment contract, before the first payday.