The first stage of sea-ice formation is often grease ice, a mixture of sea water and frazil ice crystals. Over time, grease ice typically congeals first to pancake ice floes and then to a solid sea-ice cover. Grease ice is commonly not explicitly simulated in basin-scale sea-ice ocean models, though it affects oceanic heat loss and ice growth and is expected to play a greater role in a more seasonally ice-covered Arctic Ocean. We present an approach to simulate the grease-ice layer with, as basic properties, the surface being at the freezing point, a frazil ice volume fraction of 25%, and a negligible change in the surface heat flux compared to open water. The latter governs grease-ice production, and a gradual transition to solid sea ice follows, with ∼50% of the grease ice solidifying within 24 hours. The new parameterization delays lead closing by solid ice formation, enhances oceanic heat loss in fall and winter, and produces a grease-ice layer that is variable in space and time. Results indicate a 10-30% increase in mean winter Arctic Ocean heat loss compared to a standard simulation, with instant lead closing leading to significantly enhanced ice growth.