Shadow Payroll: How to Stay Compliant Without Mistakes in Global Mobility

More and more companies are moving talent across borders to accelerate their global growth. But with this opportunity comes a critical responsibility for HR: ensuring tax and labour compliance in each jurisdiction.

One of the biggest challenges is the proper management of international payroll. That’s where shadow payroll comes into play—a key tool to avoid penalties, ensure social security contributions in the home country, and protect both the company and the posted employee.

In this article, we explain what it is, when it applies, the risks of poor management, and how we at Adlanter help companies like yours handle it safely and efficiently.

What is shadow payroll?

Shadow payroll is a parallel payroll run in the home or host country of a posted employee, with the sole purpose of meeting tax and social security obligations—without necessarily involving a real payment.

For example, if a Spanish employee is transferred to Germany but remains subject to Spanish social security, a shadow payroll is created in Spain to reflect those contributions, even if the salary is paid from Germany.

This mechanism allows you to:

• Comply with tax and labour laws in both countries.
• Preserve the employee’s rights (pension, unemployment, etc.).
• Avoid penalties due to non-compliance.
• Simplify the employee’s income tax filing process.

In an environment where tax mistakes can be costly, shadow payroll is a protective layer for both the business and its international talent.

How is it different from split payroll?

• Shadow payroll: used solely for tax or social security compliance. No actual payment is made.
• Split payroll: the salary is divided and paid from two different countries, which involves more complex tax and management implications.

When do you need to implement a shadow payroll?

Not every international assignment requires one, but there are key situations where it becomes essential:

• The employee continues contributing to social security in their home country.
• The host country requires tax withholding even if no local payment is made.
• Home country social benefits are maintained (e.g. pension, healthcare).
• Salary is paid from a country different from the employee’s tax residence.
• There is no legal entity in the host country.

In these cases, shadow payroll ensures compliance without duplicating structures or taking unnecessary risks.

Common shadow payroll mistakes

Not coordinating home and host countries

One of the most common mistakes is treating international payroll as if it were local. But in global mobility, everything is connected: taxes, social security, exchange rates, benefits in kind… Without coordination, mistakes are bound to happen.

At Adlanter, we take a global approach. We coordinate home and host countries, analyse bilateral agreements, and ensure that each payroll complies with applicable regulations.

Not properly reflecting contributions

In many cases, the employee keeps contributing in their home country. But if those contributions aren’t reflected in the host payroll, issues may arise with banks, tax authorities or even the employee’s tax return.

Our approach includes integrating contributions across both payrolls to ensure the net pay reflects reality and the employee isn’t negatively affected.

Not including benefits in kind

Does the employee have a company car? Housing? Private health insurance? These benefits must be recorded in the shadow payroll, as their tax treatment can vary by country.

At Adlanter, we help you identify and properly assess these benefits to avoid surprises during audits or tax filings.

Not anticipating regulatory changes

From 2025, for example, Spain applies the Solidarity Contribution, which removes the cap on social security contributions. This directly affects shadow payrolls for posted employees.

Our tax team monitors regulatory changes in real time and adapts payroll models to ensure full compliance.

What happens if it’s not managed properly?

Poorly managed shadow payroll can have serious consequences:

• Tax penalties for incorrect withholding or reporting.
• Loss of employee entitlements (pension, unemployment, etc.).
• Reputational damage and loss of internal trust.
• Legal risks from labour law breaches.
• Operational issues—such as when the employee applies for a mortgage and their payslip doesn’t show real income.

In international mobility, mistakes are not an option. That’s why more and more companies are outsourcing this process to experts.

How we solve it at Adlanter

At Adlanter, we help companies manage shadow payroll end-to-end, securely and seamlessly. Our approach combines:

• Expert advice: We assess each case based on the home and host country, assignment duration, and contract type. We apply double tax treaties and local regulations.
• Global coordination: We manage communication between entities, generate shadow payrolls, and ensure compliance in both jurisdictions.
• Technology and control: We use tools that automate processes, generate reports, and ensure traceability at every step.
• Multisector experience: We’ve supported companies of all sizes and industries—from startups to multinationals—in over 30 countries.

Do you have internationally assigned employees?

At Adlanter, we help you review your international payroll model and implement a shadow payroll that ensures compliance—without the hassle.