Split Payroll: When to Apply It and How to Manage It Without Mistakes

When an employee works in more than one country, or when their salary is paid by different group entities, a split payroll model may be required. When well managed, it ensures compliance with tax and social security obligations in each jurisdiction. But without proper control, it can lead to costly mistakes, penalties, and employee disputes.

In this post, we explain what split payroll is, when to apply it, the risks it involves, and how we at Adlanter help companies like yours manage it securely, efficiently, and without friction.

What is split payroll?

Split payroll is a payroll model where an employee’s salary is divided and paid from two (or more) different countries. Each portion of the salary is subject to the tax and social security rules of the country from which it is paid.

This model is mainly used in global mobility scenarios, such as when:

• The employee works across multiple countries.
• The company has legal entities in different territories.
• There is a need to optimize the tax burden or comply with local regulations.
• The employee is a tax resident in one country but works in another.

Unlike shadow payroll, which involves no actual payment, split payroll involves real payments from more than one jurisdiction.

When should you apply a split payroll?

Not all assignments require it. But in some cases, it’s the only viable option to ensure compliance and protect both the company and the employee.

Typical cases:

• Employees with dual physical presence: those who work regularly across two countries.
• International contracts: when the contract is signed with one entity, but the work is carried out in another country.
• Tax residency in a different country from where payment is made: for example, an employee living in France but receiving part of their salary from Spain.
• Tax and social security optimization: in some cases, splitting payments allows the application of double taxation treaties or the preservation of social benefits.

What does it mean for HR and Finance?

Applying a split payroll isn’t just about dividing a salary. It requires precise coordination between countries, departments, and systems. Key areas to manage include:

1. Tax withholding in each country

Each salary portion must be taxed according to the laws of the country from which it’s paid. This means understanding local rules, double tax treaties, and reporting obligations.

2. Social security contributions

Depending on bilateral agreements, contributions may be required in one or both countries. This directly impacts the employee’s rights (pension, healthcare, unemployment).

3. Employee tax filings

The employee will need to report income in their tax residence country, and possibly in the work country as well. Poor management may lead to double taxation or penalties.

4. Reporting and documentation

Proper documentation of payments, withholdings, and contributions is essential. This includes payslips, tax certificates, proof of payment, and any documents required by authorities.

Risks of poor management

Improperly managed split payrolls can lead to serious consequences:

• Tax penalties due to incorrect withholding or lack of reporting.
• Loss of social benefits if contributions are mishandled.
• Disputes with employees over discrepancies in net pay.
• Reputational damage during audits or inspections.
• Hidden costs from errors, recalculations, or adjustments.

In international mobility, mistakes are not an option. That’s why more and more companies turn to experts for this kind of management.

How we manage it at Adlanter

At Adlanter, we help companies implement and manage split payroll models with full security, efficiency, and compliance. Our approach combines expert advisory, technology, and international coordination—so HR can focus on strategic matters without worrying about tax or operational risks.

• Initial analysis: Every case is unique. That’s why we start with a thorough diagnosis: home and host countries, tax residency, contract type, assignment duration, and applicable treaties. Based on that, we design the split payroll model that best fits your organisation and employees.
• Cross-border coordination: We handle the coordination between group entities, ensuring each portion of the salary is paid, taxed, and reported correctly. This includes communication across local teams, aligning tax calendars, and integrating with internal systems.
• Tax and social security management: We apply withholdings and contributions according to each country’s laws. We ensure the employee retains their rights (like pension or healthcare) and that the company meets all obligations—avoiding duplications or penalties.
• Technology and traceability: We use tools that automate processes, generate reports, and ensure full traceability at every step. This streamlines audits, inspections, and decision-making. Everything is documented and accessible.
• Ongoing support: We don’t just implement the model—we maintain it, adapt it to legal changes, and optimise it over time. We support you through the entire lifecycle of the international assignment, from planning to offboarding. And if your structure or the law changes, we anticipate and adapt—so you don’t have to worry.

Do you have employees on split payroll?

At Adlanter, we help you design, implement, and manage split payroll models that comply with local regulations, protect your company, and enhance the employee experience.

Contact us to review your international payroll model.