June 10, 2021
3 Benefits to Employing a Shadow Payroll Partner
Shadow payroll is implemented when an employee is sent out on assignment. Shadow payroll allows the employer to meet tax requirements when an employee works outside of their home location’s payroll. Essentially, shadow payroll acts like a “shadow copy” of the home location payroll. It then is reported to local tax authorities where the employee is actually working.
Along with income taxes due to foreign tax authorities, often there is a requirement to pay into the other country’s social tax system. In some cases, a valid Certificate of Coverage can help overcome this requirement. A valid Certificate of Coverage allows the employee to remain subject only to their home country’s social tax system.
What can global companies expect from using a shadow payroll partner?
- Global Reach. One benefit to utilizing a shadow payroll service partner is gaining the global reach of that service partner’s international network. When a team has global employees who don’t know how the tax laws vary internationally, it is best to partner with an expert. There might be different requirements for those on a shadow payroll versus those on actual payroll. Keeping track of the laws applicable to your own home country’s payroll is difficult enough!
- Cost Savings. A shadow payroll partner can alleviate the excess time and workload costs associated with managing international tax. Do you have a small payroll team? Trying to manage a global workforce can be stressful for teams. Just the administration can be time-consuming, especially if you have multiple international employees in different countries, alongside other payroll obligations. A shadow payroll partner wants your team to focus on what they do best.
- Enhanced Employee Experience. Another improvement a shadow payroll partner can help with is the employee experience. Does your company care about the employee experience? Sending an employee to a foreign country should be a seamless experience for individuals. Global employees should be able to focus on having a successful assignment before and after departure and not have to consider potential tax issues. A shadow payroll partner can handle administration behind the scenes and helps a company reach its employee experience goals.
If all of this sounds complicated, that’s because it is! To ensure your company is globally tax compliant, we recommend aligning with a shadow payroll partner like Glomotax. We are here to help!
Jordan Robinson, CPA
Jordan is a Tax Manager at Global Mobility and has been on the team since 2013. His favorite part about his role is developing relationships with clients and helping them understand the complex global tax implications. In his role, Jordan also advises clients on global equity award programs and enjoys solving cross-border equity transactions.
Jordan received a Bachelor of Science degree in Accounting from San Jose State University and is a Certified Public Accountant.
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For 15 years, Global Mobility Tax, has been assisting startups and early growth companies to navigate the tax implications of a global workforce. We provide strategy, consulting, and tax services to organizations and individuals that relocate internationally.
Contact us for any of your global mobility questions or concerns.