Split payroll is a remuneration arrangement used in international assignments where an employee receives portions of their total compensation from payrolls in two or more countries. The split typically reflects the allocation of working days or economic activity between the home and host countries. For example, an employee on a 12-month assignment to the Netherlands from Germany might receive their base salary from the German payroll and a local cost-of-living supplement from the Dutch payroll.
The purpose of split payroll is to align payroll withholding with actual tax liability in each jurisdiction, particularly where income is taxable in both the home and host countries based on days worked or treaty allocation. Without a split, the home-country employer may withhold too much or too little tax, creating reconciliation issues at year end and potential cash-flow problems for the employee.
Correct implementation requires a formal allocation model agreed between home and host HR functions, accurate tracking of physical working days, and coordination between home and host payroll providers. Split payroll does not automatically resolve social-security liability: the A1 certificate or equivalent document determines under which single country's social-security regime the employee contributes, and that regime typically taxes the full salary regardless of where it is paid.