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How to get shadow payroll right 

The global mobility landscape has changed dramatically over the last four years. Following a period where technology-enabled remote working became the norm, everything looks very different for global mobility departments which now have a much wider remit. 

Businesses can now call on a universal market of assignees and contractors to meet their evolving needs.

Employees, meanwhile, can make a compelling case to work anywhere – and expect prospective employers to offer a much greater variety of remote working options. 

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In light of these shifts, some industry experts predict that global mobility will grow from affecting around 3% of the global workforce, to between 40% and 60% within the next five years. 

The speed and scale of this shift is causing HR and global mobility professionals sleepless nights. This rapid transformation of the way we work is greatly increasing their workload, and forcing them to deal with the complexities of international taxation and social security. 

This raises the question: how can HR and global mobility professionals keep globally mobile employees and their organisations tax compliant? 

In many cases, the answer may be to introduce or update a shadow payroll solution: a means of calculating tax and social security liabilities for an assignee or remote flexible worker and reporting them in the host and home countries.

This means that correct and compliant monthly payroll filing can be submitted in the host country, while the employee continues to be paid wholly or partly from the home country payroll.

The process sounds straightforward, but the number of different rules and approaches to calculating tax liabilities as well as collecting a wide variety of data, which may vary at an individual level and by country, can be overwhelming. 


How can businesses get their shadow payroll right?

After a career working in global mobility, I believe there are three key principles: 

Use the tools at your disposal 

Digitisation has swept through the HR and global mobility functions, and its finally reaching shadow payroll. While this has been and continues to be a very manual task for many, digital technologies can now take on the process and complete it at speed, to an unprecedented degree of accuracy.

By adopting such technologies, HR and global mobility teams can radically reduce their manual intensive workload, while enhancing their ability to keep their organisations tax and payroll compliant. The upshot for organisations is likely to be significant cost savings and talent development.

Call on external experts

Calculating shadow payroll correctly in-house used to depend on having in-depth knowledge of international tax and payroll laws; a very rare skillset in internal teams.

However, the introduction of technology into the equation offers businesses a significant advantage. Digitised, automated shadow payroll processes that are correctly set up and integrated into a business’s stack require internal teams to have no specialist tax knowledge to use.

Calling on trusted external experts whose technology solutions ensure internal teams are presented with the correct results is a great way to enable these teams to manage shadow payroll without needing specific expertise.

Decide ownership 

The responsibility for shadow payroll often falls between departments, especially when there’s no dedicated global mobility function.

If no one owns the shadow payroll process, no one is invested in getting it right.

Organisations will inevitably make over or underpayments and employees could feel the negative effects as a consequence. To avoid this scenario, it’s best practice to achieve consensus on exactly which team is responsible for shadow payroll, and equip them with the tools and knowledge, and assistance to manage it properly.

As new ways of working continue to present global mobility teams with new challenges – such as shadow payroll – they must aim to address them with specific solutions.

Doing this successfully presents businesses with a number of opportunities: access to a broader talent pool, the opportunity to keep their employees happy, and the ability to expand on a global scale. These are crucial parts of a modern business’s ability to grow to scale and succeed in a highly competitive landscape.

Richard McBride, is founder and CEO of payroll platform Certino