A split payroll is a method that companies often make use of any employees working to pay in a foreign country. The main feature of this type of pay structure is that the employee receives a portion of his or her salary in the currency of the country of origin. The rest of each salary is paid in the currency of the country where the worker currently lives and works.
There are several reasons for the use of a split payroll to pay employees. One of the main advantages of this type of system is that the employee is not completely at the mercy of the constant fluctuations in the exchange rate. Since the relative value of the currency usually changes regularly, every employee who is paid in full in only one currency find it impossible to predict what a salary is worth at the time it is received will be. Using a split payroll ensures that the person will always know exactly how much will be paid in the local currency and how much will be paid in the currency of the country of origin. The potential costs associated with currency exchange are also eliminated.
In addition, the employer also benefits from the use of a split payroll because it simplifies other payroll accounting functions, such as tax deductions. Once the initial determination is made on how much of the split is in the house countyâ € ™ s currency and how much of the host countryâ € ™ s currency, deductions are usually much easier. Appropriate home country taxes are levied on that part of the salary, and host country taxes are deducted from those funds. This system prevents the need for additional calculations related to the current exchange rate every time an employee is paid.
A third important feature of this system is that it makes it possible to have the goods in the country of origin in accordance with the transfer restrictions imposed by particular countries. There are rules in some countries, to be transferred with respect to the amount of money from the country. By providing employees with funds in their home country as local, both employers and employees usually be able to comply with those laws.
There are other systems also use, in addition to the split payroll. A company may decide to only offer home-based pay, all employees pay only the currency of the country of origin. They can also choose to only use the host-based compensation, which means that employees only receive the currency of the host country as wages. The final decision on which to use payment system depends on factors such as which countries are involved, how many employees are paid, and how long the employees will work in the host country.