Success Story: Implementing Split Payroll Between the Netherlands and Belgium

Managing cross-border employment can be a difficult task, especially when it involves complex tax laws, social security regulations, and payroll compliance across two countries. This was the case for Joris, our Parakar employee living in Belgium but working for a company based in the Netherlands. Recognizing the potential challenges and risks, both Joris and Kim, an HR professional at Parakar, collaborated to implement a split payroll solution that ensured compliance, minimized risks, and simplified processes.

This success case highlights how careful planning, collaboration, and expert guidance can transform a complex situation into a seamless and efficient solution. By sharing the experiences and insights of both Joris and Kim, we aim to showcase the value of tailored solutions in cross-border employment.

The need for a split payroll solution

Joris’s perspective

Joris had been employed entirely under the Dutch payroll system, even though he lived in Belgium and worked from home for part of the week. While this setup initially seemed straightforward, it presented significant compliance risks. In Belgium, working from home is considered working in the country for tax purposes, which meant that Joris was subject to Belgian tax laws. This discrepancy created a potential risk of penalties for both Joris and Parakar.

Joris’s primary motivation for transitioning to a split payroll arrangement was to ensure that his tax obligations in both countries were accurately managed. Additionally, he wanted to safeguard his social security coverage in the Netherlands, as he valued the stability and benefits it provided.

Kim’s perspective

From the HR side, Kim recognized the need for an arrangement that reflected Joris’s actual working situation. Parakar sought to comply fully with tax and legal regulations in both the Netherlands and Belgium while avoiding unnecessary administrative complexities or costs.

The process began with a thorough review of Joris’s work distribution across both countries and the available options for implementing a split payroll. The goal was to align with the legal framework while ensuring that Joris’s needs were met. This included addressing critical considerations such as social security arrangements, tax filings, and payroll distribution between the two jurisdictions.

The challenges of split payroll implementations

Joris’s perspective

For Joris, transitioning to a split payroll presented a range of challenges. The foremost concern was navigating the tax regulations of both the Netherlands and Belgium. With Belgian tax laws treating work-from-home arrangements as local employment, Joris needed a solution that ensured compliance while safeguarding his social security coverage in the Netherlands.

Choosing the right split ratio added another layer of complexity. Two options were considered: a 40-60 split and an 80-20 split. Each had distinct implications for tax obligations, social security, and administrative requirements. Joris had to weigh these carefully to find the best fit for his situation.

Kim’s perspective

On the HR side, Kim faced the challenge of implementing a compliant and efficient payroll system across two countries. The process involved:

• Securing an A1 certificate to confirm Joris’s social security arrangements.
• Drafting a global employment agreement that met the legal requirements of both jurisdictions.
• Coordinating with external advisors and accountants to ensure accurate payroll calculations and tax filings.

Unexpected obstacles arose, such as the lengthy process of obtaining the A1 certificate and the need to address retroactive compliance for prior working arrangements. Additionally, aligning payment systems and ensuring consistent documentation added to the complexity.

The results of a tailored split payroll solutions

Joris’s perspective

The implementation of the split payroll has brought Joris significant relief and clarity. With the 80-20 split in place, his tax obligations in both Belgium and the Netherlands are now fully compliant, eliminating the risk of penalties or unexpected tax issues. Furthermore, his social security coverage remains intact in the Netherlands, providing him with the stability and benefits he values.

The transition has allowed Joris to focus entirely on his work, knowing that his payroll and tax matters are handled seamlessly. The simplicity of the solution and the proactive support he received throughout the process exceeded his expectations.

Kim’s perspective

From Kim’s standpoint, the split payroll implementation has been a notable success. The once-complex situation was resolved through careful collaboration with external advisors and meticulous planning. Joris’s positive feedback and satisfaction confirm the effectiveness of the solution.

The process also offered valuable learning opportunities for the HR team. By navigating the intricacies of cross-border employment, Kim and her colleagues have developed a deeper understanding of the requirements and potential obstacles. This knowledge has positioned the company to handle similar cases more efficiently in the future.

Ultimately, the solution achieved its primary goal: providing Joris with a compliant, efficient, and stress-free payroll arrangement while ensuring the company met all legal and regulatory obligations. Both Joris and Kim are confident in the outcome, and the experience has set a strong foundation for future cross-border employment scenarios.

Cross-border employment with confidence

This case highlights the importance of tailored solutions in cross-border employment. By focusing on the unique needs of both the employee and the employer, Joris now enjoys peace of mind, and Parakar has a solid framework for managing similar situations in the future.

If you or your company are facing the complexities of cross-border employment or considering split payroll, Parakar is here to help. With extensive expertise in payroll management, HR services, and international compliance, we can guide you every step of the way to find the solution that works best for you.