Glossary
Secondment
Temporary assignment of an employee from one entity (home) to another (host), retaining the original employment relationship while the employee performs work in a different country or business unit.
A secondment is a temporary cross-border or intra-group assignment where the home employer keeps the contract and the host gets the work.
For global payroll and mobility teams, secondment is the mechanism that holds the moving parts together when an employee needs to work in a different country without leaving the home employer's books. The home contract continues; the home payslip continues; the home pension and social security continue.
The host gets the day-to-day work, books the cost via an intercompany recharge, and assumes the operational supervision risk. The 183-day OECD income-tax clock and the social-security A1 certificate (or bilateral equivalent) decide when the host country's withholding obligation activates.
Two questions decide the operational complexity. Does the secondment cross the 183-day income-tax threshold in the host? Does it cross the 24-month social-security threshold under EU Regulation 883/2004 or the equivalent bilateral agreement? If either is yes, shadow payroll, recharge accounting, and tax-equalisation policy all get activated.
What does a secondment mean in payroll and mobility?
A secondment is a temporary assignment under which an employee continues to be employed by their original (home) employer while performing work for a different entity (the host) for a defined period.
The employment contract is not terminated. The employee retains the home contract, the home benefits, the home pension, the home payslip, and the home social-security system. The host pays for the work via an intercompany recharge to the home entity rather than employing the worker directly.
Three configurations dominate. Intra-group cross-border secondment moves the worker between entities of the same multinational group. Third-party secondment lends the worker to an unrelated host entity (used in some professional-services and construction structures). Domestic secondment moves the worker between business units within the same legal entity.
Secondment duration typically runs 6 to 36 months. Duration matters because tax and social-security treaties treat short, medium, and long secondments differently, and the operational complexity grows sharply past the 12-month mark.
Treat secondment as a temporary structural arrangement, not a transfer. The home employer carries the contractual obligations; the host gets the work; the recharge agreement carries the cost. The global mobility entry covers the broader mobility taxonomy.
How does a secondment differ from a transfer, posting, or local hire?
Four mobility patterns can look similar on the surface and produce sharply different tax, social-security, and contractual outcomes. The choice between them drives the total cost.
| Pattern | Contract status | Payroll location | Typical use case |
|---|---|---|---|
| Secondment | Home retained, host on intercompany recharge | Home payroll continues, shadow on host if needed | 6-36 month project work; retain home benefits |
| Transfer | Home terminated, new host contract | Host payroll only | Permanent move; severance triggers in home country |
| Posting (EU Posted Workers Directive) | Home retained, EU service-provision sub-category | Home payroll with host labour-standards floor | Cross-border service provision inside EU/EEA |
| Local hire (subsidiary or EOR) | Host contract from day one | Host payroll only | Skip secondment; hire in market |
Secondment retains the home employment relationship. The contract, payroll, and social security stay home; the work moves. The home entity bills the host via intercompany recharge, and the worker keeps the home benefits stack.
Transfer ends the home employment and opens a new one with the host. Severance, leave payouts, and pension-transfer rules apply per the home country. The worker leaves the home payroll and the home social security entirely.
Posting is a sub-category of secondment for service provision inside the EU and EEA. The Posted Workers Directive sets host-country labour-standards floors (minimum wage, working hours, paid leave) that apply during the posting; see the posted worker directive entry.
Local hire engages the worker directly through a host-country subsidiary or an EOR. The worker is employed under host-country contract terms from day one, with no recharge accounting and no home-payroll continuation.
What does cross-border secondment do to tax residency and social security?
The two sets of rules run in parallel and produce independent outcomes. A secondment can clear the income-tax threshold without crossing the social-security one, or the reverse.
| Track | Anchor | Threshold | What kicks in if breached |
|---|---|---|---|
| Income tax | OECD Model Article 15 (Art. 14 in US treaties) | 183 days in host country in relevant tax year | Host-country tax withholding on employment income |
| EU/EEA social security | Regulation 883/2004 (A1 certificate) | 24 months (extendable to 60 by exception) | Host social contributions; worker leaves home system |
| Bilateral social security | Totalisation agreement (US-UK, US-DE, others) | 5 years typically (US treaties) | Host social contributions; certificate of coverage expires |
| Permanent establishment | OECD Article 5 | Senior secondee with decision-making authority | Corporate-tax exposure for home employer in host |
| Sub-national tax | US state, Canadian provincial, Swiss cantonal | Independent of federal day-count | State/provincial withholding from day one |
The 183-day exception fails frequently in practice. A recharge agreement that books the secondment cost to the host entity can be treated as "remuneration borne by" the host, defeating the exception even if the worker stays under 183 days. UK HMRC EIM77000 walks through the detached-duty test that determines this for UK outbound secondments.
Within the EU and EEA, Regulation 883/2004 keeps the seconded worker in the home social-security system for up to 24 months via the A1 certificate. The host pays no social charges; the home country keeps collecting them. See the A1 certificate entry for the application mechanics.
Senior secondees with decision-making authority can trigger OECD Article 5 permanent establishment for the home employer in the host country. The PE creates corporate-tax exposure independent of the worker's individual tax residency; see the permanent establishment entry.
Run the 183-day count from day one. Many secondments fail the short-stay test in month seven or eight when the worker exceeds the count or the recharge agreement crosses the borne-by-host test.
Who runs the payroll on a secondment, and where does shadow payroll fit?
Payroll architecture during a secondment depends on whether the worker remains tax-resident in the home country, becomes tax-resident in the host, or splits residency over the year.
Home-stay payroll runs when the worker stays home-tax-resident and the secondment qualifies for short-stay treaty relief. The worker stays on the home payroll, the host books the cost via recharge, and no host-country payroll is needed.
Shadow payroll runs when the worker has host-country tax-reporting obligations but the home payroll continues. The host shadow file replicates the home payroll for host-country withholding and reporting; net pay flows through the home payroll to the worker. The shadow payroll entry covers the operational mechanics.
Host-pay structure runs when the worker becomes substantively host-resident, the home payroll closes for tax purposes, and the host payroll takes over. The home employment contract continues but the payroll administration shifts. This pattern is more common for medium-to-long secondments (18+ months).
Tax-equalisation is the conventional employer policy. The worker pays a hypothetical home tax; the employer covers the actual host-country tax exposure above the hypothetical. The policy keeps the worker net-neutral across the secondment and removes individual incentive to game the tax position.
What does a secondment cost the home company beyond gross salary?
Secondment cost runs across six distinct lines. The gross salary is one of them.
| Cost line | When it applies | Typical scale | Who carries it |
|---|---|---|---|
| Gross salary + home benefits | Throughout secondment | Unchanged from home | Home, recharged to host |
| Tax equalisation | Host tax exceeds home hypothetical | 20-35% of base for UK-to-US senior | Home employer |
| Mobility services | Tax filing, immigration, relocation | $8K-$20K per secondee per year | Home employer (Big Four or specialist) |
| Shadow payroll admin | When host reporting threshold crossed | $3K-$6K setup, $200-$500/month | Home employer |
| Cost-of-living adjustment or mobility premium | Higher-cost host location | 10-25% on base salary | Home employer |
| Repatriation | End of secondment | Often forgotten at modelling time | Home employer |
The recharge accounting needs to clear OECD Article 5 PE risk and host-country transfer-pricing scrutiny. A flat per-month recharge is the standard approach; a markup over cost can be required in some host jurisdictions for transfer-pricing compliance.
For Germany-specific operational detail on inbound secondments, see the Germany country guide.
Whichapp view
Secondments cost roughly 1.5x to 2x a local hire all-in. The reason to use secondment over local hire is rarely cost; it is continuity (the worker keeps the home contract, the home pension, the home benefits, and the home network) and group control (the home entity retains the relationship).
For teams choosing between cross-border secondment and a host-country hire, see the best global payroll providers shortlist for the providers that run shadow payroll and tax-equalisation administration, and the best international PEO providers shortlist for the providers that bundle the home-and-host coordination. The EOR compliance entry covers the alternative path: skip secondment, hire locally through an EOR, and let the EOR handle the host-country employment relationship.
Treat secondment as a structured cross-country employment instrument, not a relocation event. The day-count clock, the social-security certificate, and the recharge agreement all need to be set up before the worker books the flight.
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View the shortlist →Secondment FAQs
How long can a secondment last?
Typically 6 to 36 months. The income-tax 183-day rule activates host-country withholding above that day-count in the relevant tax year. The EU social-security A1 certificate covers up to 24 months by default (extendable to 60 by exception). US bilateral totalisation agreements typically cover up to 5 years. Past these thresholds, the worker shifts into the host system.
Who pays the secondee?
The home employer pays the salary, runs the home payroll, and bills the host entity via an intercompany recharge agreement. The host books the cost without employing the worker directly. If host-country tax-reporting obligations open up, a shadow payroll runs alongside the home payroll for withholding and reporting only.
What is the difference between a secondment and a transfer?
A secondment retains the home employment relationship and the home payroll; the host gets the work via intercompany recharge. A transfer ends the home employment relationship and starts a new one with the host. Secondment keeps the worker on home pension, home benefits, and home social security; transfer moves them onto host-country versions of each.
Does an A1 certificate cover secondments outside the EU?
No. The A1 certificate covers EU/EEA and Switzerland under Regulation 883/2004. Outside that bloc, bilateral totalisation agreements provide equivalent coverage via certificates of coverage (US-UK, US-Germany, UK-Japan, and others). Without an agreement, the worker can end up paying social-security contributions in both home and host countries simultaneously.
Can an Employer of Record replace a secondment?
For most workers, yes. An EOR hires the worker locally in the host country and runs the host-country employment relationship directly. This is simpler than secondment for short-to-medium engagements where the home contract continuation is not commercially important. For senior secondees retaining home pension, benefits, and group network access, full secondment usually remains the right pattern.