Shadow payroll is a system used by companies based outside of New Zealand but employing individuals who work in the country. It allows these businesses to comply with New Zealand’s tax regulations by ensuring that employees’ income is taxed correctly, even though the employer is not based locally.
In shadow payroll, the company calculates the employee’s tax obligations in New Zealand and withholds the appropriate income tax, as if the employee were paid directly through a local payroll. However, the actual payment is often made by the overseas employer, ensuring tax compliance without the need to set up a local payroll.