Split Payments

A split payment is when an individual uses multiple payment sources to cover the cost of a transaction or when several individuals contribute their share of an order. An example of a split payment would be using two credit cards to pay for a software or service. In payroll, a split payment can involve an employer paying an employee from multiple sources during the same pay period.

Advanced financial technology has allowed consumers to split payments across multiple forms, making products and goods more affordable. By allowing split payments, businesses improve the user experience, increase conversion rates, and foster customer loyalty.

What are some split payment methods?

Businesses can choose from several split payment methods to offer at checkout or to pay employees including:

• Gift cards
• Vouchers
• Credit or debit cards
• Store reward cards
• Checks
• Cash

In addition, some peer-to-peer payment apps also allow for digital split payments, such as Uber and Lyft, where users can split the cost of rides with fellow passengers or use multiple payment methods.

How do split payments work?

During split payments, an employee could receive part of their salary in the business’s home-country currency and the remainder in the employee’s local currency.

Employees can use payments in local currency for expenses such as rent, food, and transportation, and the employer’s currency for savings or or purchases abroad.
Split payments can offset high living costs and shield employees from inflation and currency fluctuations.

Some companies allow employees to choose the ratio of host country to home-country payments to cover their expenses.

Splitting payments helps companies and their employees comply with the host country’s labor laws and regulations concerning money transfers. This payment method also allows employees to comply with the local and host country’s tax requirements, while contributing to retirement funds from abroad.

What does splitting payments look like?

Employers can use fixed-amount payments, percentage payments, and combination payments to compensate employees. Here’s what these look like:

Fixed amount payments

An employee wants $200 deposited in their savings account every payroll period and the remainder on a debit card.

The employee would then:

1. Choose a check payment method
2. Select an electronic funds transfer (EFT) payment method for their savings account and set the amount to $200.
3. Set the order so the EFT payment is processed first.

Percentage payments

An employee decides to contribute to their children’s college fund. Because the employee works on commission, their net payment varies. They use self-service to contribute 5% of their salary to the fund. The percentage allows the employee to contribute the same amount each pay period, despite their earning amount.

Payment combination

An employee based in New York has a partner and children living in New Jersey. They decide to allocate

• $900 to their checking account for their partner’s living expenses in New Jersey
• A percentage towards their children’s school fund
• The remainder is in check form for their living expenses in New York

The employee created three payment methods: an EFT payment with checking account bank details, an EFT payment for the college fund, and the rest as a check.

How to split payments during inflation

In countries with high inflation and/or weak currencies (ex. Eastern Europe, South America, or Africa), companies can pay employees in the home country currency.

Before setting payment policies, entities must consider country laws and currency transfer regulations. Though no solution fits all situations, a clearly defined policy can increase employee satisfaction and ease payroll duties