The EU Pay Transparency Directive: What does this mean for Global Mobility?

The EU Pay Transparency Directive (EUPTD) became official EU legislation in June 2023 and time is now ticking for Member States to transpose the Directive into their national laws by the June 2026 deadline. While formal reporting does not begin until 2027 for larger employers (and later for mid-sized entities), first year-reporting will be based on 2026 data, so organisations must start preparing well in advance.

There has of course been much attention on the Directive in the worlds of legal and reward, with primary focus on positively reinforcing company DEI responsibilities. However, so far, there have been fewer discussions of the implications this could have on the world of Global Mobility (GM).

What we know is that the EU Pay Transparency Directive aims to reduce the gender pay gap through increased pay transparency and a commitment to enforcing equal pay for equal work. For this to happen, employers will need to be able to justify compensation levels and be prepared for more visibility of this than in the past.

Due to the unique nature of our industry and its reward structure, internationally mobile employees could be at risk of increased scrutiny. So now is the time for companies to prepare and ensure policy is aligned with process realities.

What is the EU Pay Transparency Directive?

At its heart, the EU Pay Transparency Directive is about fairness. It will require employers to provide salary ranges in job postings, prohibits asking about a candidate’s current or past salary, and gives employees the right to request average pay levels for people doing similar work.

Larger employers (250+ employees) will also be required to report on gender pay gaps within job categories, and act if gaps over 5% can’t be objectively explained.

These measures apply to all "workers" in the EU, regardless of where they’re from, how they were hired, or what kind of contract they are on. Member States must ensure penalties are “effective, proportionate and dissuasive” (Article 23).

Does this really apply to expatriates?

While many country-specific publications are still in the early stages of consultation, it is worth noting that there is still limited direct wording on the impact to expatriate employees. That said, the Directive (Article 2 (2)) applies to “all workers who have an employment contract or employment relationship” within the EU. That includes expatriates working in EU countries, whether they’re hired locally, seconded internally, or posted under assignment structures.

Crucially, once in scope, it’s not only who is covered that matters but also what counts as pay. Article 3 (1)(a) defines “pay” broadly as “‘the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind”. That means not just base salary, but housing allowances, COLA, tax equalisation, relocation benefits and more.

Even if payroll is retained in the home country, expats may still fall under host-country reporting obligations, depending on contract structure and work location.

If it affects an employee’s total reward, it falls within the Directive’s scope.

Mobility under the magnifying glass

This Directive could highlight mobility as an outlier when it comes to compensation. Based on what we know so far, the possibility of writing-off expatriates as a unique population who need unique treatment, might not be sufficient.

As we know, expat packages can sometimes be handled in a bespoke way, justified case by case, and not often compared side by side with local peers. But now:

• Salary ranges must be published in advance for EU-based roles, which includes roles offered to expatriates
• All pay components must be reportable, and visible in internal pay gap reviews
• Justifications for pay differences need to be objective
• Joint pay assessments may be triggered if disparities exceed a 5% threshold and cannot be explained with objective, gender-neutral criteria

This means that the days of ad hoc deals, exceptions, or informal perks could become a problem if not carefully considered. For example:

• An expatriate who is localising in the host location but has negotiated ongoing housing support. Even if this is being phased out, this kind of exception would inflate the total compensation level.
• Executive moves could also distort reporting, especially where assignment packages are negotiated individually and fall outside standard frameworks.

Companies will also need to determine how different move types, such as long-term assignments, localisations, or cross-border commuters, fit into local entity reporting. Depending on contractual arrangements and host-country regulation, even non-payrolled expats may need to be included in local analysis.

What GM teams should reflect on

With legislation progressing across Member States and 2026 fast approaching, it is worth pausing to ask:

1. Visibility of expatriate compensation: How much do you know about your pay structures for expatriates - especially those on local or local-plus packages? Can you track and report their full package value? Are housing allowances or education support included in HR systems and payroll reports?

2. Policy documentation & fairness: How would your GM policy hold up under scrutiny? Is it documented? Does it define when and how allowances apply? Would it pass a fairness test - particularly between genders?

3. Exception management & tracking: Do you apply your policy consistently? Or do exceptions frequently happen? One-off uplifts or last-minute adjustments to secure a move may be well-intentioned but could become problematic.

4. Country specific nuances: Are you tracking country-level variations in how benefits are treated? Consistency will be key, but implementation may differ across countries - GM teams need to stay in sync with local HR and reward leads.

Potential impacts of inaction

While we are yet to see the direct consequences, with many implementations of the Directive in early stages, the following areas could present issues for employers:

• Increased pay transparency puts pressure on employers - Employees can request peer pay data, including average pay levels for individuals performing the same role.
• The burden of proof shifts to employers - If challenged, employers must demonstrate that they have not breached equal pay rules.
• Public exposure of pay gaps can damage reputation - National enforcement bodies can impose fines and publish breaches. Employees, investors, and the media will have access to published pay gap data. Pay anomalies involving expatriates could attract unwanted scrutiny.
• Persistent unexplained pay gaps trigger mandatory joint pay assessments - Under Article 10, if a pay gap of 5% or more cannot be explained and persists for six months, employers must conduct a joint pay assessment with employee representatives.

Even before legal consequences come into play, there’s a significant risk of internal reputational damage. If colleagues see that one group (i.e expatriates) are consistently paid more without transparent reasoning, it can undermine morale and trust.

So what should GM teams do to best prepare for the EU Pay Transparency Directive?

Juggling fairness and flexibility is a skill that GM professionals already have to master in their day-to-day roles, which put them at an advantage, as this will be required in preparation for the adoption of the Directive.

GM teams are well aware of the risks that come with inconsistency. This is an opportunity to test how well your current processes and policies stand up to the scrutiny that transparency will bring. Here is what we recommend GM teams prioritise ahead of wider implementation:

• Audit your population: Ensure you know what you are paying, and why
• Standardise what you can: Especially around local-plus and host-based packages
• Define objective criteria: So that allowances can be explained under scrutiny
• Get involved in your company’s wider pay transparency work: GM should not be an afterthought!
• Technology also plays a role: Ensure your systems can identify who has moved, where they’re reported, and how their full reward package is broken down
• Educate internal stakeholders: Ensure those who negotiate, approve, or report on expat packages understand what must be disclosed, justified, and tracked

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