I once heard, in a group of Comp & Ben professionals, a participant mention the many expatriations handled by her company. The complexity did not lie in tax, nor in the permits to be obtained, but in the comparison with local employees and the new pay transparency framework. The reactions of the other participants showed that the situation was far from isolated, and far from clear to all.
In some organisations, a simple question no longer finds an answer: is this person still an expatriate?
This employee left years ago. They got married there, they settled down, their children go to school there. The extension amendments stopped and HR turnover did its work of amnesia. This employee's life is over there. But their contract has not moved. They still receive a salary built on their home country, topped up with a package designed for a temporary assignment that is no longer temporary.
Until now, this situation could remain buried in the pay structure. Pay transparency does not make individual pay public, but it broadens the reading of pay components and makes this situation more visible and harder to ignore.
What the local teams see
Local colleagues holding the same function see the gap and say so. And they are not wrong: going to work in a country where the cost of living is lower, with a salary built on the home country and an expatriation package, can create a considerable difference, at a comparable function.
This difference is not illegitimate in itself. An expatriation assignment responds to objective reasons, it carries real constraints, and the package that accompanies it compensates for them. The problem is not that it exists. The problem is that no one can say any more why it still exists.
The risk is particularly visible in home-based models, but it concerns more broadly any temporary arrangement whose review and exit rules have not been defined.
The mechanism that only works one way
There is a technical point that few organisations look at squarely. The cost-of-living adjustment is meant to neutralise a difference in context, not to raise pay durably. In the situations I have come across, it was applied upwards but rarely downwards. Some policies even explicitly provide for a floor at zero when the host country's cost of living is lower. In that case neutralisation no longer works symmetrically: the advantage granted can be sustained and settle in over the years.
What transparency brings to the surface
Then come the elements that can weigh heavily in the balance: housing, car, school fees and many others.
Yet the European pay transparency directive adopts a broad definition of pay. Its Article 3(1)(a) defines it as “the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which a worker receives directly or indirectly (complementary or variable components) in respect of his or her employment from his or her employer”.
As a reminder, Directive (EU) 2023/970 had to be transposed by the Member States by 7 June 2026 at the latest (Article 34(1)). The principles are laid down by the European text, but the concrete arrangements fall to the national transposition laws, whose state of progress varies from one Member State to another.
Its Recital 21 is more precise: complementary or variable components “may include, but are not limited to, bonuses, overtime compensation, travel facilities, housing and food allowances, compensation for attending training […]”. Housing and travel are therefore named. The expatriation package cannot be read separately.
Not all its elements will receive the same treatment, however. A flat-rate allowance, a benefit in kind, the reimbursement of a professional expense actually incurred and a tax neutralisation mechanism are not of the same nature. Their qualification is examined element by element.
Tax neutralisation is the best illustration. It is not a benefit paid to the employee but an equalisation mechanism, and its final result is often known only a year to eighteen months later, depending on the countries involved.
The connecting factor
Unlike Directive 96/71, amended by Directive 2018/957 on posting, which applies only where the assignment takes the form of a posting within the Union, the pay transparency directive provides no connecting rule specific to expatriation: its Article 2 states only that it applies to workers who have a contract of employment or employment relationship as defined by the law, collective agreements or practice in force in each Member State.
The connecting factor is therefore to be established from the legal structure and the actual employment relationship. Maintaining the home contract, posting, suspension with a local contract, dual contract or localisation do not produce the same effects.
Where the contract and the employment link remain with the home entity, pay is compared first within that employer's perimeter, with the peers who hold equivalent functions there.
Then, as a second step and depending on the situation, Article 19 of Directive (EU) 2023/970 and the concept of a single source come into play. The text provides that the assessment of whether workers are in a comparable situation “shall not be limited to situations in which female and male workers work for the same employer, but shall be extended to a single source establishing the pay conditions”, and adds that “a single source shall exist where it stipulates the elements of pay relevant for the comparison of workers”.
Recital 29 gives this its concrete scope: this may be the case “when such conditions are laid down centrally for more than one organisation or business within a holding company or conglomerate”.
This mechanism targets the comparison between female and male workers, not the comparison between expatriates and local employees. But it raises a central question for groups: how far are their pay conditions really set by a single source, and how far can the perimeter of equal pay comparisons then extend? I come back to this mechanism, and to the information and reporting obligations that feed it, in a later article in this series.
The absence of a framework has a cost. A status that no one can date, tie to a constraint or motivate no longer provides the same justification. In an earlier article in this series, “Comp & Ben, the silent cost of hasty decisions”, I described a cost that stays diffuse in the structure and only surfaces years later. Here the initial decision was not hasty, it simply was never reviewed, and the cost behaves in the same way.
A package is decided before departure
Normally, an expatriation package is fully defined before departure. It depends on the purpose and type of assignment, the host country, its duration, the function level and the family situation, and it breaks down into elements set against a scale: the volume and mode of relocation, entitlement to international schooling, spouse support to find a job or settle in, language training, medical cover, tax neutralisation or tax equalisation.
A short assignment does not require the same relocation volume as a three-year move. That is obvious on paper. It is no longer obvious at all when no scale exists, neither for the volume nor for the level of service.
Lacking a framework on this point, I have seen the discussion slide as far as an employee complaining about having had to iron their sixty shirts themselves after the relocation. The anecdote raises a smile, but it says something serious: when the level of detail is not set at departure, the discussion is no longer about the assignment, it is about what was not planned.
What governance settles
Three questions frame an expatriation policy. Why is it necessary to send this employee abroad? What purpose is pursued? For how long?
They are not enough, however. Governance then has to be thought through across every aspect of the expatriation, and the substance of each element defined: what level of service or assistance, which package elements and at what level, so that it can be explained, justified and traced.
And an expatriation policy must not only organise the departure. It must provide, from the outset, for the frequency of reviews, the conditions for extension, the person responsible for the decision and the exit arrangements: repatriation, localisation or phase-out of the allowances. Without an end clause or a clearly designated owner, the temporary becomes a situation acquired by inertia, and an allowance maintained for years may have become contractual or turned into an established practice.
Without this, the expatriation framework remains incomplete and the status sometimes never ends. The gap then becomes hard to explain in both directions: towards the local teams, who compare, and towards the expatriate, whose situation can no longer be justified and who is exposed on the day the package comes to an end.
The essentials
Beyond its business justification, expatriation is a matter of governance, law, tax, planning and budget.
In the context of pay transparency, being able to explain a difference is no longer only good practice. Article 18 of the directive provides that, where a worker establishes before a competent authority or national court facts from which it may be presumed that there has been discrimination, it is for the respondent to prove that there has been none. The same burden falls on the employer where it has not complied with its transparency obligations, unless the breach was manifestly unintentional and of a minor character.
A well-defined expatriation policy therefore protects the organisation, which keeps the elements needed to explain the differences linked to the assignment. It protects the local teams, who can understand why the difference exists. It equally protects the expatriate, whose situation remains documented and predictable, including when the assignment ends.
Pay transparency does not create this problem. It makes it visible.
Documenting the reasons, setting the package elements against a scale, tracking assignment endings and tracing decisions over time: this is precisely what the HDH (HR Decision Hub) platform makes it possible to put in place, against organisational amnesia.