Record & Payroll
COVID-19 status update
As the situation in Italy continues to develop, Safeguard Global will be providing in-country intellect to our clients regarding legislative changes affecting employees and impacting businesses, as well as government recommendations on how to keep employees safe and healthy. You can access that information in our COVID-19 Resource Center.
As of today, we have not identified any disruption that will impact our ability to provide the service our clients expect.
Italy employer of record and payroll
If expanding to and employing workers in Italy is on your radar, it’s important to consider how labor laws and cultural norms affect your growth and workforce strategy.
Here you can learn about the payroll, benefits, tax and compliance requirements for your workers in Italy. Safeguard Global provides employer of record, sometimes known as a global PEO, and payroll services to emerging and established multinationals in Italy. If you have additional questions, please reach out―our team is here to assist you.
Hiring in Italy
Italian work visa
In Italy, every citizen of the European Union has the right to work, but non-EU nationals are required to apply for a work permit. Italy admits non-EU workers on an annually adjusted quota system, but some professional profiles are exempt from the quota.
In order to hire a foreign worker from the Immigration Single Desk (ISD), employers must submit an application, provide details about the work contract and comply with existing collective contracts that apply to the worker’s specific sector and occupation.
Within eight days of arrival, a foreign national must appear at the ISD to sign a contract with the employer and receive a permit that will allow the employee to work in Italy. This permit has the same duration as the work contract—a maximum of two years—and is renewable.
An employer that hires illegal workers may be incarcerated for a period of six months to three years, face fines of 5,000 euros per worker, and be liable for an accessory administrative fine equal to the cost of repatriating the illegally employed worker. Additional charges can be incurred if the employer has hired more than three illegal workers, if workers are minors or are subject to exploitation.
Finally, employers that hire illegal workers will not be given permission to hire foreign nationals for five years.
Labor and employment laws in Italy
The basic rights of employees are listed in the Italian Constitution and the Civil Code. There is no central employment law, but there are a variety of laws addressing the employment relationship. As a member of the European Union, Italy has agreed to comply with various labor standards shared by all EU countries.
Hiring restrictions in Italy
Businesses with 15 or more employees are required to recruit personnel from protected categories, including widows, orphans, refugees and disabled persons.
The minimum working age is 15 years old or the age a person concludes formal schooling, with the exception of employment in a family business. Minors under the age of 18 years old cannot be assigned to hazardous work or night work. And the Italian Constitution requires that all minors are paid the same amount as adults for comparable work.
Employers may not discriminate against employees or prospective employees on the basis of:
- Ethnic origin (language, culture, tradition, customs, etc.)
- Marital status
- Religion or ideology (including political or other beliefs)
- Sexual orientation/identity
- Union involvement
When companies reach a certain number of employees, they are required to hire people with a disability in at least 7% of the jobs. However, these requirements may be suspended in cases where there are financial difficulties or dangerous and strenuous work.
Additionally, the Italian constitution and employment laws explicitly give women the right to equal pay for comparable work.
Unions and collective bargaining in Italy
The Italian constitution gives employees and employers the right to join unions or associations. There is no specific process in Italy to recognize or certify a union as the bargaining agent for a group of employees. By joining a union and paying dues, workers effectively give that union the authority to negotiate on their behalf.
The constitution recognizes the right to strike, although the parties of a labor dispute are required to submit their disagreement to a provincial labor office for conciliation, and if conciliation fails, to arbitration or the labor courts. Italian law also limits conciliation attempts and has requirements for how quickly labor proceedings must conclude.
Labor actions can take many forms, such as slowdowns, brief work stoppages, or strikes. They are all lawful as long as they do not infringe on other constitutional rights. And there are statutes limiting the right to strike for workers involved in essential public services such as, health care, transportation, communications, utilities, law enforcement and education.
Works council: European Works Councils were established in EU countries in 1994 to allow the management of a company to inform and consult with its European employees on significant decisions and on the company’s progress. Works councils may be formed through the initiative of employees in every organization with more than 15 employees.
Collective bargaining: In Italy, collective bargaining primarily takes place at the industry or company level, but sometimes it takes place at the district level.
In addition, national level agreements between employers and unions have been used to implement EU initiatives, such as the agreement on teleworking. There are also national discussions between unions, employers and the government, which sometimes lead to agreements.
Privacy in Italy
In 2018, the General Data Protection Regulation (GDPR) superseded the Data Protection Directive as the primary law governing data privacy in the EU. The GDPR establishes minimum requirements for the processing and retaining of employee data and allows EU member nations to introduce more restrictive local legislation. Stricter requirements can also be established in collective bargaining agreements or work contracts.
There are additional laws regulating employee monitoring, surveillance and background check protections for employees, as well as their rights to know about the data that is being collected about them.
Italian employment contracts
Both verbal and written employment contracts are valid and binding for both employees and employers in Italy. Although, a contract must be given to the employee within 30 days of hiring. At a minimum, Italian employment contracts should include:
- Employer and employee names
- Start date
- Job description
- Probationary period
- Work hours
- Leave entitlement
- Expiration date, if the employment is for a fixed-term
Contracts may refer to a collective labor agreement for further terms and can be executed for a fixed term or for an indefinite period. The maximum duration of fixed-term contracts is 24 months.
Within the 24-month period, the contract can be extended up to four times as long as the worker consents and the extension relates to the same job. If the contract is extended a fifth time it becomes a permanent contract. The number of employees on a fixed-term contract cannot exceed 20% of an employer’s overall workforce.
There is an Italian law that provides a “SMART working” agreement between an employer and employee which allows the employee to complete the work he or she is contracted to perform without the constraints of a fixed location or fixed working hours. Employers entering into SMART agreements with employees must give priority to parents of disabled children and mothers within three years of maternity leave.
Probation periods: In Italy, probationary periods are allowed but limited to a maximum of six months for executives or high-level employees and three months for all other employees.
Compensation in Italy
Italian law does not specify a minimum wage, as they are usually set by a collective labor agreement.
Italian payroll must be accompanied by a payslip that itemizes deductions and the period covered by the wages. The employer may pay by check or by direct deposit into a bank account. There is no required frequency, so wages may be paid monthly or any other regular interval.
When authorized by the employee, an employer can make deductions from an employee’s wages, including union dues and contributions to social insurance programs, such as the old-age pension and the pension for seniority.
Bonuses: At Christmas and during the summer, it is customary for employees to receive one or more bonus payments, called a 13th and a 14th month salary. However, there is no statutory entitlement to bonuses.
Termination and severance in Italy
Italian law does not require a specific period of notice of termination or resignation. Typically, a collective labor agreement or an individual employment contract specifies any required notice period.
Termination by employer: Generally, there is no at-will employment doctrine in Italy. Only executives, domestic workers and employees over 60 years of age who are eligible for a pension may be terminated at-will.
Employers may terminate employees for “just cause” or on “justified grounds” only. Within 15 days of termination, employees have the right to ask about reasoning for the dismissal and the employer has seven days to respond.
“Just cause” has been defined by the courts as any serious breach by an employee, such as theft. No notice is required for a termination for just cause.
“Justified grounds” include less serious breaches, such as unexcused and repeated absences from work or the employer’s objectively reasonable need to reorganize business activities. Notice must be given in writing, however, for a justified-grounds dismissal.
Prohibited grounds for dismissal of an employee include:
- Political opinion
- National origin
- The filing of an employment complaint
- Trade union membership
- Participation in a strike
- Military service
- Temporary illness or injury
Additionally, a woman who becomes pregnant cannot be dismissed from the time of conception until the child reaches one year of age.
Before filing a claim for unfair dismissal, an employee must challenge the fairness of the dismissal in writing within 60 days.
Termination by employee: Generally, a collective labor agreement will specify the length of notice a resigning employee must give the employer. However, no notice is required under certain circumstances such as, nonpayment of wages, closing of the business or refusal to grant holidays.
Closings and mass layoffs: A collective dismissal is when an employer with more than 15 employees, terminates at least five employees within one province and 120 days.
The employer must give written notice of the proposed mass layoff to relevant labor unions and local works councils with details about the number of employees and positions involved, as well as the schedule and reasons for dismissals.
Payment on termination: Every employee is entitled to severance pay, regardless of the reason for employment termination. Employers must set aside a certain amount each month, which is based upon the employee’s annual salary, inflation, years of service, and in some cases age.
Employees who have completed eight years of service may obtain partial severance pay in advance for education, healthcare, extended unpaid leave, education, or to buy a first home.
The wage guarantee fund, administered by the INPS, protects severance pay if the employer is insolvent. Employers with more than 50 employees must transfer severance pay contributions to a state fund managed by the INPS, so severance benefits can be paid directly to employees.
Payments for unfair dismissals: Compensation for employees in cases of unfair dismissal vary depending on when the employee was hired.
Employers with up to 15 employees within the same municipality and up to 60 employees in Italy must either rehire the unfairly dismissed employee within three days or pay compensation equal to two to six months of wages, whichever the employer prefers.
In all cases, employees dismissed for discriminatory reasons must be reinstated. Before filing a claim for unfair dismissal, an employee must challenge the fairness of the dismissal in writing within 60 days. Claims against dismissal must be filed at least 180 days from when the employee first challenged the dismissal.
Unemployment benefits are available to workers who have been involuntarily terminated, have resigned for just cause, are pregnant or are mothers of children under one year old. The benefit is paid monthly by the INPS.
To qualify for full benefits, a worker must have been covered by unemployment insurance for at least two years before termination and must have made at least one year of payments into the system in the previous two years.
Workers who don’t qualify for full benefits but have been covered by unemployment insurance for at least two years and have worked at least 78 days in the past year may receive reduced benefits.
Working hours in Italy
There are 40 hours in an Italian workweek. With overtime, the workweek may not exceed 48 hours over the course of any seven-day timeframe within four months. A collective agreement may provide for a lower limit and permit the limit to be averaged on an annual basis.
The 40 hour work limit does not apply to all employees. Exempt employees include: managers, seasonal agricultural or industrial work, postal service workers, motorway workers, dock and airport workers, companies involved in public transport and telecommunication services, and companies involved in gas, water, or electricity production, transmission and distribution.
Employees must be paid an additional 10% above their regular pay rate for overtime hours, or hours worked beyond the 40 hour workweek. Overtime is limited to 250 hours per year.
Collective labor agreements can provide for higher overtime rates. Italian law provides that a collective agreement may give employees the choice of overtime pay or additional time off in lieu of extra compensation.
Noncompete agreements in Italy
Under the Italian Civil Code, employees may not conduct business in direct competition with their employers, divulge confidential or classified information about their employers’ business or production methods, or use such information to cause prejudice to the employer.
Upon termination of the employment relationship, a noncompete agreement is permitted if it meets the following requirements:
- Is in writing
- Compensates the former employee for restrictions on employment
- Has a limited scope and geographical coverage
- Is limited to two years
In Italy, trade secret law protects company information that:
- Is not generally known
- Has economic value
- Has been adequately kept secret by the company
Anyone found to have unlawfully acquired, used or disclosed a trade secret may be held civilly liable. All rights and actions concerning the protection of trade secrets are subject to a five-year statute of limitations.
Benefits in Italy
The retirement age in Italy is 67 years old. Early retirement is available for men who have contributed to the retirement system for 42 years and 10 months and for women who have contributed for 41 years and 10 months.
Employers may offer company pension plans but they are not obligated by law. A company pension is another way of financing employee retirement.
Servizio Sanitario Nazionale, Italy’s national health plan, provides hospital and medical benefits to all Italian citizens.
Italy’s National Institute for Occupational Accidents (INAIL) administers the workers’ compensation insurance program. The amount employers pay for workers’ compensation is dependent on an assessed degree of risk. Employees make no contributions and are covered from the first day of employment. Accidents that occur while commuting are also covered.
For temporary disabilities, employers pay the employee’s full wage on the day the accident or occupational illness began and 60% of their wage for the next three days. Then, INAIL will continue to pay 60% of the worker’s earnings for 90 days, as well as benefits, and 75% of pay after that.
If the worker’s disability is permanent, they receive either a lump sum or a pension, the type and amount depending on the degree of disability and the worker’s age and earnings.
The employer must keep payslip records and a registry of all workplace injuries for 10 years.
Leave in Italy
Vacation time in Italy
An employee is entitled to four weeks of paid annual leave, which may be taken in one continuous period. Employers may require an employee to take annual leave at a specific time of the year, in consideration of the needs of the business. Employees cannot take pay instead of annual leave, except when the employment relationship is terminated.
Sick leave in Italy
Benefits for sick leave are generally paid after the first three days of employment and the employee is granted up to 180 days per year. Additionally, a worker in the private or service sector who is unemployed is entitled to benefits if the working relationship ended no more than 60 days before the illness began.
Generally, the pay rate during sick leave is 50% of the employee’s average daily wages for the first 20 days and then 66% for subsequent days. However, specific agreements are determined by collective labor agreements.
Maternity and paternity leave in Italy
Italy has mandatory maternity leave of five months, paid at a rate of 80% of the employee’s regular earnings. A woman may take two months before the due date and three months after delivery, or with doctor’s consent, one month before the due date and four months afterward. Maternity leave may be extended on medical grounds.
Italian law makes provisions for the father to take the remainder of the paid maternity leave after childbirth if the mother dies, becomes seriously ill or abandons the child. Under these circumstances, the father is entitled to one additional month of parental leave.
Italy’s adoption leave provides an adoptive mother five months of maternity leave, which must start within five months of the child’s arrival into the family. The pay rate is also 80% of regular earnings.
Each adopting parent may take up to six months of parental leave within the first eight years of the child’s arrival into the family. Generally, if leave is taken within three years of the child’s arrival into the family, 100% of wages are paid for the first 30 days and 30% is paid for the following five months.
Each parent may take up to six months of parental leave before the child is 8 years old. The leave may be taken in one continuous period or in several shorter periods. However, if both parents take leave, the sum of leave cannot exceed 10 months. A single parent is entitled to 10 months of leave. An employee must give their employer notice 15 days in advance before taking parental leave.
While the child is under three years old, 30% of wages are paid. Leave is unpaid if the child is older than three years of age unless annual earnings are much lower than the minimum pension for that year.
Dependent care leave
A parent may take unlimited unpaid leave to care for a child under three years old. Each parent may take five days of unpaid leave per year to care for children who are three to eight years old. An employee may take three days of paid leave per month to care for a disabled relative.
Employees with at least five years of seniority at a company are entitled to 11 months of unpaid education leave, either continuous or intermittent, to attend college or other school. Collective labor agreements generally specify additional education benefits, such as the number of hours of paid education leave.
An employer must preserve the employee’s position during a period of military service in addition to 30 days after discharge. The employer is not required to pay the employee during this time but must include the period in calculations of seniority.
Italy observes eleven national holidays and many localities also observe an additional holiday to honor their patron saint. Employees who work on a holiday are paid overtime. The dates of some of the national holidays vary year to year:
- New Year’s Day (January 1)
- Epiphany (January 6)
- Easter Monday
- Liberation Day (April 25)
- Labor Day (May 1)
- Date of the Founding of the Republic (June 2)
- Assumption (August 15)
- All Saints’ Day (November 1)
- Immaculate Conception (December 8)
- Christmas Day (December 25)
- St. Stephen’s Day (December 26)
Businesses operating an entity in Italy are responsible for the following taxes:
Corporation tax: Resident companies are levied a 24% tax on their worldwide revenue. However, non-resident companies are taxed on only their Italian-sourced income. Foreign tax credit is available on tax paid on foreign-source income. A municipal tax is generally applied at a rate of 0.76% on company-owned real estate as well.
Consumption tax (VAT): Several goods and services are subject to a 22% consumption tax in Italy. Although the Italian legislation provides several reduced VAT rates for specific foods, agricultural products and health services.
Social tax: The social security system covers a range of benefits including, pensions, disability and survivors’ benefits; benefits for sick leave, maternity, paternity and parental leave; workers’ compensation; and unemployment.
Both employers and employees make contributions into the system. However, employees generally make no contributions for some benefits, such as workers’ compensation and benefits for sick leave and maternity leave.
Employers in Italy are responsible for the following taxes:
Income tax: Employers are responsible for withholding taxes from employee earnings each time payment occurs. The employer must also submit an annual statement to the Italian Revenue Agency by July showing the total amounts of income paid and taxes withheld. The employer must keep payslip records for 10 years.
Employees must pay income taxes on salary, wages and bonuses. Italy’s national personal income tax rates for individuals range from 23% to 43% depending upon their annual income. Regions and municipalities levy an additional income tax up to 2.03% for regions and up to 0.9% for municipalities. Additionally, employees need to pay a social security tax.
All Italian residents are taxed on their worldwide income while nonresidents are only taxed on income earned in Italy. Individuals are considered residents of Italy for tax purposes if they have a habitual abode in Italy or are enrolled in the government’s Registry of Population for a greater part of the calendar year.
The information provided on or through this website is for informational purposes only and does not constitute legal advice. Safeguard Global expressly disclaims any liability with respect to warranty or representation concerning the information contained herein, including the lost essence, interpretation, accuracy and/or completeness of the information in transit and language translation.
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