Payroll Services in Italy

Italian labor laws are generally employee friendly. The general conditions such as hours, pay, protection during sick leave and firing, among others, are set by national collective bargaining agreements (NCBA) for each industry. Though for now most conditions are set by NCBAs by industry, there is a slow shift towards company-level negotiations giving employers more flexibility.

General employment practices in Italy:

  • There are two general types of work agreements: fixed term and permanent employees. Fixed term refers to contracts for a specific amount of time. This can be up to a maximum of 36 months, including all extensions. If not otherwise stated in the relevant NCBA, the maximum number of fixed term contracts cannot be more than 20% of the workforce in any given year.
  • Layoffs require the following:
    1. “Trattamento di Fine Rapporto” or TFR: this is the term used for indemnization paid to employees who have been laid off, regardless of the reason for firing. This amount is equal to approximately 8% of annual gross salary for each year employed.
    2. payment of untaken vacation days, and
    3. proportional supplementary payment (of the 13th / 14th payment if you have it).
  • Like many countries, Italy has laws in place to protect disabled employees and pregnant employees against dismissal. Regarding the latter, only after the child is one year old can an employer dismiss a female employee.There are two additional protections that should be noted:
    1. Recently married employees. These employees may not be fired from the date of the publication of the request to marry until one year after the date of marriage.
    2. Representatives of works councils.
  • Social security covers services like health, unemployment, education and retirement. It is paid for by the employer, employee and through national taxes. The percentage paid by employees is based on a variety of factors such as the number of employees, the location of the business, and the industry, but is generally 30% of the employee’s gross salary.

General employee conditions in Italy:

  • A maximum workweek of 48 hours with an average of 40 hours. Anything over 40 hours is considered overtime and special permission is required for working over the 48 hour limit.
  • There is no formal minimum wage. Minimum wage is set by each industry’s NCBA. The median annual salary in Italy is 20,000€ — one of the lowest in Western Europe.
  • Thirteen payments, with the option of a fourteenth payment. The thirteenth payment is made during the Christmas holidays. Keep this in mind during salary negotiations, making sure to give your offer in terms of annual gross pay to avoid any misunderstanding.
  • Four weeks paid holiday plus three sick days, plus five months maternity leave and wedding leave. Again the NCBA determines the exact number of holidays so check your relevant agreement first.

There is a tendency to think that employers have little say in employment practices and conditions due to Italy’s history with unions and NCBAs. However, there are two developments which have made hiring in Italy more friendly for employers in recent years:

  • The shift towards decentralising collective bargaining agreements, giving more control to the companies and plants.
  • The Jobs Act from 2015 which gives employers more say and security about hiring in Italy.

The Jobs Act has been particularly helpful as it has reduced the amount of uncertainty regarding firing costs for permanent employees and by doing so has reduced the risk of hiring permanent employees.

As you’ve noticed, most employment issues — including hours, pay and working conditions — are determined in the collective bargaining agreement of the sector. With that in mind one of the first things to do if you’re considering hiring in Italy is to research the specific NCBA that affects you as that will serve as a general starting point for conditions and expectations.

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