Italy is the third-largest economy in the European Union and the eighth-largest in the world. Its geographical position is beneficial for trade with Northern Europe, Southern Europe, the Middle East and North Africa, making Italy a great place for businesses to expand internationally.
Italy's tourism industry is the biggest contributor to its economy, followed by manufacturing. The main products manufactured in Italy are machinery, clothing, footwear, steel, iron, vehicles, ceramics and chemicals.
Another of Italy’s biggest industries is shipping, imports and exports. Leading imports include petroleum, chemicals, raw materials, metals and transportation equipment. The biggest exports are machinery, food, beverages, engineering products, vehicles, clothing and textiles.
Payroll and taxes in Italy
Individual income taxes in Italy are progressive; the higher the employee’s income, the higher the payable tax rate.
As of 2022, income tax rates for an individual is between 23-43%. This is broken down as follows:
Annual taxable income (EUR)
Total per bracket
In addition to direct taxation, there is a regional tax of 1.23-3.33% and a municipal tax of 0-0.8%.
Both employers and employees are required to contribute to social security. The total social security rate is around 40% of the employee’s gross compensation, with 30% paid by the employer.
Italian employers must also pay regular premiums to insure their staff against work-related injuries, diseases and accidents. All insurance policies and claims are managed by the National Institute for Insurance against Accidents at Work, or INAIL.
Italian employees are usually required to make social security contributions at 10% of their gross compensation.
Where do these contributions go?
Generally, 33% of the total social security contribution rate is paid into the National Pension Scheme. The remaining part of the contribution is split between the following:
Social mobility fund
Temporary unemployment compensation fund
Other minor funds
It’s important to note that social mobility and sickness fund contributions do not apply to executive-level employees.
Employers should make pension contributions equal to 33% of the employee’s salary, and employees should contribute just over 9%. As an employer, you should make all of these contributions directly, withholding the employee’s contributions from their paycheck.
Working hours in Italy
The typical working week in Italy is 40 hours per week, with an eight-hour working day for full-time workers. However, this can vary depending on the sector and industry. Standard working hours are between 9:30 and 18:30, Monday to Friday. Lunch breaks can be up to two hours long.
The maximum number of hours an employee can work beyond the standard is determined by collective agreements and employment contracts, and all overtime must be paid for. Employees are also entitled to a daily rest period of 11 consecutive hours every 24 hours.
Minumum wage in Italy
The minimum wage is determined by collective bargaining agreements CBA) in Italy. Wages must be proportional to the quantity and quality of the work done and high enough to provide a minimum subsistence for the worker and their family.
Employee Benefits in Italy
The following benefits are statutory in Italy:
Work-related injury and illness insurance
Minimum wage requirements
In Italy, pension requirements are regularly adjusted based on its average life expectancy, which is one of the world’s highest. At present (2022), the minimum age of retirement is 67 for both male and female employees who have spent a minimum of 20 years in paid employment.
If a pension does not equate to at least 1.5 times the legal, social allowance for older adults, an employee will not be eligible until they are 71, following five years of contributions.
Employees can claim early pension status under the following conditions:
Women must have been in employment for 41 years and ten months
Men must have been in employment for 42 years and ten months
Employers should also look to offer supplementary benefits that are both value- and lifestyle-forward. For example, consider providing the following:
Flexible working hours
Mental health and personal wellness support
Professional development stipends
Source: Pexels/Vlada Karpovich
Types of leave available in Italy
Employees in Italy are eligible for a minimum of 22 days of paid leave per year. In addition, they are entitled to 88 hours of permission from their 5th year of employment.
Those in a management position are allowed a minimum of 30 days’ paid leave per year, with 32 hours of permission if they are in full-time employment.
In addition to the above, collective bargaining agreements and individual employment contract terms between the employer and employee may stipulate longer annual leave periods.
As well as statutory annual leave, employees are entitled by Italian employment law to one rest day per week (usually on Sundays) and one rest day for each public holiday (these are listed below).
Normal pay should be received during annual leave and public holidays.
Italy observes the following public holidays:
New Year’s Day
International Workers’ Day
All Saint’s Day
St. Stephen’s Day
Employees are entitled to one rest day for each municipality for the relevant Patron Saint’s day.
Sick leave in Italy is generally paid up to a maximum of 180 days per year. In some sectors, employees are granted a public indemnity. This is 50% of their average daily wages for the first 20 days and 66.66% for subsequent days. For most categories of employees, the indemnities are paid for by the employer on behalf of the public offices. This reduces the number of contributions paid monthly.
Pregnant employees are entitled to maternity leave, regardless of their length of service. Pregnant subordinate employees are required to take five months of maternity leave. This can be taken from two months before childbirth to three months after. During maternity leave, the employee is entitled to 80% of their regular pay; this comes from the social security authorities, and the period is classed as actual work time. The employer should make up the difference in remuneration, meaning that the employee gets their normal monthly salary during maternity leave.
When returning to work, the employer must give the employee the same position, duties and tasks they carried out. Employees cannot be dismissed from the beginning of the pregnancy to one year after birth (this is known as the protected period). Employees with an income of less than €8,145 can have their maternity indemnity increased by three months.
Maternity leave can be converted into paternity leave under the following circumstances:
The child’s mother becomes seriously ill or dies
The mother abandons the child
The father is granted full custody of the child in court
Employees taking paternity leave are entitled to their normal terms and conditions of employment. However, collective agreements and contracts may provide more flexibility on this matter.
Both parents are allowed to take further leave up until the child is 12 years old, with no qualifying period of employment required. The total amount of leave taken by both parents must not exceed 11 months.
Regardless of their length of service, employees are entitled to adoption leave when adopting a child, both from Italy or from overseas. Adoption leave may only be taken by one of the adoptive parents.
An employee who adopts a child nationally is entitled to paid adoption leave for five months after the placement of the child with them. An employee adopting a child from overseas may start the five months’ paid adoption leave before the child has arrived in Italy. This is in compliance with the foreign adoption procedure. Any remaining leave can be taken immediately following the child’s arrival in Italy.
Leave for the care of dependents
Employees are entitled to time off to care for dependents. Employers cannot dismiss an employee during this type of leave.
Attracting talent in Italy
According toGallup’s State of the Global Workforce report, Europe has the least engaged employees in the world. Italy was among the countries with the lowest engagement ratings, not even reaching the threshold of 10% for engaged employees.
With that in mind, companies looking to expand their business to Italy and hire top Italian talent need to consider their benefits packages from an employee engagement perspective.
Employee engagement initiatives can bring many advantages to an organisation. For example, an engaged workforce is typically more productive and motivated, and engaged employees are less likely to churn from a company. They can also improve workplace morale, as employees who are engaged will likely have a more positive attitude towards their work.
Here are some ways in which companies can improve employee engagement:
Recognising and rewarding hard work is a simple but effective way to keep engagement levels high. Employees who feel appreciated at work will doubtless be more productive and feel more satisfied in their jobs.
Involve staff in decision-making processes
Employees who feel as though they are involved in the company’s key decision-making processes are more likely to be productive and engaged. Allowing employees to have a say in how the organisation operates is a strong way to keep them engaged. This can be done through company surveys and skip-level meetings to discuss ideas.
Termination of employment in Italy
Employment contracts in Italy cannot be terminated without a justified reason, according to Italian labor law. Some of these reasons include breach of contract, re-organisation or economic reasons.
Employees in Italy cannot resign through a simple resignation letter; they must complete a formal resignation procedure in order to end an employment relationship. Exceptions include:
Consensual resolution with a formal agreement
Parents of sons under the age of 3 (in this case, the formal resignation happens care of the Ministry of Labor local offices)
Dismissal in Italy should be conducted as part of a formal, complex procedure overseen by the law. Grounds for dismissal in Italy include the following:
Justified objective reasons such as redundancy due to economic, production or organisational reasons.
Justified subjective reasons such as serious misconduct in breach of the employee's contractual obligations.
Just cause, such as circumstances that prevent the continuation, even on a temporary basis, of the employment relationship, such as the employee's gross misconduct.
An employee’s minimum notice period should be set out in the applicable collective bargaining agreement based on their service length, level and position. The notice period required for a resignation is typically shorter than for a dismissal.
In the case of individual dismissals, employers can choose to make a payment in lieu of the notice period. Social security payments must be paid in this instance. Employees with fixed-term contracts or who are under probationary periods are not required to provide notice.
A probationary period can be included in the employment agreement. This period must be agreed upon by both parties in writing.
A probationary period must not exceed six months in any event.
Employers must cover severance payment in all cases of dismissal or resignation. The amount to be paid is equal to the sum of each annual salary divided by 13.5.
Collective dismissal occurs when an employer with more than 15 workers intends to terminate the employment of at least five employees within a single work unit or from multiple work units within the same province within 120 days.
Collective redundancy procedures are as follows:
The employer must:
Notify the works council and the Employment office
Inform the appropriate employee representatives and trade unions
Notify the labour authorities
The following information must be provided:
Reasons for making the redundancies
The technical, organisational or economic reasons why it is impossible to avoid, wholly or in part, making the redundancies
The number of redundant employees, along with their job descriptions
The timeline for redundancies made
Any measures taken regarding the redundant employees
The proposed method for calculating redundancy payments other than those conferred by law or CBAs
For employees hired before 7 March 2015, if it is proven that there is unfair dismissal, the affected employees can be reinstated to their original position and be paid a reinstatement indemnification amounting to a maximum of 12 months' salary.
For employees hired after 7 March 2015, reinstatement and payment of a reinstatement indemnification can only be provided after an oral- dismissal or discriminatory dismissal.
In other cases of unlawful dismissal, the employer is only required to pay a reinstatement indemnification (between a minimum of six and a maximum of 36 months’ salary). The amount paid is subject to the employee's length of service, the lack of reasons behind the dismissal, and the number of damages suffered by the employee. The dismissal is then effective.
What are my options for hiring in Italy?
Airswift provides a variety of employment solutions for companies wishing to hire Italian workers. Our services make it easy for you to hire employees efficiently and within full compliance with Italian labour laws.
Our knowledge and expertise enable us to reduce risk while carrying out the administrative tasks involved in hiring and onboarding employees. This gives you more time to focus on business development.
Our contract hire services allow you to fill temporary vacancies and give your organisation the agility to respond to the market's shifting demands.
For long-term hiring requirements, our professional search service can help you find talented full-time employees for permanent contract positions within your company.
Employer of record
For foreign companies wanting to hire remote employees without setting up a physical, legal entity, an Employer of Record in Italy simplifies the hiring process with minimal compromise on expense and time.
An experienced EOR allows you to bypass the complications of physical entity setup and focus on developing your business activity and growth. An EOR can help you by overseeing local payroll, managing statutory benefits and employee compensation, and fulfilling all legal requirements to ensure compliance.
*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.
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