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Italy – Employer of Record
AVASO provides employer of record services for customers that want to hire employees and run payroll without first establishing a branch office or subsidiary in Italy. Your candidate is hired via AVASOs’ Italy PEO in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. The individual is assigned to work on your team, working on your company’s behalf exactly as if he or she were your employee to fulfill your in-country requirements.
Table of Contents
- Hiring in Italy
- Employment Contracts in Italy
- Working Hours in Italy
- Holidays in Italy
- Vacation Days in Italy
- Italy Sick Leave
- Maternity/Paternity Leave in Italy
- Health Insurance in Italy
- Italy Supplementary Benefits
- Termination/Severance in Italy
- Paying Taxes in Italy
Our solution and Global PEO service enables customers to run payroll in Italy while HR services, tax, and compliance management matters are lifted from their shoulders onto ours. As a Global PEO expert, we manage employment contract best practices, statutory and market norm benefits, and employee expenses, as well as severance and termination if required. We also keep you apprised of changes to local employment laws in Italy.
Your new employee is productive sooner, has a better hiring experience and is 100% dedicated to your team. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. AVASO allows you to harness the talent of the brightest people in 187 countries around the world, quickly and painlessly.
Hiring in Italy
CBAs, or Collective Bargaining Agreements, between trade unions and employers’ associations are common in all sectors. National CBAs are only binding on a company if the company is a member of the relevant employers’ association. If a company is not a member, it does not have to apply the rules agreed to via CBA. However, the agreement applies if reference is made to it in the employment contract or the employer adopts its terms.
When negotiating terms of an employment contract with an employee in Italy, it may be useful to keep the following in mind:
Employment Contracts in Italy
It is legally required to put a strong employment contract in place in Italy which spells out the terms of the employee’s compensation, benefits, and termination requirements. An employment contract in Italy should always state the salary and any compensation amounts in Euros rather than a foreign currency.
Working Hours in Italy
The normal work week for an employee consists of 40 hours.
An employee whose working hours exceed 6 hours per day is entitled to a rest break. Typically CBAs regulate rest breaks but where no CBA applies, a rest break cannot be less than 10 minutes.
Holidays in Italy
- New Year’s Day
- Easter Monday
- Labour Day/May Day
- Constitution Day
- Corpus Christi
- Assumption of the Blessed Virgin Mary
- All Saints’ Day
- Independence Day
- Christmas Day
- Second Day of Christmastide
Note that if a public holiday falls on a Sunday, the day is carried over to Monday or paid.
Vacation Days in Italy
According to the CBA AVASO is operating under in Italy, employees are granted 25 days of vacation plus 32 hours of paid leave.
Italy Sick Leave
Under Italy’s labor law, employees are entitled to paid leave of three working days per year in the event of a serious illness (subject to a doctor’s notice) or death of their spouse or second degree relative. Arrangements may be agreed to with the employer in the event of a severe illness. Continuous or discontinuous leave of up to two years may be allowed for serious, documented family reasons.
Maternity/Paternity Leave in Italy
Female employees are entitled to maternity leave for two months prior to and three months following the expected date of childbirth. Throughout the maternity leave, a daily allowance is granted equal to 80% of the last salary paid through the social security system (INPS).
Fathers are entitled to one day of paid paternity leave, although the mother may transfer two of her days to the father, for a total of three days leave.
Health Insurance in Italy
National health insurance in Italy is managed by the National Health Service (SSN) and funded through direct taxation as well as indirect taxation by employers and employees. Upon registering with the Local Health Service, a social security number and a health card are issued. The health card entitles the employee to low or no-cost treatment.
Private health insurance coverage is also available. With private insurance, individuals can freely choose their own doctor and specialist, be treated at private hospitals, etc. Many residents have a private health insurance policy which pays the portion of medical bills that isn’t paid by social security.
Italy Supplementary Benefits
Some companies provide allowances for company cars, mobile phones, and meal vouchers. High tech firms often provide training.
A 13th month or annual bonus (tredicesima mensilità) is common in Italy and is paid just before Christmas. Some of the bigger companies also provide their employees with a 14th month of pay (quattordicesima mensilità) which is paid in the summer.
Termination/Severance in Italy
As a general rule, probationary periods of no more than 6 months may be agreed to in writing in the employment contract. The actual length of time for the probation period is usually fixed by the Collective Bargaining Agreements (CBAs).
Under Italian labor law, employment contracts cannot be terminated without a justified reason. Justified reasons include breach of contract, or for economic or reorganization reasons. If an employee is dismissed for breach of contract, the employer must follow a disciplinary procedure which will involve writing a letter to the employee that sets out the facts behind their alleged breach of contract and allowing the employee time to justify their actions. If the employer still wishes to proceed to dismissal, it must then confirm the dismissal in writing, setting out why the employee’s justifications have not been accepted.
If the dismissal is for economic reasons, the employer must follow a special procedure which involves serving notice of dismissal on the employee and the local Labour Office and calling a meeting to try and reach an agreement. If no agreement can be reached then the employer can opt to dismiss.
During employment, employers must set aside an annual amount equivalent to around 7% of the employee’s pay, to be paid to the employee on termination as an “end of service allowance” or TFR (trattamento di fine rapport). TFR is mandatory and is due in any case of termination of employment (including resignation, and dismissal for just cause or death). TFR is calculated on the basis of the employee’s wages, taking into account not only his/her basic wage, but also any other compensation periodically paid to him/her.
Redundancy: A collective redundancy occurs when a company employing more than 15 employees intends to make at least five dismissals within 120 days in either each work unit or a number of work units in the same province. If an employer intends to carry out collective redundancies, it must inform the employees’ representatives in writing. The redundancy procedure is then divided into phases:
- Phase I – negotiations must begin within seven days of receiving the written information. Consultation must take place within 45 days. The company must provide notice of the results of the consultation to the Regional and Provincial Employment Offices.
- Phase II – If the parties do not reach an agreement, the Employment Office must summon them for final negotiations. If an agreement is not reached then the company can make the redundancies. Redundancies must comply with the employees’ notice periods. Sanctions for noncompliance with the redundancy procedures can range from reinstatement to the payment of compensation.
Paying Taxes in Italy
Income tax in Italy is progressive, meaning the higher the income, the higher the rate of tax payable. In 2015, the tax rate for an individual was between 23-43%.
While there are different rates for social security contributions, based on industry sector and for management level, the standard contribution for employees is 10% of gross salary and employers contribute about 35% of the employee’s salary.