Employment in Italy

Italy, located in the south of Europe, is a popular country for many North American businesses to expand to by finding and hiring talent. Factors that influence the popularity include population, GDP and infrastructure. Italy, however, is a complex country for a foreign employer. Topics such as  the TFR and 14 salary months increase the complexity. In this blog, you will find a brief summary on hiring and employment in Italy. 

Italy, along with other European countries such as France and Belgium, is classified as a country with a complex employment and payroll system. This is due to, among others, industry specific collective bargaining agreements, social security considerations and, as mentioned, the TFR and 14 salary months. We'll guide you through these topics and provide some additional insights. Enjoy! 

 

Employment at-will, notice periods & corona measurements Italy

As you may know, employment in Europe is more employee-friendly than employer-friendly in comparison to North America. An example that showcases the employee-friendliness is employment at-will. “Employment at-will” is not an option in Italy. Employment at-will means that an employer can terminate an employee at any time for any reason, except an illegal one, or for no reason without incurring legal liability. This also means that an employee is free to leave a job at any time for any or no reason with no adverse legal consequences.

 

Due to the current global pandemic, Italy took additional corona measurements and has chosen to suspend layoffs until April 1, 2021. After that, the situation will be reviewed. A contract can still be terminated for misconduct, failing a probationary and an expiration of a fixed-term contract. 

 

Now that you now that employment at will is not an option in Italy, it might be good to learn more about the notice periods in Italy. Italian Notice periods can be long. The length of notice period is provided by each collective agreement. In most collective agreements (e.g. collective agreement of metal workers, tourism industry, textile workers, chemical workers, trade industry and the food industry) the notice is as follows: 

  • 9 months tenure: 10-75 days

  • 4 years tenure: 10-75 days

  • 20 years tenure: 30-180 days. 

In addition, notice periods may depend on the position of the employee within the organization.

 

Salary and compensation Italy 

What is a suitable salary and compensation for a sales representative in Italy? In Italy, just like in most countries, salaries differ based on years of experience and the responsibilities that come with the job. In the table below you can find a small comparison on the average salaries of a sales representative in Italy, the Netherlands and Germany. To learn more about the costs of hiring please read our blog on Costs of Hiring an Employee in Europe.

 

Germany

Netherlands

Italy

Annual Salary Range

€29,000 - €56,000

€25,000 - €49,000

€23,000 - €45,000

Average Annual Salary

€39,399

€33,426

€30,746

Average Bonus

€5,106

€3,050

€7,198

Average Income Tax

29,5%

38,10%

32%

 

Employment contracts Italy

The employment relationship in Italy, as in other European countries is governed by national/Italian law. The employment law describes what basics you need to include in the employment contract. The content of the contracts depends on the type of CBA (Collective Bargaining Agreement). This CBA determines the options of contracts, notice period, probation periods, overtime and mandatory insurances/pension.  

 

There are two main types of labor contracts: A permanent contract (contratto a tempo indeterminato) and a fixed-term contract (contratto a termine). The permanent contract is common in Italy and provides higher protection for the employee. This is in line with the employee-friendly attitude in Europe. A temporary contract can last for 36 months including possible extensions. Certain limits are determined by the CBA’s. 

 

TFR and the 13th and 14th salary months

Now that we've learned which employment contracts are most popular in Italy it is crucial to dive into important employment contract benefits/topics an employer should keep in mind.  The TFR and the 13th and 14th salary months are two important topics in Italy.

 

Firstly, the TFR. In Italy, there is no severance pay or redundancy compensation. However, upon termination of the employment relationship, the employee receives the so called TFR (Trattamento di fine rapporto), which is a part of workers' wages whose payment is deferred upon termination of the employment relationship. This is an amount of approximately 10% of the gross wage, which is collected when the employee resigns the job or is dismissed. The TFR, for the employer, is one of the workforce costs because it is a part of benefit which is paid at the termination, but which accrues during the relationship. Every month the employee accrues the worth and at the termination of the working relationship the company pays the employee the total accrued amount. This TFR can also be placed in a pension fund.

 

Secondly, the 13th and 14th salary months. Though uncommon in most countries, according to Italian law, compensation is granted in fourteen instalments, with one extra instalment paid in December. Generally defined by the CBA and depending on the employee´s industry, position, status and seniority, the 14th payment instalment is typically paid in June. 

 

Holiday entitlement & Maternity Leave Italy

Is Italy also "employee-friendly" when it comes to holiday entitlement and maternity leave? The minimum number of vacation days in Italy based on a 5 days’ workweek is 20.  However, many contracts, particularly for state employees, allow for 28 days, or five weeks, of paid leave per year. Employees in Italy are also entitled to so-called permit hours (permessi) that can be used for personal reasons. The amount of hours depends on the particular collective bargaining agreement.  

 

Employees have to take at least 2 weeks of holiday a year. The days that are left at the end of the year can’t be paid out. When someone leaves the due holiday days are paid out. For more information on paid vacation days in Europe, please feel free to read our blog on paid vacation days in Europe 2021

 

When it comes to the  statutory maternity leave (congedo di maternità) in Italy, the duration is 5 months, or 20 weeks. Employees can choose from two options:

  • Take 2 months preceding expected date of delivery and 3 months following the birth.

  • Take 1 month preceding expected date of delivery and 4 months after. Mothers need to submit a medical certificate, justifying the well-being of the baby will not be harmed were you to allow the leave only 1 month prior.

Looking at the pay, a mother has the right to an allowance equal to 80% of the salary for the entire duration of the maternity leave. If part of a collective labor agreement, the employee can receive more favorable allowance up to 100%. It is also a common practice as an employer to pay for the remaining 20%. More information about maternity leave in Europe can be found in this blog

  

Social Security Italy

Social security in Italy is built upon compulsory contributions made to the National Institute of Social Security (INPS). Contributions vary depending on the industry and the job title of the employee. Employer contributions range between 29%- 32% and employee contributions range between 9,19% - 10,49%. The rate depends on the type of activities performed by the company, the number of employees and the position of the employee. These contributions also cover other funds like unemployment, sickness, maternity, temporary unemployment compensation, social mobility and other smaller funds.

 

 

Get in touch 

If you would like to learn more about employment in Italy, how employment in Italy can be arranged, the differences between North American and European contracts, please do not hesitate to reach out to us. We would love to assist you with your European HR needs. 

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