Italy PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Italy to companies willing to enter the Italian market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Italy.  However our solution allows you to start the operations in Italy within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Italy fast facts

Population, million: 60,3
Land area: 301,340 km²
Capital: Rome
Local currency: EUR

Italy, officially the Italian Republic, is a unitary parliamentary republic in Europe. Located in the heart of the Mediterranean Sea, Italy shares open land borders with France, Switzerland, Austria, Slovenia, San Marino and Vatican City.

Hiring, Negotiating and Doing Business in Italy

Necessity of written employment contract

An oral employment contract is valid and effective. There is no specific requirement for a written employment contract nor obligation to draft the contract in Italian. However, to be valid, certain clauses must be in writing (for example, a probationary period, a fixed-term period and a non-competition clause).

Italy Employment Contract

Types of employment agreements

The most common type of employment contract is the permanent one, which is written and contains details about the wage, the activities that the employee must perform, the working hours, holidays etc. This type of contract is concluded on an indefinite period of time and it must be signed only by employees who are at least 15 years old.

For a certain category of employees, the entrepreneurs can use the temporary contracts that are concluded for maximum 36 months and, if it is necessary, they can be extended.

Other type of employment contract is the supply one for employees hired through a work agency that signed a contract with the employer and another one with the worker. The supply contract can be signed on an indefinite or definite period of time.

Italy working hours

There is no cap on daily working hours as such. However, employees are entitled to a daily rest period of 11 consecutive hours every 24 hours. This effectively restricts how many hours a worker can work in a day.

The normal working week is 40 hours, and the maximum working week is an average of 48 hours every seven days, including overtime, calculated over a four-month reference period. Collective bargaining agreements (CBAs) can extend this reference period to six or 12 months provided that there are objective, technical or organisational reasons for doing so, and often provide for a shorter normal working week (for example, 37 or 39 hours).

Overtime

CBAs regulate overtime. Where no CBA applies, overtime must be agreed between the parties, although overtime cannot exceed 250 hours per year.

Overtime must be compensated with increased salary, although a CBA can state that the worker must be allowed to take an equivalent period of compensatory rest. There is a limit on the amount of night work an employee can perform. A night worker’s normal hours of work must not exceed an average of eight hours in every 24 hours. However, this limit can be adjusted by a CBA.

Vacation leave in Italy

All employees are entitled to a minimum of four weeks’ paid annual holiday. Collective bargaining agreements (CBAs) and individual contracts can provide for a longer period of holiday entitlement. Annual leave cannot be replaced by a payment in lieu, except where the employment contract is terminated.

There is no statutory unpaid holiday entitlement. However, a CBA can provide for unpaid leaves of absence.

Sick leave: 

Entitlement to time off

Collective bargaining agreements (CBAs) or individual contracts generally provide for a period of time off as a result of illness or injury, during which the employee is entitled to keep his/her job.

Entitlement to paid time off

In the case of illness or injury, CBAs or individual contracts generally provide for a period of paid time off, during which the employee is entitled to keep his job and to receive their salary in the proportion and for the period set out in any applicable CBA or the individual employment contract. After this period, the employer can dismiss the employee by giving notice. This period is generally between six and 12 months, and applies in cases of both a single period of sick leave and multiple periods.

Italy Maternity Leave

Female employees must not work for two months before, and three months after, childbirth. This compulsory period of maternity leave can be changed to one month before and four months after childbirth, if a medical certificate is produced.

A female employee can request to go on early maternity leave in certain circumstances, for example, if her duties involve lifting or moving heavy objects. In this case, a medical certificate is required, together with an authorisation from the Employment Office. However, the employer’s consent is not needed.

During the entire pregnancy, and for a period after childbirth, the employee must not be allocated tasks that may endanger her health.

During maternity leave, employees receive an allowance from the National Social Security Body equal to 80% of their salary.

Italy Severance Laws

Termination of employment

There are two ways in which the employer can terminate an employment contract:

• Dismissal without notice period for just cause, for example, where there is a serious breach of the employment contract (gross misconduct).
• Ordinary dismissal with notice based on either a:
  • subjective reason (involving a breach of the employee’s legal and contractual duties); or
  • objective reason (involving economic factors relating to production, the organisation of work, the proper functioning of the business and redundancy).

Specific rules apply to employees who are executives (dirigenti) . The relevant notice period is set out in the applicable collective bargaining agreement (CBA), based on the employee’s length of service, position and level. The notice period required in the event of resignation is usually shorter than for dismissal. In the latter case, the employer can opt to make a payment in lieu of the notice period, on which social security contributions must be paid.

Severance payments

In all cases where an employment contract is terminated, even for just cause, the employer must pay the dismissed employee the following:

• Severance pay. The employer must pay severance pay (trattamento di fine rapporto (TFR)) in all cases, even if there is a resignation or just cause for dismissal. The amount payable is equal to the sum of each annual salary divided by 13.5. These amounts are index-linked annually.
• Pro rata supplementary monthly payments. The employer must pay these if it has done so during the employment contract. In these circumstances, the employer must pay the amount due up to the date on which the employment contract is terminated, including the pro rata sum accrued during the notice period.
• Payment in lieu of holidays not taken. If dismissed employees have not used all their holiday allowance before the employment contract is terminated, they are entitled to a payment in lieu of unused holiday allowance.

Italy Tax

National income tax is levied at progressive tax rate on all income reported below.

Health Insurance Benefits in Italy

Social security contributions are made by both the employee and the employer.

The Italian employer, in order to pay social security contributions for employees, must register with the Italian Social Security Administration (Instituto Nazionale Previdenza Sociale or INPS).

The total social security rate is around 40% of the employee’s gross compensation (the rate depends on the work-activity performed by the company, the number of employees of the company, the employee’s position), and is shared as follows:

• Employer’s charge is around 30%.
• Employee’s charge is around 10%.

In general, only around 33% of the total rate is paid into the National Pension Fund, the remainder is paid to the following Social Security funds:

• Unemployment fund.
• Sickness fund (not applicable for executives).
• Maternity fund.
• Temporary unemployment compensation fund (ordinary and extraordinary, not applicable to executives).
• Social mobility fund (not applicable to executives).
• Other minor funds.

The social security contribution, for employees who registered with INPS after 1 January 1996 without a previous social security position in Italy, is calculated and paid up to a maximum amount of EUR 103,055 for the year 2020.

Additional Benefits in Italy

Italian law provides for an annual 13th payment, paid once a year on the occasion of the Christmas holidays that usually corresponds to one month’s remuneration. In addition, NCBA or even individual contracts may provide for the payment on the 14th payment, usually paid in July.

Italy Holidays

There are 12 public holidays, which are not included in the minimum holiday entitlement.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.