How To Hire And Pay Employees In Italy

When expanding into Italy, your business can take advantage of its attractive economy, which boasts significant international investment. Italy’s economy is one of the top 10 largest in the world, and the third largest in the European Union. Italy is very popular to businesses wanting to invest in R&D, innovation and design, whilst entering the European Single Market.

However, conducting business in Italy does pose some challenges, no matter how rewarding. The country is known to have long, complex and difficult-to-navigate regulatory processes. Though Italy's workforce is highly skilled and educated, cultural differences can make team management difficult.

Employees are entitled to a minimum of 4 weeks holiday per year when working full time, excluding public holidays.

There are 13 public holidays in Italy. Employers often provide more holiday than the statutory minimum. Any accrued holiday cannot be replaced by payment in-lieu.

Probation periods in Italy vary depending on the position of the employee. A probation period is generally 6 months for high level employees such as management, and 3 months for other employees. A probation period should not exceed 6 months and will need to be provided in writing.

Employment in Italy cannot be terminated without a just cause or reason. These include breach of contract, gross misconduct, company reorganisation, and economic reasons. If an employee is dismissed for gross misconduct such as a serious breach of trust, or serious violation of contractual duties, then no notice period is required. If an employee is dismissed for a justified reason, which may be subjective such as a less serious breach of their contractual obligation, or objective e.g. redundancy. In these cases, notice of termination is required.

Dismissals must be notified in writing with reasons detailed. If the dismissal is due to just cause or subjective reasons, a special disciplinary procedure must be complied with. Notice periods are subject to any collective bargaining agreements. In Italy, when any employment is terminated (regardless of the reason, including resignation), the employee has the legal right to receive a leaving indemnity, known as TFR (trattamento di fine rapport). TFR is calculated based on the employee’s basic salary plus any other compensation periodically paid, and usually equates to 7% of the employee’s total compensation.

Post-termination restraints can be enforceable if they are reasonable and protect a business’ legitimate interests. Both customer and employee non-solicits are permissible. Any non-compete agreements should be no longer than 6–12 months. These clauses must be agreed in writing, limited in territory, scope and time, and provide reasonable compensation. Reasonable compensation is usually 25–50% of annual salary for a one-year non-compete agreement for the entire Italian region. This clause would be null and void if requirements are not met.

A written contract of employment (contratto di lavoro) is a legal requirement in Italy. Some clauses, such as probation periods and non-compete covenants, are not valid unless they are in writing. A contract of employment should also include salary, place of work, hours, annual leave entitlement, compensation details, and termination requirements. Unless an end date is specified in the contract of employment, then employment is considered to be indefinite.

Fixed-term contracts are permitted on the basis they are justified on grounds such as replacing an employee on maternity leave, sick leave, seasonal work, occasional work, or extraordinary work. If employment continues beyond the expiry date, the employer is required to pay additional remuneration at a rate of 20% for up to 10 days beyond the expiry and 40% for up to 20 days. If the employee is still working 20 days after the expiry date, their employment will be deemed indefinite. If an employee is rehired less than 20 days after expiration (or 10 days for contracts of less than six months), their employment will also be deemed indefinite.

Expectant mothers in Italy are entitled to five months’ maternity leave (congedo di maternità). Generally, this is taken two months prior to the expected due date and three months after the birth. Subject to certain conditions, the leave may be taken earlier or later. During maternity leave, the employee is entitled to up to 80% of their basic salary which is paid by social security (INPS) (Instituto Nazionale Previdenza Sociale). Fathers may take seven days’ paternity leave within five months of the birth, paid at 100% of basic salary.

Parents also have the option of parental leave (congedo parentale facoltativo); this may come into effect after maternity leave ends and is paid at 30% of salary. Parental leave can be used until the child reaches 8 years of age and can be split between the mother and father. The length of parental leave is 11 months. During the first year after the birth, a mother is entitled to take two hours’ rest per day when working over six hours and one hour’s rest when working less than six hours.

Sick leave and payment in Italy generally depend on any collective bargaining agreements, or individual agreements stipulated in the contract of employment. Typically, for the first three days, an employee is paid in full by the employer. After the three days, further payment depends on any prior agreements. Social security will make a contribution of 50% for days 4-20 and 66% from day 21 onwards. A certificate must be provided by a doctor to prove the employee is unable to work.

The Italian Social Security system (previdenza sociale) is managed by the National Social Security Institute (Instituto Nazionale Previdenza Sociale or INPS). Contributions are made by both employees and employers. Employers are responsible for registering their staff with the INPS. Contribution rates and benefit entitlements vary depending on the industry. The INPS contributes to benefits such as sick pay, maternity, paternity, parental leave, retirements benefits, disability, and survivor benefits.

National health insurance in Italy is managed by the National Health Service (Servizio Sanitario Nazionale or SSN) and funded through direct and indirect taxation. Registration is handled by the Local Health Authority Service (Azienda Sanitaria Locale or ASL) which issues a social security number and a health card (Tessera Sanitaria). This card entitles the holder to either no or low-cost treatment. Hospital services are free of charge and there are charges for services such as dental treatment and some outpatient services. Private health insurance is also available, with the option to choose doctors, specialists, and treatment at private hospitals. It is common for employers to offer this to their employees as a benefit so medical bills will be fully covered for items not included by the SSN.

Work permit applications in Italy are only accepted for a few months once a year, or even once every two years. The available window for applications depends on the job market and state of immigration within Italy. There is a strict quota on the number of permits issued. Highly skilled employees may be exempt from the quota depending on the requirement for their skills in the country. However, even these individuals still need to follow the process of applying for a permit and visa.

A work visa in Italy falls under the category of a long stay visa, also known as a D-visa. Firstly, a job offer must be made before the process can begin. The employer will need to apply for a work permit at the immigration office in their province. Once a permit has been approved this will then need to be sent to the employee, and the embassy or consulate where the employee will apply for the visa must be notified. If the visa is approved, there is a window of six months for the employee to enter Italy. Once the employee has entered Italy, they then have eight days to apply for a residence permit (permesso di soggiorno). An Italian work visa is generally valid for two years, depending on the contract of employment, and can be extended for up to five years.

Italy does not have a mandatory minimum wage. Salaries are typically determined by collective bargaining agreements on a sector-by-sector basis.

Salaries (stipendio) in Italy are generally paid on a monthly basis, most commonly towards the end of the month. A 13th month bonus payment (tredicesima mensilità) is common in Italy and is usually paid in December, before Christmas. Some larger companies also provide employees with a 14th month of pay (quattordicesima mensilità) which is paid in the summer.  

Social security contributions are the responsibility of the employer to deduct from an employee’s salary before payment. Both the employer and employee are subject to social security contributions. Contribution rates vary based on the industry sector and seniority level of the employee. Contribution rates are typically around 10% for an employee and 30-35% for employers.