Payroll & Employment Guide Italy

Italy offers two main types of employment contracts: indefinite contracts, which are the most common, and fixed-term contracts. In most cases, employers and employees prefer to sign a written contract to ensure proper registration with the relevant authorities. While the contract should ideally be in writing, parties can also establish it verbally through actions like starting work.

Notice periods: Range from 15 days to up to 6 months or more, depending on employee category, seniority, and applicable collective agreements

Termination of employment: Just Cause (Giusta Causa), Justified Subjective Reason (Giustificato Motivo Soggettivo), Justified Objective Reason (Giustificato Motivo Oggettivo)

In Italy, benefits and welfare are governed by a combination of National Laws and Collective Bargaining Agreements (CCNLs). While the government mandates essential social security coverage, specific welfare provisions often differ based on the employee's classification (dirigente vs. quadro/impiegato).

Mandatory social security & insurance

Social security contributions (INPS) are mandatory and cover pensions, health care, maternity, and unemployment. Additionally, employers must pay INAIL contributions to cover workplace accidents and occupational diseases.

• Sick pay:
  • Days 1–3 (periodo di carenza): Typically paid by the employer.
  • Days 4–20: Social security (INPS) pays 50% of the salary.
  • Day 21–180: INPS pays 66.6% of the salary.
  • Note: Employers often supplement these payments to reach 100% of the salary, depending on the CBA.
• Maternity leave: Mandatory for 5 months (usually 2 months before and 3 months after birth). INPS provides an allowance of 80% of the remuneration, often supplemented by the employer.
• Paternity leave: Fathers are entitled to 10 working days of leave, paid at 100% of their salary.
• Parental leave: Optional leave available until the child turns 12. The allowance is 30% of the wage, though duration and eligibility criteria apply.

Severance pay (TFR - Trattamento di Fine Rapporto) TFR is a mandatory, integral component of employee compensation in Italy. It accrues cumulatively and is disbursed upon termination of the employment relationship (regardless of the cause).

• Calculation: A portion of the annual salary is set aside each year (Salary divided by 13.5).
• Revaluation: The accrued amount is revalued annually by a fixed rate of 1.5% plus 75% of the inflation rate (ISTAT consumer price index).

Welfare and benefits by classification

The CCNL Commercio distinguishes benefits based on the level of responsibility:

• Dirigenti (Executives - H021):
  • Health & liability: Employers must provide comprehensive Civil Liability insurance and specific health insurance (RCC) due to the high-level decision-making risks associated with the role.
  • Welfare credit: The CBA introduces a mandatory welfare credit accessible through the CFMT welfare platform to support work-life balance.
  • Additional perks: Commonly includes company cars and supplementary pensions.
• Quadri & impiegati (Middle managers & white-collar - H011):
  • General welfare: Includes health and safety measures, family support, and access to training.
  • Allowances: Benefits often include meal vouchers (buoni pasto), transportation allowances, and reimbursement for professional expenses incurred during assignments away from the regular workplace.

Remote work expenses

• Teleworking: Employers are legally required to reimburse or provide a flat-rate indemnity for expenses such as internet and phone bills.
• Smart working (hybrid): While employers must provide necessary tools, strict reimbursement of expenses (such as internet bills) is not required by law unless agreed individually.

Italy has a progressive tax system that applies to both individuals and businesses. Employers must withhold income taxes (IRPEF) and social security contributions from employees’ salaries.

• Personal income tax (IRPEF) rates (2026):
  • €0 – €28,000: 23%
  • €28,001 – €50,000: 33% (Reduced from previous 35%)
  • Above €50,000: 43%
• VAT: 22%
• Tax allowances: Italy uses a tax credit system (for employment, dependent family members, etc.) rather than deductions to reduce tax liability.

Salaries in Italy are determined by the relevant National Collective Bargaining Agreement (CCNL), which sets minimum wage levels based on job classification (Level I–VII, Quadro, Dirigente). Remuneration must align with the quantity and quality of work delivered.

Salary structure & timing

• 13th/14th month: Most CBAs, including the commercial sector, provide for a 13th-month salary (tredicesima), typically paid in December. Some contracts also include a 14th month.
• Payment deadline: Salaries are typically paid by the 10th of the following month.
• Review: Minimum wage levels are subject to periodic adjustments based on CBA renewals.

Overtime and night work

• Overtime: Legally, overtime must be compensated with at least a 10% increase over standard rates. However, in practice, most collective agreements set this rate between 30% and 50%.
• Night work: Defined as a period of at least 7 consecutive hours, including the interval between midnight and 5:00 AM. Night work requires specific compensations and health assessments as per the CBA.

Compensation distinctions by role

• Dirigenti: Compensation consists of a higher base salary plus performance-related bonuses tied to company goals. Due to their results-oriented role, they do not adhere to strict working-hour schedules (no overtime pay in the traditional sense), though they are entitled to 30 days of vacation.
• Quadri & impiegati: Salaries are based on the CCNL grid. They work a standard 40-hour week and are eligible for overtime pay.
  • Note: Quadri and Impiegati are entitled to 22 days of vacation (for a 5-day work week) or 26 days (for a 6-day work week).

Termination and severance costs

• TFR payout: Upon termination, the employer must pay the accumulated TFR. The annual accrual is calculated as the annual salary divided by 13.5.
• NASpI ticket: If an employee is dismissed (except for voluntary resignation), the employer must pay a state contribution ("Naspi ticket"). This costs 41% of the monthly Naspi ceiling for every 12 months of seniority in the last 3 years.

Notice period: If the notice period is not worked (by employer choice), an indemnity in lieu of notice (indennità sostitutiva) must be paid.

• Minimum salary increases (effective 2026):
  • Note: These increases apply to minimums; amounts may be absorbed if the employee has a "Superminimo Assorbibile".
  • Quadro: +€60.77
  • Level I: +€54.74
  • Level II: +€47.35
  • Level III: +€40.47
  • Level IV: +€35.00
  • Level V: +€31.62
  • Level VI: +€28.39
  • Level VII: +€24.31
• Salary payment deadline: By the 10th of the following month.
• Employee withholdings (IRPEF & INPS): Must be remitted via Form F24 by the 16th of the following month.
• Taxes/contributions deadline: By the 16th of the following month.
• Termination pay: In Italy, termination payments must be made with the final payslip. The payment is typically due on the 10th of the following month or the 10th of the second month after termination, depending on when the TFR (severance payment) is paid:
• Payroll currency: EUR

In Italy, collective bargaining agreements between trade unions and employers' associations govern key employment terms, including wages, hours, and benefits. While employers and employees can negotiate contracts, all agreements must align with national labour laws and CBAs. This ensures that contracts meet statutory minimum standards despite the freedom to negotiate.

Total employment cost: 30%

• Social security (healthcare, pension, injuries, sickness)
• Unemployment
• Maternity
• Temporary unemployment compensation
• Social mobility
• Workers' compensation
• Disability insurance
• INAIL (workplace accidents & occupational disease insurance)

Minimum wage: No statutory minimum wage

Probation period: Up to 6 months for all employees; 3 months for non-managerial positions

EOR services in Italy let you legally hire individuals without setting up a local legal entity. The EOR acts as the official employer and handles all legal responsibilities, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

PEO services in Italy deliver HR and administrative support while you retain your role as the legal employer. Employers with existing legal entities in Italy use PEO services to help manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams offers a payroll calculator tailored to Italy’s labour laws. With our tool, you can quickly estimate net and gross salaries, employer and employee contributions, and other mandatory deductions.

Here is a list of public holidays in Italy: