Last updated:
Hiring in Italy: TFR, 13th & 14th Salary Explained
Summary:
- TFR (severance) accrues for every employee at roughly 6.91% of annual gross (salary ÷ 13.5, net of a 0.50% INPS contribution) and is paid out whenever employment ends, for any reason.
- The 13th month (tredicesima) is effectively universal and paid in December; the 14th month (quattordicesima) is only owed where the sector’s CCNL provides it.
- Italy has no statutory minimum wage — pay floors and many terms come from the applicable CCNL (national collective agreement), so picking the right one is essential.
- Employer INPS runs ~29–32% of gross; IRPEF is 23% / 33% / 43% in 2026 (the middle bracket dropped from 35% to 33%).
Quick answer: Italian employment cost is driven by three things foreign employers often miss: TFR severance (about 6.91% of gross accrued every year and paid out on any exit), a mandatory 13th-month salary in December (and a 14th where the CCNL requires it), and employer INPS contributions of roughly 29–32%. There is no statutory minimum wage — the sector CCNL sets the floor. You can hire without an Italian entity through an EOR, but permanent-establishment risk remains if the employee holds contracting authority.
TFR — Italy’s statutory severance
Trattamento di Fine Rapporto (TFR) is mandatory deferred compensation that every employer must set aside for every employee. It is not a bonus and not optional. Each year the employer accrues annual gross salary ÷ 13.5 (≈7.41%); after a 0.50% INPS contribution, the net amount retained as the employee’s TFR is about 6.91% of annual gross — roughly one extra month of pay per year.
The accumulated balance is revalued each 31 December at 1.5% fixed plus 75% of annual inflation. TFR is paid out when employment ends for any reason — resignation, dismissal, mutual agreement, retirement or expiry of a fixed term. Depending on company size and the employee’s election, it is held in-company, in the INPS Treasury Fund (mandatory for firms with 50+ employees), or redirected to a supplementary pension fund. Either way, budget it as a real, accruing liability.
The 13th and 14th month salaries
Italian pay is annualised across more than twelve instalments:
- Tredicesima (13th): effectively universal for all private-sector employees, paid in December, equal to one month’s salary and accruing 1/12 per month worked.
- Quattordicesima (14th): not universal — owed only where the employee’s specific CCNL provides for it (common in commerce, tourism, services and logistics; absent in others such as metalworking). When due, it is typically paid in June or July.
So annual base cost is about 13 months of pay, or 14 where a fourteenth applies — these are part of the RAL (gross annual pay), not add-ons.
CCNLs: where Italy’s pay rules really live
Italy has no statutory national minimum wage. Minimum pay is set by the CCNL — the national collective agreement for each sector (Commercio, Metalmeccanici, Studi Professionali, Turismo and many more). The applicable CCNL determines minimum pay by job level, the 13th/14th, notice periods, probation, leave and overtime. Applying the wrong CCNL is a significant compliance risk, so the first step in any Italian hire is identifying the correct agreement.
Hiring in Italy without the compliance headache
Between TFR severance, the 13th and 14th salaries, the right CCNL and employer INPS of roughly 30%, Italian payroll is easy to get wrong. TopSource employs your hire through our Italy Employer of Record — or runs compliant payroll under your own entity — handling CCNL selection, INPS/INAIL, IRPEF and TFR accruals end to end.
Social security and income tax
Employer INPS contributions run roughly 29–32% of gross (about 30% on average), varying by sector, company size and employee category; employees pay around 9–10%. Employers also pay INAIL work-injury insurance, whose rate depends on occupational risk (well under 1% for office roles). Income tax (IRPEF) is progressive, and for 2026 the brackets are:
- 23% up to €28,000;
- 33% from €28,000 to €50,000 (reduced from 35%);
- 43% above €50,000.
Regional (≈1.23–3.33%) and municipal (0–0.9%) surcharges apply on top, and the employer withholds everything as sostituto d’imposta.
Key employment terms
- Probation, notice: set by the CCNL and job level (probation commonly up to six months for senior roles).
- Fixed-term contracts: allowed without a reason up to 12 months; a justification (causale) is required to extend up to the 24-month maximum.
- Annual leave: minimum four weeks (20 working days) paid, on top of 12 national public holidays plus the local patron-saint day.
- Dismissal: requires just cause/justified reason; for staff hired since March 2015 the Jobs Act “contratto a tutele crescenti” generally provides graduated monetary compensation rather than automatic reinstatement.
Hiring without an Italian entity
A foreign company cannot run Italian payroll without either a local entity or an Employer of Record in Italy that employs the worker on its behalf, handling CCNL selection, payroll, INPS/INAIL, IRPEF withholding and TFR. Be aware that an EOR reduces but does not automatically remove permanent-establishment risk — if the Italy-based employee negotiates or concludes contracts, a local entity may be the more compliant route, and only a properly licensed provider should be used. If you already have an entity, our Italy payroll service manages the monthly run, TFR accruals and 13th/14th payments. Talk to our team about the right structure.
Frequently asked questions
Is TFR mandatory for foreign employers in Italy?
Yes. TFR is a non-waivable statutory entitlement that every employer of an Italian employee must accrue, regardless of nationality or where the company is based. It accrues at roughly 6.91% of annual gross salary and is paid out whenever the employment ends, for any reason.
How much extra does TFR add to my payroll cost?
About one additional month of pay per year — roughly 7.4% of gross is set aside, of which about 6.91% is retained as the employee’s TFR. It must be budgeted as a real, accruing liability, not an optional bonus.
Do I have to pay both a 13th and a 14th month salary in Italy?
The 13th month (tredicesima) is effectively universal and must always be paid, normally in December. The 14th month (quattordicesima) is owed only if the employee’s specific CCNL provides for it — common in commerce, tourism and some services — typically paid in June or July.
Does Italy have a minimum wage?
There is no statutory national minimum wage. Minimum pay is set by the national collective agreement (CCNL) for the relevant sector and job level, which is why selecting the correct CCNL is essential before issuing a contract.
What are the employer’s social security costs in Italy?
Employer INPS contributions run roughly 29–32% of gross salary (about 30% on average), plus employer-paid INAIL work-injury insurance whose rate depends on occupational risk (often well under 1% for office roles). Employees additionally pay around 9–10% INPS, withheld from their pay.
What income tax will be withheld from my employee’s salary in 2026?
IRPEF is progressive: for 2026 it is 23% up to €28,000, 33% from €28,000 to €50,000, and 43% above €50,000. Regional (about 1.23–3.33%) and municipal (0–0.9%) surcharges also apply, and the employer withholds all of it as sostituto d’imposta.
Can I hire in Italy without setting up a company?
Yes — through a licensed Employer of Record, which legally employs the worker and handles payroll, INPS/INAIL, tax withholding and TFR. However, an EOR does not automatically remove permanent-establishment risk if the employee negotiates or concludes contracts, so roles with binding commercial authority may still require a local entity.
Useful Insights
Hiring in Italy: TFR, 13th & 14th Salary Explained
Understand Italy's TFR severance, the mandatory 13th month and CCNL-dependent 14th month, INPS social security, 2026 IRPEF brackets, and how an EOR fits in.
Explore
30% Ruling & Hiring in the Netherlands: Employer’s 2026 Compliance Guide
The 30% ruling in 2026, Dutch payroll taxes, the mandatory 8% holiday allowance, the two-year sick-pay obligation, and how to hire in the Netherlands with or without an entity.
Explore
Top EOR Providers for Secure Global Payroll
Choosing an EOR is no longer just about fast onboarding. Compare the top global EOR providers on compliance, data security, and multi-country payroll to find the right fit for your enterprise.
Explore AI in HR: closing the gap between hiring speed and global compliance
AI in HR speeds up global hiring but never shifts legal accountability. Where the compliance risk sits, and how to keep a human in the loop.
Explore Hiring in the UAE: EOR vs WPS Payroll — 2026 Employer Guide
How to employ staff in the UAE in 2026: the Wage Protection System (WPS), end-of-service gratuity, visas, and when to use an Employer of Record vs your own entity.
Explore How to Choose One of the Best Global Payroll Provider for Multi-Country Compliance
Choosing global payroll providers for complex multi-country operations comes down to compliance depth, not country-count marketing. This guide covers the capabilities that separate real providers from resellers, the three operating models and when each fits, the risks that catch multinational employers, and the due-diligence questions to ask before you sign.
Explore
Employer National Insurance Rates: A Guide for UK Employers
Employer National Insurance holds at 15% above the £5,000 Secondary Threshold, but the Lower Earnings Limit has risen and Statutory Sick Pay is now payable from day one. A practical guide for UK employers to the rates, thresholds and payroll changes that shape your real workforce cost.
Explore
European Pay Transparency: What HR Leaders Must Do Now
How enterprise teams should evaluate employer of record (EOR) services for global compliance, data security and multi-country payroll, with the five criteria that matter most.
Explore How to Choose Employer of Record (EOR) Services for Enterprise Compliance
How enterprise teams should evaluate employer of record (EOR) services for global compliance, data security and multi-country payroll, with the five criteria that matter most.
Explore TopSource vs ADP: Which Global Payroll Provider Wins?
Choosing between TopSource and ADP isn't about which name you recognise it's about which provider actually fits how your business operates. This comparison breaks down country coverage, EOR services, support quality, and pricing transparency, helping SMEs and mid-market companies decide where their global payroll truly belongs.
Explore
Mark is the Global Sales Director at Topsource Worldwide. He has been a pioneering figure in the global expansion space since 2013. He is the first salesperson to sell EOR services in Europe, a feat he accomplished in 2013.