Hiring in Italy
You’ll know it as the home of Pasta, Pizza and the Tower of Pisa, as well as the guys who gave us straight roads and the names of many of our towns and cities. Italy’s successes are certainly long term, with the Italian economy the 3rd largest in the Eurozone and the 8th largest in the world.
Italy is a founding EU member with comprehensive integration into the single market, as well as a leader in science, engineering, manufacturing, automotive and energy. Italy’s workforce of roughly 23 million is highly educated, highly skilled and contributes to an advanced, mixed economy worth over $2 trillion.
Italian workers enjoy extensive access to employment law, regulated employment practices and Italy ranks top ten globally in terms of quality of life. Foreign investment is actively encouraged and the labour market is divided between a mix of Italian and international organisations, much like the rest of the EU.
Guide to becoming an Employer in Italy
Italy is perhaps most famous for its culture, its fashion and its food, but its economic strength shouldn’t be overlooked either. Among countries in the European Union, it trails only France and Germany, and it ranks eighth in the world by GDP, so it’s no surprise that it’s a popular destination for incoming international businesses.
Like many other highly developed economies, Italy’s is largely service-driven (accounting for around three-quarters of its GDP). However, it does retain a strong industrial sector and is the EU’s second-largest manufacturer, leveraging its strong links with other EU countries, the United Kingdom and the United States to export hundreds of billions of dollars of goods every year.
But from a payroll perspective, what does doing business in Italy look like? This guide sets out the basic facts you need to know.
Establishing your Business in Italy
Italy does have a reputation in some quarters for bureaucracy and inefficiency, but from a business registration perspective, things have improved in the last decade or two. It’s now possible to get through all the procedures of incorporation in as little as 2-3 weeks, which is a standard-bearer for how Italy is looking to lead the EU in this respect.
The most important parts of the process are:
- Opening an in-country bank account in the company’s name
- Executing incorporation deeds before a notary public
- Registering with the tax agency, social security institute, labour office and the insurance institute
- Deposit documents with the Register of Enterprises
- Obtain a VAT number and a fiscal code
Employment Law in Italy
Employment laws and employee rights in Italy are relatively complex: businesses have to navigate a mix of EU legislation, Italian legislation and collective bargaining agreements (CBAs) negotiated by unions.
The standard working week in Italy is 40 hours. Overtime can be worked up to a maximum of eight hours a week and 250 hours per year; rates of overtime pay aren’t specified in law, although an increase of between 15-50% is common in CBAs.
Probationary periods can vary between 20 working days and six months, with CBAs again playing a major role in defining these for different companies and across different industries. Notice periods are also governed by CBA negotiations.
What is the Minimum Wage in Italy?
Italy is one of a small number of developed countries that does not have a legally mandated minimum wage. Instead, wage rates are determined by (yes, you’ve guessed it…) CBA negotiations, with unions ensuring that employees get a fair rate for their jobs. CBAs also specify the frequency at which payroll can be run.
The main type of bonus paid in Italy is the 13th-month bonus, usually paid in December ahead of the holiday season. Some CBAs also provide for a 14th-month bonus for employees, should they meet certain pre-defined targets.
Italy does not have severance pay as such, but it does have a system known as TFR instead. This is a payment that employers are expected to set aside so that it can be paid to employees when they leave the business. The calculation for the amount per employee per year is their annual salary divided by 13.5.
What are the Social Taxes in Italy?
Income tax in Italy should be withheld from employees’ pay and remitted to the Tax Agency monthly. National income tax is applied at four progressively higher rates, ranging between 23% and 43%, and is applied without any exemptions at the bottom end of the scale. Additionally, there are regional (from 1.23% to 3.33%) and municipal (up to 0.8%) income taxes.
Social security contributions should also be withheld and remitted, and the total rate is currently 27-28% from employers, and 9.19% from employees. This total figure covers a range of benefits, including unemployment, sickness, maternity, unemployment and social mobility.
Maternity Leave in Italy
Maternity leave is 20 weeks – eight before birth and 12 after – with pay of 80% of salary covered by the social security programme. The paid paternity leave entitlement increased from seven days to ten as of January 2021, and the mother can transfer an extra day from her entitlement if she so wishes.
Italian National Holidays & Annual Leave
There are 12 days of public holiday in Italy, which are:
- New Year’s Day
- Epiphany (6 January)
- Easter Sunday
- Easter Monday
- Liberation Day (25 April)
- International Workers’ Day (1 May)
- Republic Day (2 June)
- Assumption Day (15 August)
- All Saints’ Day (1 November)
- Immaculate Conception (8 December)
- Christmas Day
- St Stephen’s Day (26 December)
Paid leave is a minimum of four weeks a year, although many CBAs guarantee more than this for certain employees.
In the event of illness, employers should pay employees for the first three days of absence (assuming the absence has been certified by a doctor), after which the social security services cover the payment.
Why become an Employer in Italy
Perhaps the biggest obstacle that incoming businesses face when getting started in Italy is dealing with CBAs. These make such big differences to employing staff that no two businesses and no two payrolls are the same.
But despite these challenges, once your business is set up, your payroll is negotiated, and your paperwork is complete, you have a market rich in disposable income and a business community that is largely profitable and willing to invest in new products and services.
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