Global HR Compliance in Italy

If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in Italy Guide below will help you understand the nuances of labor legislation in the country.

Companies hire international workforce for various reasons but in most cases they are:

• entering the foreign markets to sell company products. To do so, the company hires sales representatives who would represent their product and sell it to their local client base.
• hiring a global talent with unique skills that is unavailable in the local market or costs the company less than the talent with similar skills hired in the home country.

Before entering a certain foreign market or engaging a global talent, it is crucial for the company to understand how it can make local hires and reward its workers on a monthly basis. Growing companies often face a challenge of paying benefits and bonuses to the commission-based independent sales representatives they are working with.

If you intend to hire and pay your foreign workforce in full compliance with labor laws and regulations of Italy, then the Global Employer of Record service from Acumen International may be the best way for you to go. We are an International PEO company and we specialize in global employment, meaning we can employ your employees in Italy and act as their legal employer on your behalf. We will payroll your foreign workforce monthly and provide benefits to them through our global network so you don’t have to set up your own legal entities there.

We are experts in global workforce employment in , and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Italy.

See the guide below for a general overview of labor rules and regulations in Italy or contact us if you need to employ workers in Italy or would like to get more details.

Hiring and Firing Workforce in Italy Guide

The question shouldn’t be on why it CAN’T be less complicated to expand internationally or why you CAN’T extend your business operations to such an attractive market as Italy. But rather it should be why you WON’T break out of the limitations and just move. This is because Acumen International, the express global employer of record provider has gone all out to help you break forth any seeming barriers and help you achieve your goal of being a global player with limited stress. In the interim, here is a simple but comprehensive information on the things you must know about Italian labor market if you must do business there.

# Employment Agreements

In Italy, every member of staff employed needs to have an employment contract (“contratto di lavoro”). The two main kinds are a permanent employment contract (“contratto a tempo indeterminato”) and a temporary fixed term employment contract (“contratto a termine” and “contratto a tempo determinato”), temporary agencies contracts.

Temporary Agencies Contracts

An agency can only place workers with an employer to satisfy a temporary demand and agencies must have fulfilled certain criteria and received authorization. A temporary contract ( contratto per prestazioni di lavoro temporaneo) is a fixed-term contract or an open-ended contract, where an agency must pay compensation to a worker for the periods when he isn’t working. The agency must pay workers’ social security contributions and work accident insurance. Temporary workers have pro rata rights to annual and public holidays, a 13th month’s salary and any other payments which other workers employed by the same company are entitled to.

Permanent employment contracts

The permanent employment contract governs the “traditional” employment relationship in Italy. This contract has an indefinite open time period and guarantees the employee higher protection than does any other form of Italian employment contract.

Fixed-term contracts

Companies can hire employees on a fixed-term contract for arrangements limited by time. Fixed-term contracts can last up to 36 months, including any extension. Quantitative limits are normally set by national collective agreements (NCAs).

#Employment Termination and Severance Pay (Dismissal)

Under Italian law, any termination of employment must be justified. The reasons to terminate an employment contract can be divided in three main categories:

• Objective justified reasons – which are related to the abolition of a job position due to a company’s economic situation regarding production, work organization, or proper functioning;
• Subjective justified reasons – which occur when the employee commits a breach of his/her contractual obligations or is guilty of negligence in the performance of his/her duties, but the behavior is not so serious as to constitute a dismissal for just cause;
• Just cause (“giusta causa”) – that indicates any serious misconduct or breach that renders the continuation of the employment impossible, including, theft, riot, serious in subordination, and any other behavior that seriously undermines the fiduciary relationship with the employer.

Mutual agreement

The employer and the employee sign an agreement in which they express their intent in writing to mutually terminate the employment contract, identifying the possible mutual waiver of notice charges. They are called settlement agreements. When coming to an agreement on the mutual termination of the employment relationship, the parties are free to choose what clauses to include in the contract. They usually decide to include:

• A clause where the employer agrees to grant the employee a sum of money as an incentive for the employee to terminate the contract.
• A clause where the employee renounces all possible claims against the employer.

#Severance payments

Civil Code provides that the indemnity in lieu of the notice period, if due, must be calculated based on the gross annual salary received by the employee plus the amount of the commissions, incentives, bonuses, board and lodging allowances, and all other continual payments received during the last three years (or the less duration) of the employment relationship, with the exception of expense reimbursements. The applicable National Collective Labor Agreement may provide the specific items to be included (or not to be included) in the calculation of the severance indemnities. Also Italian law provides for the payment of a deferred form of remuneration, also known as a severance indemnity (“Trattamento di Fine Rapporto” or TFR). In addition to the minor statutory termination indemnities, the TFR must be paid to employees when an employment agreement is terminated, regardless of the cause of the termination. The TFR amount varies depending on the employee’s salary and length of service.

#Employee Benefits and Contributions

Pension benefits

In Italy, pensions are operated by INPS and fed by salary-based contributions paid by both the employer and the employee. For employees, the pension is linked to the amount of contributions paid as a percentage of the employee’s global salary during an entire working life. In certain specific cases provided for by law (e.g. periods of leave), in order to allow the employee to reach the minimum pension requirements, the contribution is directly paid by the government. In other cases, such as the interruption or the termination of work (from lack of work during one’s working life or retirement before retirement age) the contribution due by law can be directly paid by the employees.

Healthcare and Insurances

Accidents: The right to payments arises in cases of a violent accident that occurs during working hours resulting in death, permanent, total or partial disability, or the temporary inability to work, which lasts longer than three days. Payments are made even in cases where the worker is at fault and are only excluded in cases of willful misconduct by the worker.

Illness: Benefits available to those suffering occupational illnesses are generally restricted to a specific list of such illnesses. The Constitutional Court however, has held that workers suffering from all occupational illnesses, even if not originally listed, are eligible to apply for benefits, provided that the occupational illness manifests itself within a given period of time from the employee leaving the position that purportedly caused the illness, and if the disability resulting from the illnesses greater than 10 percent. Moreover, some collective agreements also provide for the employer’s obligation to enter into specific insurance policies covering accidents, death, and disabilities of its employees.

#Probationary period

The statutory trial periods are 3 months for employees not assigned to management functions and 6 months for all other employees. During the trial period, either party may freely terminate the working relationship at any time, without any notice, obligation or payment of the relevant indemnity “in lieu”.

#Overtime

The needs of a particular company may, in exceptional circumstances or on an occasional basis, require employees to work beyond their “usual working hours.” Overtime is regulated by law and by the applicable collective agreement. The law provides that overtime is calculated separately and paid by way of an increase in salary pursuant to the NCBA, which may in any case permit that overtime be compensated with time off in addition or as an alternative to the salary increases that may be due.

#Work hours

The normal duration of the working activity is 40 hours per week. However, the applicable collective agreements or internal collective agreement may determine shorter working hours. In any case, the maximum duration of working hours is 48 hours per week, including the overtime. It must be pointed out that this maximum duration does not apply to executives. Employees are entitled to 11 continuous hours off every 24 hours and also 24 hours every 7 days (which usually corresponds to Sunday, unless the working activities is organized in shifts).

#Annual leave

Under Italian law, employees are entitled to annual holidays. The minimum length of annual holidays is four weeks per year, but the applicable NCBA may provide for a longer term. The four-week period must be used for at least two consecutive weeks during the same year, if requested by the employee, and the remainder of the weeks must be used within 18 months of the end of the accrual year.

#Sick leave

In case of sickness, the employee’s protection has been remarkably improved, mainly through collective bargaining. During sickness, suspension of the contract, with job protection, lasts for periods usually determined by collective agreements, according to the employee’s seniority. The average period is about one year. During this time, the worker is fully paid (by the employer or by the Social Security). Beyond this period an employee is usually entitled, under collective agreements, to a further period of unpaid leave.

#Parental leave

Maternity leave

Female employees cannot work during the 2 months prior to the planned birth of the child (3 months in case of dangerous jobs, listed by the Minister), and during the 3 months following the birth. Upon permission released by the competent doctor, the maternity leave can start 1 month before the planned birth and finish 4 months later. At the end of the maternity leave, the mother has the right to come back to the same job position she left and at the same/better conditions, and until the child is one-year-old, entitled to work in the same office or at least, in the same city.

Paternity leave

The father is entitled to paternity leave, on the same terms and conditions as in the case where the mother is seriously mentally injured, and for the residual duration if the mother dies or abandons the child.