Comprehensive Guide to Employee Benefits and Compensation in Italy

Employee benefits are the additional perks offered along with their regular salary. These can be in monetary or non-monetary form, depending on company policies. These benefits aim at:

• Improving employee satisfaction
• Retaining them in the organization
• Attracting new employees to the organization 

These benefits depend on the budget the company decides and the number of employees who are a part of the organization. Once the employee benefits are decided, these are included in the employee’s compensation structure. 

Companies today have employee satisfaction at the top of their agenda. Hence, they provide both mandatory and supplemental benefits to their employees. 

According to government laws, all Italian employees are entitled to mandatory benefits. Depending on the terms of the company’s benefits program, they might additionally employ supplemental benefits. 

Some of the mandatory benefits include minimum wages, overtime pay, etc. Apart from the monetary benefits, the employees can also take leaves and holidays depending on the situation. The Italian Government decides the number of leaves and public holidays. The company might also give you an allowance for your meals, fuel, etc., depending on the company policy.

When developing your compensation and benefits policy for Italy, you must consider the various compensation rules established by the government.

Compensation Laws in Italy

Italy has several compensation laws specified by the Italian Government. Let’s examine some compensation laws driving Italy’s compensation and benefits policy. 

• As per Act n. 196/1997, Sect. 13 of the Constitution, the working hours cannot exceed 40 hours in a week and 8 hours in a day.
• If the employees work beyond 48 hours a day, the employers must arrange for a specific authorization from the Department of Labour under Act 196/1997.
• Article 36 states that all employees should get a day’s break in a week to rest. The rest day should ideally be on a Sunday as per Sect. 2109 Civil Code.
• The Civil Code states that all employees must have access to a minimum of 8 days of paid leave once they complete a year with the organization.
• The Sect. 2110 Civil Code, Act 1204 of 30 December 1971 states that employees can not terminate a female employee within a year of their child’s birth.
• Italian Constitution’s Article 3 states that no employee is discriminated against based on sex, race, language, religion, political opinions, or personal and social position.

How to Design an Employee Benefits Program for Employees in Italy?

When designing a compensation package in Italy, there are several things you must consider, such as budget and the benefits employees want. 

Let’s look at some steps in curating employee compensation and benefits in Italy. 

Step 1: Decide on a budget and frame your goals

Before creating a compensation and benefits strategy, you must have a budget from the company’s top management. You must identify the goals you hope to achieve with a benefits plan.

Some of these goals can be:

• Motivating and inspiring current workers and attracting new hires with better benefits
• Choosing the perks for all employees while keeping the budget in mind
• Complying with all applicable Italian federal labor legislation

Step 2: Consider the industry standards and the expectations of the employees

While having a budget is essential, you must be aware of the types of benefits that other businesses in the same sector provide to their employees. This enables you to compare your perks to those of your competitors and peers in the industry.

Try to comprehend what the employees anticipate from the new benefits plan and the perks they prefer. Use the data to determine employees’ desired benefits and try to include them in your benefits plan.

Step 3: Add flexibility

All the employees have different needs and expectations from the company’s benefits plan. Hence, before you decide on workers’ compensation in Italy, you must try to understand the diverse needs of the employees. The internal survey helps to uncover some of the individual requirements the employees might have. You may use these insights to add some personalisation to the benefits plan. 

You can meet the various needs of your employees if your compensation plan is adaptable. Additionally, it allows flexibility for any internal corporate policies or federal regulations adjustments.

Step 4: Act on the feedback

Getting input from different stakeholders is crucial when creating the benefits plan. Share the first draft of your benefits plan with the employees and other essential members of the management so they can review it. 

You can include feedback that improves the benefits plan and falls within the budget allotted. Additionally, you can modify or remove a benefit if you know the employees won’t use it as per the survey.

Step 5: Cross-check the plan and release it

It is essential to review the compensation and benefits plan in Italy before releasing it to ensure they remain viable in the changing business environment. Additionally, it would help if you allowed flexibility so companies can modify it in response to changes in the economy or the Italian labor law.

Before you release the benefits plan, you must cross-check it for any possible errors. Before starting the implementation phase, evaluate each element of the benefits plan. You must design a few measures and performance indicators to assess the strategy’s effectiveness and monitor the entire activity. With these KPIs, you may monitor the implementation and make real-time adjustments to the benefits plan.

Types of Guaranteed Benefits in Italy

The employees have access to several employee benefits in Italy. Before you create a benefits plan for your employees, you must know the federal laws that govern these mandatory benefits. 

• Minimum wage
• Unlike most countries, Italy does not have a minimum wage requirement for employees working across companies.
• However, the National Collective Agreements have decided on the minimum wages based on the sector for every role, and the employers must adhere to it.
• Working hours and overtime
• In Italy, the employees must work 8 hours a day and 40 hours a week. Hence, most companies operate only five days a week.
• Employees who work beyond the maximum number of hours are entitled to overtime pay in Italy.
• CBAs control overtime pay, which typically ranges from an additional 15% to 50% of the employee’s hourly rate of compensation.
• If an employee works during the night hours, their working hours cannot exceed 8 hours every 24 hours under any circumstances.
• An employee who is younger than 16 years cannot work beyond 7 hours a day.
• Paid leaves
• All employees in Italy are entitled to a minimum of 8 days of paid leave per the Civil Code after completing a year with the organization. 
• However, the period can be extended to 4 weeks if there are any collective agreements in the picture.
• Employees can only encash their paid leaves if they avail themselves. This can only be done when an employment contract is terminated.
• Public holidays
• Employees in Italy can take 12 public holidays. These holidays include one regional holiday, and the remaining 11 are national holidays.
• If a public holiday occurs on Sunday, the employee can take a leave on Monday instead.
• Sick leaves
• The employees in Italy are entitled to sick leaves, and the employer and the Government pay for these leaves.
• The employer pays 100% of the employee’s salary for the first three days of these leaves. Beyond that, the employee receives 50% from the employer. However, these payments will only be made for two instances in a year.
• The Italian Government pays the salary for the remaining leaves after three consecutive days for up to 21 days.
• If the employee falls sick for the third time, they receive 66% of their salary, and it falls to 50% if the employee is sick for the fourth term in the year. 
• Beyond four terms of sickness, the employer does not pay for the leaves.
• Maternity leaves
• In Italy, female employees can take a maternity leave of up to 5 months. The employees can avail of the first two months of leaves before the due date and the rest post-delivery.
• The employees receive 80% of their regular salary during their maternity leave.
• A female employee can extend the maternity leave up to 6 months once the leave period is over. However, the extended period will be unpaid leave.
• If the employee chooses to let go of their parental leaves, they can choose to work for 6 hours a day.
• Paternity leaves
• All fathers can avail of a paternity leave of 20 days post the birth of multiple children.
• The male employees receive 100% of their salary while on paternity leave.
• Annual Bonus
• Most companies in Italy offer a 13th-month salary to all employees in December.
• However, there are no legal requirements for a bonus payment. The companies make the payments as there are a few collective bargaining agreements.

Employee Benefits for Expatriates

The ex-pats who travel to Italy for work enjoy the same benefits and perks as regular employees who are residents of Italy. The ex-pats have access to health insurance and all the mandatory and supplemental benefits given to regular employees. These benefits are a part of worker’s compensation in Italy. However, as the ex-pats travel from a different country to work in Italy, they might get a few additional benefits:

• Accommodation expenses
• Relocation expenses
• Traveling expenses

Employers have different mechanisms to compensate their ex-pat employees for their expenses to come and settle in Italy. However, the employment contract states these benefits’ terms and payment conditions.

How are Employee Benefits Taxed in Italy?

Taxes are an essential part of the compensation package in Italy. Employers must consider bonuses, leave payments, and other benefits when determining an employee’s take-home pay because most perks are part of the employee’s taxable income. The company must deduct the right amount of taxes based on the tax slab from each employee’s paycheck before crediting their salary. 

Italy currently has a progressive tax system. Because of this, the tax rate increases as gross income increases beyond a certain level. The employees’ gross compensation includes the monetary value of their benefits. The tax rate is between 23% and 43% and varies according to your gross income slab.

Restrictions for Italy Benefits and Compensation

Like other economies, most benefits are taxable in Italy. To determine how much tax an employee owes, you must know how much these perks are worth. The employer must schedule all required monthly tax payments to the nation’s tax authorities.

Before deciding on a compensation structure, be sure your company is legitimately incorporated in Italy. The remuneration and perks must also comply with Italian labor legislation. Employees who put in extra time to help your business must receive overtime compensation per federal laws.

Supplemental Benefits for Employees in Italy

Italy is an employee-friendly country. Hence, apart from the mandatory benefits, the nation also offers supplemental benefits to the employees. These supplemental benefits add to the magnitude of pull that attracts new talent to the organization. These benefits also help in retaining the existing employees in the organization.

Stock options

The employees in Italy have access to the company stocks as a supplemental benefit. Hence, if the company is experiencing a growth wave, the employees can benefit from the high value of the stocks. Additionally, some companies offer a profit-sharing option to their employees to show gratitude towards them and the work they put in for the company.

Supplemental Insurance

Some employers offer life and accident insurance to their employees apart from health insurance coverage. These cover a major cost during emergencies and can greatly benefit employees. Some employers also offer dental and optical insurance to their employees as an add-on to their existing health plan. 

Upskilling Allowance

Employees in Italy are motivated to acquire a new skill or brush up on their existing skills. Hence, companies might provide professional development stipends to their employees to cover the cost of these training modules.

Wellness Allowance

Companies in Italy also cover the wellness expenses of their employees. These expenses generally include costs related to physical and mental well-being like a gym membership, therapy sessions, etc.

How Can Multiplier Help with the Benefits Management in Italy?

Establishing a company in Italy effectively attracts top personnel to your company. Offering outstanding employee benefits in Italy is one way to do this. You may get around it by incorporating the local labor regulations into the benefits package and curating it step-by-step. You can get help in curating a feasible benefits plan from an international PEO platform like Multiplier.

Multiplier helps you understand Italian labor laws and hire educated, qualified employees who can help you grow your business. Without setting up a business there, you can start hiring employees in Italy with the help of Multiplier. While assisting you in staying within your budget, the PEO will help you manage employee expenses that arise from providing mandatory and supplemental benefits to the employees.