Italy’s Labor Law

Italy is a central manufacturing hub and the third-largest economy in the European Union, with employee-friendly employment laws. 

Italy attracts global investment in critical sectors like automation, machinery, fashion and design, nutrition, and culinary. The presence of a high-skilled local workforce and the geographical advantage incentivize entrepreneurs and global companies to expand their business operations in Italy. 

Companies planning to hire local talents to scale up their operations in Italy must enter into a contractual employment relationship per the labor law in Italy. Even though the labor law in Italy is a work in progress, some key provisions include 

• mandatory reporting of gender pay differences and action plan to correct it within 120 days
• a maximum of 48 hours of weekly work time
• minimum four weeks’ working days of annual vacation leave 
• Five months of maternity leave in Italy for foreigners and citizens

This employment law in Italy guide will walk you through the pivotal aspects of Italy’s labor code, including working hours, leave schemes, payroll taxes, dismissal rules, and data privacy obligations, that remind you of employer obligations.

Applicability of the Act

The labor law in Italy is concerned with statutory employment rights, for example, working time, holiday entitlements, paid leave, data protection and privacy, protection from unfair dismissals, and employer duties like maintaining a safe and secure workplace, etc. 

While Italy’s employment rules are negotiated and derived entitlements from labor laws to suit the job role functions and protect employee rights. 

All statutory employment rights under labor law in Italy are guaranteed to employees. Failure to extend the mandatory benefits could expose employers to legal liabilities such as fines, compensation, and indemnity pay. 

The labor code in Italy defines employees who receive a specific salary, perform certain work activities within a company, and are under the direction of the management and the control of their immediate supervisor. 

Certain statutory rights under the labor act rules in Italy, like personal data protection, minimum wage, and insurance, also apply to self-employed platform workers.  

Independent contractors and freelancers are usually outside the scope of labor regulations. However, employers are encouraged to secure IP rights and payment terms within the scope of Italy’s employment rules. 

Employment Contract

An employment contract is a legally drafted document to ascertain rights and duties in an employment relationship. The most prominent being: 

• the employer must pay the salary, ensure fixed working hours, grant paid leave and provide a safe workplace, etc., as per statutory labor rights 
• the duty to perform work as envisaged

Italy’s employment law allows employers to enter into fixed-term or indefinite-term employment contractual relationships. It avoids misinterpretation of employment rules and regulations and averts legal complications in the future. 

The labor laws in Italy allow employers to renew and extend fixed-term contracts only once with valid reasons and for a maximum period of 12 months. 

As per the labor act rules in Italy, employers may conclude employment contracts within 30 days of hiring, along with the following details: 

• Identification credentials of parties to the employment agreement
• Date of commencement of the employment
• Working hours and conditions
• The job role
• The salary and methodology used for calculation, payment cycle, and other negotiated entitlements

Employers may unilaterally amend the contract to regulate employees’ duties and place of work. However, the labor law in Italy prohibits such an amendment in other instances. 

The labor code in Italy also mandates mentioning a trial period in the written employment contract. Employers can set a trial period (periodo di prova) for a maximum of six months, and both parties are free to terminate the agreement without notice and indemnity. 

Key Provisions of the Act

The labor act rules in Italy are governed by:

• The Republican Constitution of Italy
• The Civil Code of Italy
• Various laws enacted by the Italian Parliament
• Case laws and judgments of labor courts
• European Union directives and regulations 

Based on which key provisions of the act are defined, including working hours, leave schemes, payroll taxes, employment termination rules, employer penalties, and employee privacy obligations.

Working hours 

• Italian labor law does not cap the daily working hours. 
• But the labor code in Italy mandates a minimum daily rest of 11 consecutive hours. 
• People working more than six consecutive hours are entitled to at least a 10 minutes break.
• It is sufficient for employers to maintain permissible average working hours over a four-month reference period, while collective bargaining agreements may extend it for six or 12 months. 
• Italian employment rules usually fix an average weekly work time of 37.5-40 hours. 
• However, major employers in Italy are negotiating a four-day workweek with 36 hours of weekly work time.
• The working hours per Italian labor law, including overtime work, shall not exceed 48 hours per week.
• Night work is carried out between midnight and 5 am per the labor law in Italy. 
• Employers may record an average of eight hours of night work in Italy. 
• Different working hour limits apply to young workers aged 16 years to below 18 years. 
• Employers may not employ individuals under 16 years for more than seven hours a day in a five-day workweek.  
• Individuals aged 16 and 18 can be expected to work up to eight hours a day in a five-day workweek.

Italian working hours law does not apply to executives and managers who are in the job position of independent decision-making or work-from-home employees. 

Overtime 

• Overtime work is not defined under the labor law in Italy, but employers cannot record more than 250 hours of additional work per year for each employee. 
• Italian employer regulations allow Collective bargaining agreements to regulate overtime work. 
• Collective bargaining agreements usually decide additional compensation for overtime work between 15% – 50% of employees’ hourly pay. 

Minimum wage

Italy’s employment rules do not prescribe a mandatory minimum wage. However, effective from October 2022, the member states of the EU have two years to formulate a national law per EU Directive 2022/2041 on minimum wage. 

Moreover, Article 36 of the Italian constitution guarantees a decent lifestyle, and employers must compensate their employees with fair wages equivalent to their work. 

The labor law in Italy mandates bonus payments (13th salary), usually on occasions such as Christmas. Additionally, employers are expected to offer a 14th salary or bonus month payment, usually during July.  

Public holidays 

• The labor regulations in Italy mandate employers to grant 12 paid public holidays per year.
• While New Year’s Day (1st January), Liberation Day (25th April), Labour Day (1st May), Republic Day (2nd June), and Christmas Day (25th December) are fixed, the other seven public holidays vary every year per the Gregorian calendar. 
• Employers may ask employees to work on public holidays but with double-time pay.  

Leave schemes

• Birth & Parenting Leave (BPL):

Employers fund the indemnity through the National Institute for Social Security (INPS). Employees receive up to 80% of the average daily salary throughout the paid maternity leave in Italy. Employers may pay the remaining 20% of the salary based on specific collective labor agreements. Whereas paternity leave in Italy is paid 100% by social security. 

Indemnity during the extended parental leave is applicable per Italy’s employment rules, and the social security body pays 30% of the average daily salary. 

• Maternity leave
• Employers must grant eligible employees at least five months of paid maternity leave in Italy. 
  • Italy’s paid maternity leave rules require employers to grant two months of leave before birth and continue it until three months after the birth. 
  • The same can be divided into one month of paid leave before birth and four months after birth. 

• Paternity leave
• Italian labor code mandates employers to grant up to 20 days of paid paternity leave for multiple births (or adoptions) within five months of the delivery.
• Effective from August 2022, revised provisions for shared paternity leave in Italy for a child up to 12 years of age (previously six):
  • Employers may extend up to six months of paid leave to each parent. 
  • However, employers shall limit shared paternity leave to a combined paid leave of nine months.
  • In the case of single parents, employers may extend up to 11 months of rest, of which nine months is paid leave.

• Annual leave:
• Italy’s employment regulations require employers to offer at least four weeks of annual paid leave. 
  • In some instances, employers may provide continuous leave for only two weeks during the same year. 
  • While the remaining leaves are provided within 18 months after the end of the accrual year. 
  • An individual employment contract or a collective bargaining agreement may provide more paid annual leaves.

Other leaves                   

Employers are obliged to grant a suitable paid leave in case of sickness and disability per the labor act rules in Italy. 

Additionally, Italy’s employment rules compel employers to accept the free transfer of accrued annual hourly leave or holiday entitlements from one employee to another in the same company to tend to their child suffering from a prolonged illness. 

Payroll taxes & obligations

The financial year in Italy runs from 1st January to 31st December. However, companies are free to choose a different fiscal year. Some significant aspects of payroll tax obligations for employers per Italy’s labor laws are:  

• A registered employer with Italian tax authorities is required to:
• deduct and withhold taxes on salary paid 
• pay social security contributions along with the contributions made by a salaried employee
• pay & file withheld taxes to authorities monthly or quarterly
• Income taxes deduction
• Income taxes in Italy are progressive, and individuals are taxed under four income slabs: 
  • 23.00% tax on salaries up to €15,000
  • 25.00% tax on salaries between €15,000 – €28,000
  • 35.00% tax on salaries between €28,000 – €50,000
  • 43.00% tax on salaries over €50,000.01

• Social security contributions
• The Italian social security system is funded through general taxation and contributions paid by employers, employed workers, independent workers, and self-employed workers. 
• Employers in Italy must use the appropriate F24 form to pay contributions (INPS) and premiums (INAIL) related to various social benefits, including: 
  • health services
  • sickness compensation
  • maternity and paternity pay
  • incapacity and disability benefit
  • old age pensions
  • survivors’ pensions
  • benefits in case of accidents at work or occupational disease
  • family benefits
  • unemployment benefit
• As of January 01, 2022, the social security rate is 40% of gross salaries (deducted as 10% from employee salary and 30% contributed by the employer)
• Social security obligations also apply to foreigners employed in Italy. 

Payslip

• Italian employment rules do not permit employers to pay salaries in cash. Italy encourages employers to use cheques, bank transfers, or other electronic payment methods for disbursing salaries.
• The labor code in Italy does not prescribe a template. However, employers can include the following information in the employee payslip:
• Information about the employer and employee, like their social security number, company code, employee code, etc. 
• Total remuneration amount 
• Date of remuneration paid
• The rate at which the compensation is paid 
• Days of absence or total working time
• Employer’s social security and other contributions

Employee termination

Italy’s employment law termination clause gives employers the flexibility to justify any termination of employment based on objective (economic or organizational changes), subjective (breach of contractual obligations), and just cause. 

The Tribunal of Milan in 2014 upheld the validity of disciplinary dismissal based on the employee behavior who posted offensive comments about the company on social media. 

However, employers must take enough legal precautions before unfair dismissals and mass terminations. 

Notice period:

• Employers may ask employees to serve a notice period before the termination of the employment contract. 
• Collection bargain agreements determine the duration of the notice period based on the length of service and job position. 
• The notice period required for resignation is usually shorter than for dismissal. 

Collective dismissal: 

• A collective dismissal under labor law in Italy occurs when employers order five or more dismissals in their business unit, which is in the same district, within 120 days. 
• Employers with more than 15 employees must notify the competent employment office in writing, explaining the following: 
  • detailed reasons for layoffs 
  • the number of employees to be laid off 
  • the timetable of the redundancy plan
  • the calculations of economic awards

Severance payment:

• Italy’s labor law mandates employers pay the dismissed employee, even if they are dismissed on just cause. 
• The current practice of calculating severance pay is to divide the annual salary using a denominator of 13.5

Data protection and employee privacy

Employers in Italy must offer general protections under General Data Protection Regulations (GDPR) rules while monitoring, processing, and storing employee/independent contractor data.

Even during the background checks, the employers and the contracted third party must not infringe upon personal opinions that fall outside the ambit of evaluating professional aptitude, for example, political, religious, and union-related views. 

The labor law in Italy also mandates companies to ensure the confidentiality of a whistleblower’s identity.

Concerning the monitoring of IT devices at the workplace, Italy’s labor regulations allow employers to block Internet access and/or social networks. 

Penalties 

The Italian labor code prohibits gender-based discrimination about the assignment of a job level or career progression. Employers are under labor law in Italy to report gender pay differences.

Further, the labor regulations in Italy mandate companies to implement an action strategy within 120 days to reduce the gender pay gap.

The labor codes in Italy provide for specific instances of penalties on employers:

• Employers are subject to administrative penalties for not reporting mandatory disclosure of gender pay differences. 
• Employers may end up paying a penalty of between 12 and 24 months’ salary or reinstate the dismissed employee, depending on the degree of ‘unfair’ dismissal. 

Compliance Strategies for Employers

Labor regulations help employers maintain a safe, responsible, and effective workplace in Italy. Here are some popular compliance strategies for entrepreneurs and global companies to adhere to Italy’s labor act rules. 

• Managing through employment contracts:
• Employers’ obligations towards minimum work conditions and employee rights are detailed through the labor regulations.  
• Companies may negotiate and enter into a contractual employment relationship to ensure compliance with such labor regulations in Italy.  
• Developing an in-house HR team:
• Companies may develop an in-house team of HR experts to secure employer interest during the hiring and managing of local talents per labor law in Italy. 
• HR experts on Italy’s labor laws shall negotiate working hours, annual leaves, workplace conditions, and salary and manage payroll per labor code in Italy 
• They enjoy management’s confidence to negotiate organizational changes, indemnity, employee appraisals, etc.
• Contracting third-party service providers 
• The rise of SaaS-based HR platforms has empowered entrepreneurs and global companies to hire and manage global employees easily.  
• Such platforms can draft employment-related legal documents, manage payroll or even help in background checks. 
• Employers also prefer these platforms for compliant global expansion with minimum effort and rapid results.

How Can Multiplier Help?

European directive 533/91 is applicable in Italy, so employers are obliged to detail the most important terms and conditions of employment in writing.

A well-drafted employment contract compliant with Italy’s labor act rules and written in a language understood by employees can help. Collaborating with a global PEO-EOR platform like Multiplier will simplify your hiring and managing practices in Italy. 

Multiplier helps entrepreneurs and global companies to easily hire and manage local talents through automated employment contracts, payroll management, and compliant business expansion in 150+ countries, including Italy. 

Not just that, but experts at Multiplier can help you draft employment-related documents in multiple languages, including Italian and English, as prevalent in the country of operation.