Payroll and HR in: Italy

With the 8thlargest economy in the world and the 2ndlargest manufacturing economy in Europe, Italy is truly a global trading hub, with strong links to Europe, America, Africa and Asia. Here’s what you need to know about Italian payroll and HR. 

payroll and hr in italy
Local currency


Dialling code


Pay periods

13 – 14

World Bank Ease of Doing Business








Tax year

Jan 1st – Dec 31st



Company tax


Social security


Wages tax

23 – 43%

Getting started with payroll in Italy

Italian Wages and Pay

There are a range of statutory pay requirements in Italy, governing minimum wage, sick pay, various types of parental pay, and redundancy pay. Let’s take a look at the core considerations for each: 

Italy does not have a government-set legal minimum wage. Instead, wages in Italy are typically determined through collective bargaining agreements (CBAs) negotiated by trade unions and employer associations. These agreements cover various sectors and regions, setting minimum wage standards for different types of jobs and industries. 

When employees in Italy are sick, their salary is initially 100% covered by their employer for the first three days. However, the coverage drops to 66% on the third occurrence of sick leave in a year, and further to 50% from the fourth instance. 

Starting from the fourth day of sickness, compensation is shared between the employer and the Italian social security agency (INPS), up to a maximum of 180 days per year. This arrangement typically ensures that employees receive full or nearly full pay during their sick leave. 

Additionally, employees may be eligible for paid or unpaid leave for educational pursuits or social programs, depending on their employment contract. 

Parental leave is generous in Italy. Maternity leave must cover a minimum of 5 months at 80% salary, reimbursed by INPS. Further leave can then be negotiated – typically, an additional six months of unpaid leave (rising to 10 months for single parents) can be negotiated. Paternity leave covers 10 days at 100% pay. 

Statutory redundancy pay, also known as severance pay, in Italy is governed by a system called “Trattamento di Fine Rapporto” (TFR), which translates to End of Employment Treatment. 

The TFR is accrued throughout an employee’s tenure at a rate of approximately one month’s salary for every year of employment, typically calculated as one-twelfth of the annual salary for each year of employment, plus any additional remuneration. It’s based on the last salary earned before termination. 

Certain collective bargaining agreements and company policies might offer different or additional severance benefits. The actual amount and conditions can vary based on these agreements and the specific circumstances of the employment termination. 

All employees in Italy, including part-time and temporary workers, are entitled to the TFR. 

Some companies offer the option to invest the TFR in pension funds or other investment schemes during the employment period, which could affect the amount available at the end of the employment. 

Payroll and Employment Deductions in Italy

In Italy, you’re responsible for making a number of deductions from an employee’s salary during payroll, as well as making your own contributions as an employer. Here, we’ll cover what you need to know about the Italian tax and social security system: 

IRPEF stands for Imposta sul Reddito delle Persone Fisiche and it refers to Personal Income Tax. Employers are responsible for withholding the appropriate amount of income tax from employees’ salaries and remitting it to the tax authorities. As of 2024, Italy now has three main tax brackets, as opposed to the four brackets previously, in attempt to simplify their income tax system. The 2024 income tax rates are: 

Annual income 


Cumulative tax to top of band 

On the first €28,000 



Above €28,000 up to €50,000 



Over €50,000 




Further local and regional taxes will also be levied against employees, usually accounting for a further 1.5 – 2% of salary.  

In addition to the above tax rates, you need to add the municipal tax supplement (imposta addizionale comunale) which ranges from 0.1% to 0.9%, plus the supplemental regional tax which ranges from 0.7% to 3.33% depending on region and income bracket. 

Employers are required to withhold social security and health insurance contributions from their employees’ salaries. These contributions go towards funding the national pension system, healthcare, and other social welfare programs. 

Employer contributions are typically 29.40% – 33.00% 

Employee contributions are typically 10.00% 

The Istituto Nazionale della Previdenza Sociale (INPS) manages the main public pension system in Italy. This system is based on a pay-as-you-go (PAYG) model where current workers’ contributions fund the pensions of retirees via their social security contributions. Both employers and employees contribute to the pension system. 

Workplace pension schemes are designed to complement the mandatory public pension system managed by the Istituto Nazionale della Previdenza Sociale (INPS). While not mandatory, the establishment of occupational pension schemes is encouraged by Italian law. There are fiscal incentives for both employers and employees to contribute to these schemes—both employers and employees benefit from tax advantages for contributing to occupational pension schemes, which serves as an incentive for their adoption and use. 

In some sectors, occupational pension schemes may be part of collective bargaining agreements. In such cases, if an employer is part of an industry where the collective bargaining agreement includes provisions for a workplace pension scheme, they are required to adhere to these provisions. 

There are various types of occupational pension schemes in Italy, including closed pension funds (fondi pensione chiusi), open pension funds (fondi pensione aperti), and individual pension plans (PIPs). The choice depends on factors like the size of the employer, the sector, and employee preferences. 

Italy Payroll and HR Compliance

Moving onto to the key areas you need to consider to make sure you stay fully compliant with Italian employment law, now, we’ll cover the various rules and legislation governing payroll and HR compliance in Italy: 

13th-month salary, often known as “Tredicesima,” is a legal requirement in Italy. It’s essentially an extra month’s salary paid to employees, typically in December, ahead of the Christmas holiday season. All employees, including part-time and temporary workers, are entitled to this payment, regardless of their contract type. 

The amount is generally equivalent to one month’s salary, calculated based on the employee’s current earnings. It is usually paid in proportion to the amount of time worked during the year. 

In some cases, employees may also be entitled to a 14th-month salary, usually paid in the summer, although this is more common in specific industries or under certain collective agreements. 

Onboard a new employee typically requires the following: 

  • Employment contract (Signed) 
  • Employee ID 
  • Completed new hire form 
  • TFR2 Form 

The TFR2 form is a requirement to show where the employee would like to allocate their TFR upon the end of their employment relationship. TFR is a part of the employees earnings which payment is deferred until the termination of the employment relationship.  Employees can choose whether to allocate the TFR to a pension fund of their choice or leave it in the company. 

In Italy, every employee is assigned a Tax Identification Number (TIN), known as “Codice Fiscale.” This unique identifier is required for all payroll-related activities, including tax withholding, social security contributions, and reporting. Employers must ensure that they have the correct TIN for each employee to ensure accurate payroll processing. 

New hires cannot be made whilst the registration is being setup. According to Italian rules, it is not possible to hire an employee if the company does not have a tax code.  Should the company have an employee start working before the registration is complete, this has significant risks and in the event a company is inspected penalties may be issued anywhere between 1500 EUR – 5000 EUR.  

It is important new hires are registered with the Italian authorities before their start date, this is completed via a ‘Unilav form’. 

Unless instantly dismissed on the grounds of serious misconduct, an Italian employee can expect a minimum of 30 days’ notice when having their contract terminated. In the case of large-scale redundancies or the liquidation of a business, more notice will be required. A business will be expected to notify an employee of their termination in writing. 

Employees are protected against instant dismissal in Italy. There are three grounds for termination of an employment contract outlined in Italian law. 

  • Justified objective reason (i.e. redundancy) 
  • Justified subjective reason (i.e. misconduct or breach of contract, such as constant tardiness) 
  • Just cause (i.e. gross misconduct that makes a working relationship untenable, such as physical assault of a colleague or embezzlement) 

An employee can launch an appeal citing unfair dismissal. It is advisable to consult a legal professional before attempting to terminate a contract of employment in Italy. 

Italy is quite open to overseas employees, so most applications will automatically have the right to work in Italy. Anybody from an EU member nation will not require any kind of visa or documentation. You’ll know if somebody can work in Italy – they’ll provide you with a Codice Fiscale. This 16-digit code is a taxpayer reference, similar to the National Insurance number in the UK. When a permit or visa is required, they may be: 

  • Standard Work Visa (Subordinate Work Visa): For employees who have an offer from an Italian company. The employer must apply for a work permit (Nulla Osta al Lavoro) on behalf of the employee. Once the work permit is approved, the employee can apply for a work visa at the Italian embassy or consulate in their home country. 
  • EU Blue Card: Aimed at highly skilled workers from non-EU countries. Applicants must have a higher education degree or professional experience, a work contract, and meet salary requirements. The Blue Card offers several benefits, including easier family reunification and mobility within the EU. 
  • Seasonal Work Visa: For seasonal employment in sectors like agriculture and tourism. These visas are typically valid for up to nine months. 
  • Working Holiday Visa: Available for young people from countries that have bilateral agreements with Italy. This visa allows them to work and travel in Italy for a certain period. 

Italy Employee Benefits

Mandatory employee benefits in Italy

Alongside the benefits provided by Italy’s social security system—such as pensions and public healthcare—employers are legally required to offer the following benefits to their employees:

Common supplementary benefits

In addition to the mandatory benefits, employers in Italy will offer wider benefits packages to stand out as a competitive employer and improve the overall welfare of their workforce. While it’s up to each individual employer to decide what they offer, common benefits packages in Italy include:

Italy Statutory Leave and Time Off

Legally, Italian employees are entitled to 26 days of paid holiday and a further 11 public holidays.  

Weddings are a big deal in Italy, so employees are also entitled to a further 15 days of paid wedding leave. This should be planned in advance between employer and employee. Wedding leave can start 3 days before marriage but can be taken within one year of a wedding of the employee prefers to save it for a honeymoon. 

Employees are entitled to 11 public holidays per year, plus 1 day for each municipality for the relevant patron Saint Day, which are not included in the minimum holiday entitlement. 

Holidays are always observed irrespective of the day on which they fall. Holidays are moved to the nearest Monday so that employees get a free day in compensation for a holiday falling on a non-workday. 

Italy’s public holidays are: 

  1. New Year’s Day 
  2. Epiphany 
  3. Liberation Day 
  4. Easter Monday 
  5. Labour Day 
  6. Republic Day 
  7. Assumption of Mary 
  8. Allhallows 
  9. Immaculate Conception 
  10. Jesus’ Christmas 
  11. Boxing Day 

In Italy, maternity leave is mandatory for two months before and three months after childbirth, with no work permitted during this period. It’s possible to start leave one month before and extend it to four months after birth upon medical approval. 

During maternity leave, mothers receive a daily allowance from the social security system, equivalent to 80% of their last salary. Employers must pay the remaining 20%. Post-maternity leave, they are guaranteed the same or a better job position in the same office or city until the child turns one. 

New mothers can also take optional maternity leave upon the completion of their mandatory maternity leave. Optional maternity leave is for a maximum of 6 months, paid at 30% of salary by the INPS. 

Paternity leave is compulsory for fathers who are employees and consists of a statutory leave period of 10 days, or 20 days in cases of multiple births. These days can be used by the employee father, including adoptive and foster fathers, within the first five months of the child’s life. 

In the five months after the child’s birth, the father can be entitled to one more day of unpaid leave (which can be paid if the mother agrees to transfer it from her own maternity leave). 

Employees on paternity leave are entitled to the same allowance, have the same rights to return to their job after paternity leave and have the same protections against dismissal as employees on maternity leave. 

Parents in Italy are entitled to take leave to care for their children during the first 12 years of the child’s life. Both mother and father can each take up to six months of parental leave, or one parent may opt to take up to 10 months alone. In the case of a single parent, the entitlement extends to 11 months. 

For the first 9 months of parental leave, parents are eligible for indemnity from INPS, capped at 30%. Within this period, they can take up to one month of leave annually with 80% salary compensation until the child reaches six years old. This leave can be alternated between parents according to their choice. For the year 2024, the policy has been updated to extend the 80% salary compensation to the second month of leave, matching the existing provision for the first month. 

Employees are entitled to paid sick leave, paid for by the employer and subsequently the government. Employers are obliged to pay employees in full for their first 3 days of sick leave. 

If employees are off sick more than twice a year, the amount of sick pay they receive reduces. For the first 2 periods of sickness per year, the employer pays 100% of the regular salary rate of pay for the first 3 days. This reduces to 66.00% for the third period of sickness and 50.00% for the fourth. Any subsequent sickness in one year is unpaid. 

For clarity: 

  • (short) Days 1-3 of sick leave: 100% paid by employer 
  • (moderate) Days 4-20 of sick leave: 50% paid by the employer; 50% social security 
  • (long) Days 21-180 of sick leave: 34% paid by the employer; 66% social security 


During this time, the employee cannot be dismissed. At the end of the leave, the employee is entitled to come back to the same job position they left and on the same/better conditions. 

During vacation days, if an employee can provide all the proper documentation, then those days should be considered sick days, not vacation days. 

CBAs can provide for the possibility of the employee to request, on termination of the paid sick leave period, additional unpaid time off. The employer may or may not be obliged to grant this request. 

Bereavement: Employees are entitled to paid leave of three working days per year in the event of serious illness or death of their first or second-degree relative. Employers have the right to request certification in each instance and provide further unpaid support of up to 2 years in serious family circumstances. CBA’s often work to increase this minimum provision. 

Special event: Employees are entitled to 15 days paid personal leave at the time of their marriage and occasional days off for family responsibilities, study leave, election, blood donation and wedding leave (including the death of a relative or the sickness of a child). These are overwhelmingly governed by CBA sector and industry. 

Sabbatical: There is no such governmental recognition of sabbatical leave. The most similar would-be educational leave based on 5 years continuous service for a maximum of 11 months. Otherwise, it is governed by local contract and CBA. 

Setting up a legal entity in Italy

When setting up in Italy, you can either open a branch of your business or a separate company. A branch will require a lot of paperwork, extremely vigorous financial checks, and taxation on your global profits. 

With this in mind, most SMEs set up a Società a Responsabilità Limitata, or SRL. This is a limited liability company. An SRL can trade all across Italy and is subject to far fewer restrictions on a national level. You’ll only need one director, and they do not have to be an Italian resident (though the business will require a local address and Italian bank account). 

As is so often the case, it’s in matters of tax that the advantages of an SRL over a branch become apparent. Any business in Italy will be taxed twice – IRES is the Italian corporation tax, while IRAP is the Regional Tax on Productive Activities.  

If opening a branch, however, your business must also pay taxes in other nations. Italy is not protected by a double tax treaty, and the laws are vigorous. If your company is deemed to be withholding tax, whether by accident or design, you will be liable for substantial repayments and fines – as well as a lengthy, intrusive audit from the Italian tax authorities.  

Entity set-up FAQs

Expect to wait up to 10 weeks before your Italian entity is ready to start trading. If you’re fortunate, this may be closer to 8 weeks. 

No, there is no legal requirement for any director of an Italian business to be a resident of the country. You will need an Italian bank account registered to an Italian address though, so some kind of reliable agent in Italy will be essential. 

You can open a branch of an existing business in Italy, though this requires more paperwork and red tape than opening a subsidiary business. Unless the brand name of a parent company is particularly valuable, consider starting at SRL to trade in Italy. 

A Società a Responsabilità Limitata, or SRL, is a limited liability company in Italy. This is a popular choice for any foreign business opening an Italian presence. As a limited liability company, an SRL will be a separate legal entity from your parent business. It’s cheaper to set up, will incur less tax, and offers more trading flexibility – though the company must be folded if the named directors wish to move on. 
A Società per Azioni (SpA) is a corporation. This is the kind of business you would need if you plan to open a branch of a major international company in Italy. While this will bring greater brand recognition, you will be taxed on your profits on a global level and will be subject to considerably more rigorous financial regulation. 

This depends on what kind of entity you set up. An SRL, the most popular form of subsidiary business in Italy, has a minimum share capital requirement of €10,000. An SpA requires a minimum capital of €50,000. 

Setting up an SRL requires less paperwork. For this business, you’ll need: 

  • A list of the directors of the business 
  • Proof of identity of the directors, and evidence that they are of good standing 
  • An Italian tax code 
  • The deed of the business, confirming that it has been approved by Italian law 
  • Power of attorney for a representative of the business 

You may also be asked to provide further information about the directors of the business, including personal financial histories. At least 25% of the minimum share capital will also need to be placed into a deposit scheme. 

Finally, if you prefer to open a branch, you will need: 

  • Registration of the business in Italy 
  • An Italian tax code 
  • A statement of activity in Italy 
  • Power of attorney for a representative of the business 

Again though, the financial affairs of the parent company will be examined with a fine-toothed comb. 

Country nuances

Interested in expanding into Italy?

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