Italy boasts of a progressive financial standing, being the 9th largest economy globally. Their economy focuses mainly on the services and manufacturing sector, which makes up three-quarters of their GDP.

Major economic hubs:

Padua, Milan And Venice

Skills in demand:

ICT Professionals, Marketing, Creative And Design Professionals, STEM Occupations, Teaching Professionals, Health-Related Occupations

Resident Tax Information

Personal income taxes are levied on the income derived from employment, alternatively  known as Imposta Sui redditi delle persone fisiche (IRPEF). However, an individual in Italy  has the following income taxes —

• National income taxes
• Regional income taxes
• Municipal income taxes

All resident employees are taxed on their worldwide income (i.e., foreign income and the income derived in Italy). Non-residents are only taxed on their income derived from employment within Italy.  

The income tax rates in Italy are progressive and are below —

Social Security

Employers must enroll their employees in the Italian social security. The social security  funds in Italy include —

• The social mobility fund (not applicable to executives)
• Temporary unemployment compensation fund (applicable for ordinary and extraordinary employees, not applicable to executives)
• Unemployment fund
• Sickness fund (not applicable for executives)
• Maternity fund
• Other minor funds
  

The Italian social security contributions include —

Employers must contribute additionally towards the INAIL for any accidents at work.

Statutory Benefits

Statutory benefits in Italy are relatively complex. Certain benefits laid down by the Italian  

labor laws include —

• All Italian citizens and foreign expats are entitled to the national health system.  Therefore, employers must enroll their employees in the national health system and ensure that the contributions are made as a part of the payroll process.
• Pensions are mandatory in Italy. All employees in Italy must contribute toward the pension funds of the social security differs by employment type. Both parties must contribute to social security for this reason.
• All employees must be covered for work-related accidents through the state insurance program. Work-related accidents are managed by the National Institute for  
• Accidents at Work. All employers must contribute to these funds as an Italian employee has the right to recovery due to accidents caused at work.
• Employers must register all employees with the NHS for short-term sickness benefits.  
• Providing statutory leaves as laid down by the Italian labor laws is mandatory.
  

Fringe Benefits

Employers commonly provide fringe benefits that do not form a part of an employee’s compensation. Fringe benefits are provided to an employee in addition to their regular salary.  

Commonly provided fringe benefits in Italy include —

• business trips
• Additional paid

• time off
• Flexible working  
• hours
• Office equipment
• Meal vouchers
• Additional medical  
• expenses
• Commuting  
• expenses/office  
• vehicles

Exempt Benefits

As per the Italian income tax laws, certain expenses and benefits are exempt from taxes.  

The exempt benefits include —

• Contributions towards the Italian social security are completely deductible
• Contributions toward the voluntary pension funds are deductible up to EUR 5,164.57
• For employees with disabilities, medical expenses are completely deductible

Long-term Incentives

The best way for an employer to show their appreciation of hard work and dedication is through long-term benefits. Employees will often be rewarded with company specific goals, such as stock options or other forms of equity ownership that provide incentives over time horizons greater than one year when they achieve certain performance milestones within the business unit/organization where employed.

Employers in Italy commonly provide certain long-term incentives that include —

• Voluntary pension schemes: Medium and large enterprises in Italy commonly provide additional voluntary pension schemes for employees.
• Additional group life insurance: An executive in Italy must be insured for sum  insurance of €200,000 in cases where they are unmarried/single and for €300,000 if  they are married and have a family. This can also be extended to other employees of  your organization.
• Health, medical, and dental covers
• Employee stock options
• Performance based incentives
• Unemployment coverage
• Long term care

Termination Process

The contract can be terminated if the employment relation cannot be maintained:

• Incase of breach of employment contract
• When such an event occurs, even outside the employment relationship, which has an impact in the working environment causing the deterioration of the relationship between the employer and the employee

Notice Period

The Notice period for employees in Italy is up to 75 days

Severance Pay

Severance pay is not a requirement in Italy. However, employees who have been dismissed or have resigned are legally entitled to the Trattamento di Fine Rapporto (TFR).

According to the Italian Civil Code, any employee terminated, regardless of the reason, has the legal right to receive a leaving indemnity or the TFR. The calculation of it is as follows:

• Employee’s gross annual salary divided by 13.5.
• Deduct a withholding tax of 0.5% for the Italian Social Security / pension agency (INPS). This payment will fund the INPS to ensure that workers receive their TFR in the event that the company is incapable of doing so.