Following is a summary of recent payroll changes in Italy.
The rules and contribution exemptions for employees hired on
open-ended contracts have changed – reducing the contribution
bonus and length of time the benefit is applicable.
An employer who hires an employee between 1 January – 31
December 2016, on an open-ended contract with the same conditions
as the previous year, is exempt from paying 40% of total social
security contributions. This excludes INAIL bonuses, at an annual
capped amount of EUR 3,250. For employees hired in 2015, the
thresholds set by the previous law will apply for the entire
three-year period. The longest period contribution benefits apply
for is 24 months.
This cannot be combined with other exemptions or reductions of
financing rates provided for by current law.
Tax relief on productivity bonus
After a year of suspension, the de-taxation link to wages and
productivity bonuses has been reintroduced. The existing regulatory
framework still applies.
This applies to private sector employees with income derived
from subordinated employment that did not exceed EUR 50,000 in the
This condition is certifiable by the beneficiary in writing, in
case the withholding agent required to apply the substitute tax is
not the same that issued the Certificazione Unica
(Certification on income) in the previous year.
The government announced that the productivity bonuses of a
variable entity, where payment is linked to increases in
productivity, profitability, quality, efficiency and innovation, is
measurable and verifiable on defined criteria by a Decree to be
issued within 60 days from 1 January 2016. These amounts are
subject to substitute additional regional and local taxes as well
as IRPEF (Personal Income Tax), amounting to 10%
but no more than EUR 2,000.
Productivity bonuses must be paid in compliance with territorial
or business contracts.
The maximum de-taxable amount cannot exceed EUR 2,500 for
companies that involve employees in work, in accordance with the
terms defined by the Ministerial Decree.
Services or works voluntarily offered to all employees,
categories or to relatives, for recreational, educational, social
and health purposes will not count as part of the income tax base
Paternity leave for employed fathers was trialed in 2015. It
will be extended in 2016, and needs to be used within five months
of the child's birth. The same applies to optional paternity
The application of part-time pre-retirement is now ruled.
However, it raises several concerns and requires further
Employees hired with full-time open-ended contracts, who will
accrue the right to receive age pension (must meet the minimum
requirements to be eligible) up until 31 December 2018, can agree
with the employer a transformation of their contract from full-time
When an employee moves to a part-time contract from a full time
one, the employee will accrue the right to figurative pension
coverage related to the activity performed. The employer does not
pay the lost contribution, but will pay the employee directly. The
reduction of working hours could be between 40-60% of full-time
Additional financing of social safety nets in derogation
In 2016, the government will increase the funds allocation for
social safety nets, with a budget of Euro 250 million.
The treatment of wage integration in derogation, from 1 January
– 31 December 2016, is granted for a period no longer than
three months in a year. The mobility treatment in derogation to
current legislation cannot be granted to employees who, on the
starting date of the treatment, have already received benefits of
mobility schemes for at least three years (continuous or
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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