Everything a French employer needs to know when hiring workers in Italy
French companies looking to expand their business operations might consider tapping into the global talent pool to increase productivity. Italy is a highly desirable location with several key benefits, including a strong economy and a strategic location that allows you to reach various lucrative markets.
Since the pandemic, remote work has become increasingly popular, and hiring international workers has helped employers grow their talent pool and increase their skill sets. This means that companies can hire top talent from around the world — however, there are certain considerations you’ll need to make to remain compliant with local labor laws.
Hiring an employee in Italy gives you access to a booming economy and a skilled workforce, and can help you establish a presence in various areas. Skilled Italian workers are also well-educated and proficient in a number of desirable industries.
Recruiting workers from Italy can seem like a time-consuming and complicated process. This guide will tell you everything you need to know to hire in Italy and how an Employer of Record (EOR) can save you some headaches.
Reasons to Hire in Italy
Strong Economy
French companies can benefit from Italy’s large economy. The country is home to the 8th biggest economy in the world and has the third largest economy in terms of GDP in the EU, making it an attractive choice for companies looking to expand. Italy’s economy has also generally experienced steady and stable growth.
Italy has a strong and diverse economy with strengths in a range of important sectors. French companies who want to hire in Italy can gain insights into industries such as manufacturing, engineering, and fashion.
Additionally, the government has passed various reforms and offers tax credits to support Foreign Direct Investment (FDI). Companies can get tax credits or incentives for various different reasons, including employing younger workers or women, tax deductions, energy efficiency, and more.
Strategic Location
Italy’s prime location and close geographic proximity to other important markets are other benefits for companies recruiting skilled Italian workers. This can make it easier to operate your business and communicate with your international workers.
The country’s southern location also provides several additional benefits and can help your French company build a presence in other European, Mediterranean, North African, and Middle East markets.
Italy is a major transportation and logistics hub. The country is home to many major ports and airports that move a significant amount of goods and people every year, providing access to major supply chains.
History of Innovation
The Italian government has made major investments into Research and Development and launched lucrative funds for investments in innovative technologies. In 2022, Italy ranked 5th in total R&D gross expenditure among European countries. This makes it an attractive destination for smaller French companies, start-ups, and spin-offs.
- Deep tech
- Green, Energy, and Circular economy
- Healthcare
- ICT
Understanding Local Employment Laws
Expanding to Italy is an attractive option for European companies because of the country’s talented workers and ample opportunity for growth. However, hiring skilled Italian workers can be somewhat complicated for international companies. There are several different rules, regulations, and collective bargaining agreements that you’ll need to consider to remain compliant and avoid financial and legal penalties.
Classifying Your Employees
Italian labor laws provide different benefits and securities to full-time employees and independent contractors. It’s important to properly determine the type of worker when hiring in Italy, as misclassifying your employees can result in noncompliance penalties such as fines.
In Italy, employees are people who have a full-time working agreement with your company and work within the organization under the direction of the employer. Generally speaking, these workers are hired on a permanent basis. Depending on the terms of each sector’s specific collective bargaining agreements, your employees have the right to certain benefits, including:
- Sick leave
- Paid time off
- Severance pay
- Social security contributions
Independent contractors provide paid services to your company on a shorter-term or project-by-project basis. This form of work is typically determined by a contract. The worker is also not considered to be a part of your company and not entitled to the same number of benefits. Additionally, it is the responsibility of the independent contractor to handle their own taxes and social security contributions.
Employers will also need to ensure that employees have the correct tax numbers. Workers from a different country are considered Italian residents for tax purposes if the employee for the majority of the fiscal year:
- Has a residence in Italy
- Has a domicile in Italy
- Is registered in the Records of the Italian Resident Population
Employment Contracts
Any employment relationship with skilled Italian workers must have an appropriate employment contract under Italian law. Valid contracts may be bilingual but must feature terms and clauses in Italian, and both the employee and employer must sign the agreement prior to the worker beginning. An employment agreement must be in writing and clearly define the working relationship, including:
- The company’s name
- Start date
- Length of the arrangement
- A description of the job’s duties and responsibilities
- Salary, employee benefits, and dates of payment
- Working hours
- Probation period (if applicable) and termination conditions
There are several different kinds of employment contracts that you should consider when hiring in Italy.
Permanent or Unlimited Duration Contract
This is a standard employment contract and is used to hire full-time Italian workers on an indefinite basis. Employees under this type of contract generally receive more protections than other types of employees and are entitled to benefits and time off. Workers must receive notice before termination.
Fixed-Term Contract
This employment contract is temporary and has a defined end period that needs to be specified in writing. Contracts can last up to a total of 36 months and can be extended up to 5 times. If you’re looking to expand your talent pool, it’s important to know that your fixed-term Italian workforce cannot be greater than 20% of your company’s permanent workers in the country.
Part-Time Contract
Part-time employment contracts restrict the amount of hours a worker in Italy can work in a week. Employers must specify in writing the employee’s hours of work within a certain time period. Workers under this agreement aren’t entitled to as many benefits as full-time workers, but the amount of payments and other entitlements are pro-rated to permanent employees in the same position.
Additionally, Italian employers can add clauses to these types of contracts, including:
- Elastic clauses to increase the amount of working hours.
- Flexible clauses to vary the amount of working hours throughout the day.
Other major types of contracts that can be used in Italy are:
- Apprenticeship contracts: an open-ended employment agreement to attract highly skilled young Italian workers.
- On-call contracts: for intermittent workers.
- Temporary agency contracts: for qualified employment agencies.
Costs of Hiring in Italy
Recruiting top-tier skilled Italian employees can help you expand your business and grow your talent pool, but there are some crucial obligations you’ll need to cover to remain compliant when hiring Italian workers. Here’s roughly what you can expect to spend per new Italian hire.
Compensation
In Italy, there is no federally-mandated statutory minimum wage. Instead, each sector has a collective bargaining agreement between trade unions and employer’s associations to protect workers. CBAs determine the average hourly pay rate depending on the industry and set additional employment terms, such as vacation and leave entitlements.
Collective bargaining agreements are also responsible for other wage-related issues, such as pay increases, work organization, or cost-of-living pay adjustments.
It’s important for French companies to know that Italy follows a standard Monday through Friday 40-hour work week. Employees who work more than 40 hours in a week are entitled to overtime pay and can work up to 48 hours per week or 250 total overtime hours per year. Overtime rates are dependent on the CBA and can be up to:
- 150% of the hourly rate for the first 8 hours
- 200% of the hourly rate for any additional hours
- 150% of the hourly rate for overtime night work between 10pm and 6am
- 130% of the hourly rate on holidays and Sundays
Payroll
International employers who want to hire in Italy are responsible for setting up payroll and deducting the mandatory tax and social security contributions. Paychecks for your Italian workers should be sent out by the 27th of each month.
Corporate employers in Italy are generally taxed 27-28% of the employee’s salary. Employers are responsible for paying up to:
- 32% for Social Security contributions
- 4% for IRAP Regional Tax and Bank Holidays
- 1.5% for Injuries Insurance
- 7.4% for TRF (Severance)
Collective bargaining agreements also dictate whether or not you should give your workers additional pay. Depending on the industry you’re looking to hire in, your company may be responsible for paying 13th-month or 14th-month salary bonuses for your full-time employees. 13th-month bonuses are generally paid around the middle of December, and 14th-month bonuses are paid near the middle of the year.
Employee income tax depends on the terms of the sector’s CBA and the employee’s annual salary. The income tax rates for Italian workers are:
- 23% for salaries up to €15,000
- 25% for salaries between €15,000 and €28,000
- 35% for salaries between €28,000 and €50,000
- 43% for salaries above €50,000
Workers in Italy are also responsible for paying between 9.19-10.48% for social security.
Leave Entitlement
Like many other European Union nations, Italian labor laws entitle workers to a generous amount of time off per year. If you’re hiring in Italy, you need to abide by these rules and regulations to avoid penalties.
Full-time employees in Italy can take up to 4 weeks (or 20 days) of paid vacation leave every year, though some CBAs can grant additional PTO. Employees must use at least 2 of the 4 weeks in a single year and can take at least 10 days off consecutively.
Italy has 12 recognized National Public Holidays. These include:
- New Year’s Day (January 1)
- Epiphany (January 6)
- Easter Sunday
- Easter Monday
- Liberation Day (April 25)
- Labour Day (May 1)
- Republic Day (June 2)
- Assumption Day (August 15)
- All Saints’ Day (November 1)
- Immaculate Conception (December 8)
- Christmas Day
- St. Stephen’s Day (December 26)
There are 10 regional holidays that may vary depending on the location of your employee.
Skilled Italian workers are entitled to additional time off such as sick leave, maternal leave, and more. New biological or adoptive mothers may take up to 5 months of paid maternity leave at 80% of their original salary and can take up to 2 months off before the birth and three months afterwards. Workers are also eligible to take up to 10 days of paternity leave at full pay, and this can be extended up to 6 months at reduced pay.
Additionally, employees can take up to 180 days of sick leave in a single year, up to 15 days for personal leave, and up to 2 years of disability leave.
Termination and Severance
In Italy, there is no minimum statutory required notice period to end an employment agreement, though notice periods are decided by collective bargaining agreements.
International companies hiring in Italy cannot terminate an employment agreement at will and must ensure certain requirements are met to remain compliant. Employers in Italy can terminate an employee if:
- The employer has just cause, which can include misconduct such as theft
- The employer dismisses the employee with notice for breaches of the worker’s legal or contractual responsibilities
- The employer dismisses the employee for objective reasons such as economic factors or redundancy
Italian employees who have been terminated are entitled to a severance payment called a Trattamento di Fine Rapporto (TFR). The required amount can be found by dividing the employee’s yearly salary by 13.5, plus an extra 1.5% for every year of service and inflation compensation.
How to Hire Italian Skilled Workers
Now that you have a better understanding of Italian labor laws and collective bargaining agreement requirements, you can begin to attract skilled Italian workers to your company. To remain compliant, you can either set up a local entity or partner with an employer of record.
Set up a local entity
To hire staff in Italy, your company can set up a local legal entity. This is a good choice if your company is looking to establish a physical working environment in the country or if you’re planning to hire lots of workers. Companies who want to set up their own legal entity are responsible for all employment requirements or classifications and must ensure all obligations are met to avoid noncompliance penalties.
All companies looking to operate in the country need to contact the National Business Register for taxes and social security contributions.
Partner with an EOR
Alternatively, your company can partner with a global employer of record or professional employer organization. EORs in Italy act as the legal employer in the local country without requiring you to set up a legal entity. This can be much easier than navigating complex local laws and compliance challenges yourself.
Engaging employer of record services in Italy can provide several important benefits when your business hires cross-border talent and prevent compliance risks.
Intuitive Hiring Process
By partnering with a quality employer of record that acts as a legal employer, you won’t need to worry about the logistical requirements of hiring top-skilled Italian workers. An EOR can help ensure that all employees are properly classified, eliminating the risk of noncompliance fees or reputational damage.
EORs can also connect you with top talent from the country you’re looking to hire in. An employer of record will help quickly hire employees and handle additional requirements, such as onboarding your staff.
Your employer of record handles all the complicated aspects of hiring employees, including local payroll processing, benefits administration, taxes, leave entitlements, and more. Meanwhile, you take care of day-to-day operations across your team.
Expertise in Local Labour Laws
Italy’s employment legislation and CBA terms can be somewhat complicated to understand. An employer of record is an entity that provides your company with in-depth knowledge about these complex rules and regulations, so you can hire top international talent while abiding by all necessary laws.
Your EOR can also help you stay up-to-date with updates in policy or legislation and ensure all employment contracts are valid.
Cost-Effective
Setting up your own legal entity can be time-consuming and expensive. If your company isn’t looking to build a large labor force in the country or just wants to test the market, engaging an EOR in Italy can be quicker and much more affordable for your business. This gives you a cost-effective and risk-free way to expand your business and efficiently recruit talent from almost anywhere in the world.
Partner with Borderless
Borderless is an EOR with expertise in local labor laws and can help you remain compliant when hiring in Italy. Borderless provides several beneficial services, including payroll, tax deductions, and any other step in the hiring process.
Book a demo today to see how Borderless can help you hire top talent from around the world without needing to know complicated laws or regulations yourself.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
