Employee benefits in Italy: all you need to know

Highly skilled employees enjoy an increasing range of opportunities for remote work around the world. Offering competitive benefits is paramount for employers seeking to attract and retain top-quality overseas talent.

For those without in-depth experience hiring and paying remote workers overseas, it can be extremely challenging to keep track of all pieces of the statutory and supplementary benefits puzzle. This is especially true in Italy, where regulations governing employment are unusually complex.

It’s vital to understand some notable characteristics of Italy’s payroll and employee benefits systems:

• It’s mandatory for all companies working with in-country employees to own their own Italian-based legal entities to manage payrolls, employee benefits, taxes, and regulatory compliance.

• Italy’s constitution, civil code, industry-specific labor agreements, and individual contracts all play intersecting roles in how employee benefits are administered.

• Employers must offer each employee an individual contract.

• Italy has strong labor unions and pro-worker policies, often administered regionally.

• Italy’s government is particularly focused on correct classification of workers as either employees or contractors. Even innocent misclassification opens employers up to hefty penalties, potentially including loss of intellectual property.

• Italian employees are paid monthly. Employees are typically guaranteed an additional “13th month” salary, paid in December. Depending on the industry and the labor contract, some may also be entitled to a “14th month” payment the summer after the year in question.

• The exceptional Italian public health network, the Servizio Sanitario Nazionale (SSN),supports high-quality basic care, but offering additional private insurance provides employees with more choice and flexibility.

• Italy’s complex employee benefits regulatory system, as well as the high costs of funding mandatory employee insurance and other benefits in the country, make working with independent contractors a more attractive option for some businesses. A company should only make this and other structuring decisions based on experienced in-country legal advice.

All this can get complicated — but it doesn't have to be.

Working with Remote as your employer of record (EOR) simplifies the entire process. An EOR makes hiring in Italy more cost-effective, secure, and simple.

As an experienced EOR, Remote strengthens the effectiveness of your Italian business operations by:

• Serving as your required in-country legal entity

• Managing hiring, onboarding, payroll, and benefits

• Keeping you compliant with all relevant tax and employment legislation

• Leveraging the knowledge of our locally focused, culturally competent in-country legal and benefits experts to help compete for top local talent

Who is entitled to benefits in Italy?

Knowledge of the benefits expectations and requirements in Italy will help you avoid costly risks, such as misclassification of employees or violations of locally specific labor contracts. The more you know, the more you’ll also be able to gauge the effectiveness of your benefits management program.

All Italian citizens working in Italy are entitled to employee benefits. Several factors determine the kinds of benefits each can receive. Industry-specific requirements are the major decider here, but Italy’s vibrant labor unions also play a key role, as do individual employee characteristics such as age, gender, salary range, length of employment, and location.

Every citizen and legal resident in Italy has automatic access to the country's healthcare system. Since free or low-cost medical care is a mandatory benefit within the Italian social welfare system, employers are not required to provide health insurance. The country’s healthcare system is funded largely by taxes, including the regional production tax, or IRAP. This tax on companies doing business in Italy is calculated at the regional level and collected at the national one.

Pension contributions are mandatory for employers and employees, but differ based on the nature of the industry and job classification.

Employers - not employees - are also required to maintain insurance for work-related accidents through the Istituto Nazionale per l'Assicurazione contro gli Infortuni sul Lavoro (INAIL).

Employees in Italy are entitled to paid sick time off, with the initial three days paid in full by the employer, and the country’s national health system supporting an employee’s salary for up to 180 days. Robust corporate taxes form the financial backbone of this system.

Independent contractors in Italy may access only certain state-provided benefits. These exclude paid holidays, sick pay, and work-related accident insurance. Thanks to implementation of the Jobs Act in Italy, contractors are able to take advantage of parental leave and receive maternity allowances.

Statutory and common employee benefits

The core statutory and common employee benefits in Italy are:

• Leave entitlements

• Parental leave

• Pension plans

• Retirement contributions

• Minimum wage requirements

• Overtime pay

• Work-related injury and illness insurance

You’ll want to get a basic overview of each:

Leave entitlements

Holiday leave

Four weeks (20 days) of paid holiday leave per year is the minimum statutory requirement in Italy for full-time employees. Employers may not substitute payment in lieu for these four weeks. Two of the four weeks must be used within a given year, while the rest can be used within 18 months of the end of an accrual year. Industry-specific labor contracts may provide longer paid holiday leave. Italy additionally mandates 12 public holidays annually.

Sick leave

Sick leave allowances for employees in Italy can be unusually complicated, depending on the job classification and the labor contract. The standard formula: Employees receive 100 percent of their salary from their employers for the first three days of sick leave. (This drops to 66 percent for the third annual instance of sick leave used, then to 50 percent for the fourth.)

From the fourth day of illness, employees typically receive a percentage of their salary from the Italian social security agency, the Istituto Nazionale della Previdenza Sociale (INPS), and a percentage from their employer, covering up to a maximum of 180 paid sick days annually. In practice, this amounts to full or almost-full pay.

Maternity and paternity leave

Employees receive a mandated five months of paid maternity leave, typically two months preceding the birth and three after.

During maternity leave, employees receive 80% of their normal salary, paid from the INPS through the employer, with the employer typically making up the difference. Adoptive parents are entitled to the same five months of paid leave.

Italy also provides 10 days of paternity leave, paid at 100%, to be taken within five months of a child's birth. Paternity leave can be extended in the event of the mother’s absence or incapacity.

In their child’s early years, both parents collectively may take up to 10 months total parental leave, much of that typically paid at a reduced rate or taken unpaid.

Upcoming legislation will make these allowances even more generous, including longer paternity leave and more paid time off for meetings related to children’s education.

Pension plans/retirement contributions

Italy regularly adjusts pension requirements to its average life expectancy, which is among the highest in the world. Pensions are available to those meeting age and minimum contribution requirements. For 2021 - 2022, the minimum age was set at 67 for both men and women, with a minimum of 20 years paying into the system. If pensions do not equal at least 1.5 times the legal social allowance for older adults, an individual will not be entitled until age 71, and after five years of contributions.

To claim early pension status, women must have contributed for 41 years and 10 months of employment, and men for 42 years and 10 months of employment.

Employers must typically make pension contributions equaling 33 percent of an employee’s salary, while most employees contribute just over 9 percent of their salaries. The employer makes all these contributions directly, withholding the employee’s portion from their paycheck.

Minimum wage

There is no national mandatory minimum wage in Italy, although that may change in the near future. The country's various industries set minimum wages for each employment classification, typically through collective bargaining agreements.

Overtime

The general work week in Italy is 40 hours. The standard workday is eight hours. The maximum number of hours employees can work beyond these standards are determined by employment contracts and collective agreements, and all overtime must be paid.

Insurance

Employers are obligated to pay regular premiums to insure their employees in Italy against work-related accidents, injuries, and diseases. The INAIL manages all such insurance policies and pays claims.

Supplemental benefits to consider for Italian employees

Read Remote’s guide on the best employee benefits to attract top global talent to learn how offering supplemental benefits can help you attract higher quality local candidates. Our value-based benefits guide will walk you through a collection of more cost-effective benefits you can offer remote workers, and our small business benefits guide offers suggestions on benefits and perks that companies of any size can easily afford and manage to attract top talent.

In Italy, many of the best executive-level employees seek out benefits packages that include:

• Stock options and profit-sharing (not expected, but highly valued)

• Supplemental life and accident insurance

• Supplemental retirement plans

• Supplemental health insurance plans (these can be especially attractive, offering greater flexibility and convenience than Italy’s already-generous public program)

Employees in Italy at all levels are looking for similar additional benefits, as well as values-forward and lifestyle benefits that include:

• Flexible or asynchronous hours (significant priority for Italian knowledge workers)

• Professional development stipends

• Home office support

• Support for co-working spaces and opportunities

• Support for mental health and personal wellness

Remote’s Future of Modern Benefits study gives you a 360-degree view of the most-valued benefits according to skilled international remote workers.

How to set up and manage benefits for international employees

Managing benefits for international employees requires you to understand existing in-country employee benefit structures and supply attractive, cost-effective supplemental benefits. In a country like Italy, you need constant attention to the fine details of compliance at the level of individual and industry-specific labor contracts. Intricate regional, national, and European Union regulations demand localized expertise.

Find out how working with Remote as your employer of record can free you to scale your business instead of scrambling to set up your own legal entity and trying to stay on top of the complexities of the Italian benefits system.

You’ll work with our team of payroll, taxation, and benefits experts, and through our fully-owned Italian business entity that will serve as your team’s legal Italian employer of record. Our team members’ combined experience in managing compliance with international employment regulations is unsurpassed.

With Remote’s intuitive global employment platform, you’ll be able to manage the following processes with simplicity, security, and speed:

• Supervise payroll and time off

• Manage local employment taxation obligations

• Maintain compliance with mandatory in-country benefits

• Administer additional benefits and perks

• Develop fair and competitive compensation packages

• Create compliant employment contracts

• Manage offboarding in compliance with local legislation

We know what Italian regulators demand, and what talented employees want. This allows us to streamline the entire process of hiring, onboarding, payroll, taxation, compliance, and benefits for you, while helping you avoid costly missteps.

Want to learn more about building a business plan with the most local relevance and global impact? We walk you through it here.

It’s easy to manage a competitive Italian benefits system

Administering payroll and benefits to retain the best talent in Italy is especially complex and challenging. It requires much more deep local knowledge, up-to-the-minute expertise, and logistical resources than most foreign firms possess on their own. Even the smallest error can lead to major legal and financial consequences.

Your success in managing employee benefits in Italy is dependent on two factors:

• Precise compliance with national and local regulations and contracts governing the country’s statutory benefits system

• Zeroing in on the most desirable supplementary benefits to enhance your competitiveness

As your employer of record in Italy, Remote is the payroll and benefits specialist you need. Our country- and region-specific expertise, and our commitment to transparency, remove the frustrating guesswork of managing employee benefits in a multi-faceted system.

Get started with Remote so you can hire and pay your international employees and expand your company’s presence in a world of possibilities.