Employee benefits in Italy: all you need to know

Navigating the international hiring process can be difficult, especially when stepping into unfamiliar territory. 

Highly skilled employees have an increasing range of opportunities for remote work around the world. So, 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. Hiring in Italy, with its unique employment regulations, adds an extra layer of complexity. 

In this article, we’ll unravel everything there is to know about the Italian employment system, from minimum wage to managing benefits for international employees.

Our goal is to guide you through the Italian employment landscape so that you can tackle the hiring process in Italy with confidence, efficiency, and ease.

What you need to know before hiring in Italy

First, let’s take a look at 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 the 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.

What is the minimum wage in Italy?

Italy doesn’t have a national mandatory minimum wage. Instead, the country’s various industries set minimum wages for each employment classification, typically through collective bargaining agreements (CBAs).

This approach allows employers and trade unions to negotiate and set minimum wage standards tailored to each sector. The sectors’ respective minimum wages depend on factors such as industry-specific demands, productivity levels, and economic conditions. 

While CBAs offer more flexibility, they also mean that minimum wage rates can vary significantly across industries. The wage gap can lead to disparities in compensation for workers in different sectors. 

However, this may change in the near future.

The current Italian government is in favor of implementing a national minimum wage, and a bill has been brought forward to Parliament. This potential change aims to establish a standardized minimum wage that applies to all sectors so all workers in Italy have a fair compensation framework. 

How do CBAs work in Italy? 

CBAs are made between trade unions and employers’ associations to set terms of employment. 

In general, a CBA regulates the following: 

• Pay raises and expected inflation

• Changes introduced by companies, such as new work methods

• Non-pay issues (holidays, hours, leave, and information rights)

There are two types of CBAs: national and regional. National CBAs set the minimum standards of employment throughout the country and cover all workers within a specific sector. Regional or company-wide CBAs address specific details, such as working conditions, employment contracts, and bonuses. 

CBAs play a crucial role in determining wages and working conditions in Italy. It’s important for foreign companies hiring Italian workers to understand these agreements, as it will help them avoid non-compliance penalties. 

National CBAs

National collective bargaining agreements (NBCAs) protect around 95% of workers in Italy.

These agreements establish the minimum employment standards nationwide to ensure coverage for all workers within a sector. Minimum wage rates agreed upon under NBCAs are adjusted annually according to inflation and are reviewed and negotiated every three years. 

This framework guarantees regular updates and fair representation for workers, as it aims to provide more stability and consistency in employment conditions at a national level.

Regional and company-wide CBAs 

CBAs at the regional or company-wide level focus on finer details, such as working conditions, employment contracts, performance standards, bonuses, and length of service. 

This decentralized approach allows for more tailored agreements that address specific regional or company needs. Bonuses and standards of productivity are typically reviewed and agreed upon on an annual basis. 

The goal of having a regional or company-wide CBA is to establish a transparent and mutually beneficial arrangement between employers and employees at a more localized level.

Understanding and negotiating CBAs in Italy can get complicated — but it doesn’t have to be.

Working with Remote as your employer of record (EOR) simplifies the entire process and guarantees compliance with all CBA regulations. 

An EOR makes hiring in Italy and other European countries 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

What is the average salary in Italy? 

If you’re an employer looking to hire in Italy and are concerned about the lack of minimum wage regulations, you’ll want to know what the average salary is and what’s considered acceptable.

Here’s an overview of the country’s average salary landscape to help you make better-informed decisions.

According to Salary Explorer, the average gross salary in Italy as of March 2023 is €43,800 per year or €3,650 a month. It includes various benefits, such as housing stipends, travel expenses, and vacation allowance.

Minus all the benefits, you’re realistically looking at an average annual salary of 29,700 euros or €2,475 per month, according to Statista. 

Keep in mind: this number is an average, and it doesn’t necessarily reflect what you’ll pay the workers you hire in Italy. 

4 factors that affect Italian wages

While the average wage serves as a reference point for determining compensation in Italy, there are several factors that affect Italian wages. Understanding them is essential for employers and job seekers alike to navigate the Italian job market and negotiate fair compensation packages.

1. Sectors

Different industries have varying levels of demand, skill requirements, and profitability. All of these factors directly impact salary ranges. For example, the finance and technology sectors often offer higher wages than sectors with lower profit margins. 

According to Salary Explorer, the average monthly salary by sector in Italy is as follows: 

• Healthcare: between €2,880 and €8,730

• Legal: between €2,030 and €7,500

• Accounting/finance: between €1,830 and €7,390

• IT: between €2,880 and €6,550

• Engineering: between €3,390 and €3,860

• Advertising/design: between €2,170 and €3,730

• Retail: between €1,410 and €6,670

• Construction: between €1,620 and €6,220

• Hospitality: between €1,240 and €6,650

• Automotive: between €1,410 and €2,630

Knowing the country’s salary ranges will help you better gauge the wage expectations across different sectors in Italy and offer reasonable wages when hiring in the country. 

2. Job level

As in most countries, you can expect to earn much more in managerial positions than in entry-level roles in Italy. 

According to Salary Explorer, the salary increases are as follows:

• Junior level: 3 to 5%

• Mid-career: 6 to 9%

• Senior level: 10 to 15%

• Top management: 15 to 20%

This statistic demonstrates the potential for significant salary growth as employees progress in their careers in Italy. Be sure to consider salary increases when hiring Italian workers to ensure competitive compensation and opportunities for advancement.

3. Region

In Italy, the region can significantly impact wages and living costs. 

Northern Italy, which is characterized by thriving trade, an industrial economy, and a well-developed tourist infrastructure, is richer than the South. The average income and cost of living in Milan, for instance, is nearly twice that of cities in the South.

And while Southern Italy has a lower cost of living, it faces higher unemployment rates. This disparity can be attributed to factors such as a less-developed industrial sector, limited job opportunities, and economic challenges. 

Understanding these regional differences is key when considering salary structures and cost-of-living adjustments for employees in Italy.

4. Gender

Despite progress in gender equality, a significant gender salary gap persists in Italy. On average, women earn 4.2% lessthan men in the country. 

The reasons for this gap include occupational segregation, unequal opportunities for career advancement, and discrimination in the workplace. 

Fortunately, efforts are underway to address this issue by promoting pay transparency, implementing equal pay legislation, and creating a more inclusive work environment for everyone.

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 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 the 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

• Overtime pay

• Insurance

• Supplemental benefits 

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 of 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. 

The current minimum age is set at 67 for both men and women, and it’s expected to remain so until at least 2026. Individuals are required to have a minimum of 20 years of contributions to the system to qualify for retirement benefits.

Early retirement and access to a state pension are possible in Italy after you have contributed for at least 41 years and 10 months (for women) or 42 years and 10 months (for men).

Workers who don’t qualify for a full pension may be eligible to receive an old-age social assistance benefit, known as assegno sociale. This benefit is accessible to individuals who are at least 67 years old and have lived in Italy for a minimum of 10 years.

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.

Overtime pay

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 is 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

You’ll want to sweeten the pot to attract top talent. Read Remote’s guide on the best employee benefits and find out 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 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.

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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.