Employment laws in Italy: how to hire and stay compliant

Italy is a solid destination to do business in Europe. Apart from being a major center of cultural and economic advancement in Europe, Italy also has the resources to cater to modern-day remote work culture. 

If you want to hire in Italy, though, you’ll have to navigate the country’s complex rules and remain compliant with employment laws and tax practices. Many businesses struggle with this aspect of international hiring because they don’t have comprehensive knowledge of local laws. The best way to overcome this challenge is to partner with an employer of record like Remote that can help you hire and stay compliant when you hire internationally. 

In this article, we explain the key labor laws in Italy, statutory employment rights, and what you need to consider before you hire employees in Italy. We’ll also explain how Remote makes it easy and safe to stay compliant with employment laws in Italy.

Understanding essential labor laws in Italy

The first step before recruiting workers in Italy is getting to grips with Italy's employment law and work culture. Understanding the country’s labor laws can help you avoid errors that may lead to non-compliance. 

Do employment laws in Italy vary by state?

The Italian legal system is broad, encompassing the Constitution, domestic laws (e.g. Law no. 300/1970, the “Workers’ Statute”) and the European Court of Justice (CJEU) rulings. The legislative chambers have approved employment law in Italy for the entire Republic. Thus, there are no distinct variations between federal and state employment regulations.

What do you need to know before hiring an Italian employee?

To hire workers in Italy, you’ll have to: 

• Register a local entity in Italy. Employers must own a local entity in Italy or any other country they wish to hire in. This rule also applies to multinationals in many countries wanting to hire staff anew. 

• Work with a professional employer organization (PEO). With a PEO you’ll still have to open your own legal entity in Italy. However, a PEO can take on several HR functions via a co-employment arrangement, including onboarding, benefits, taxes etc. This option works best if you want to expand operations or establish a large team in Italy, but don’t want to deal with the administrative hassles of international employment.

• Alternatively, you can partner with an employer of record who can take on the legal responsibility of hiring abroad. Remote offers global employment services that can make it fast and easy for you to hire, pay, and manage employees compliantly. Importantly, Remote takes the headache out of handling HR tasks and compliance. 

Remote operates its own legal entity in Italy, and our team can provide you with expert insight into the work culture and local laws to stay compliant. The presence of our localized expertise means that you can rely on Remote to hire and manage employees in Italy in no time successfully. We offer constructive owned-entity global employment solutions to help you fully comply with Italy's labor laws. 

In addition to hiring, Remote specializes in managing payroll, offering employee benefits, and helping your remote employees determine where to pay taxes. We provide around-the-clock support for managing your global employee network and your team of contractors. 

If you are yet to decide the best location to set up, check out Remote's Where-to-Hire report. You will get insightful and relevant information on the most affordable and tax-friendly locations in one click. 

The Italy salary calculator: how to calculate the total cost of an Italian employee?

Want to find out how much it would cost you to hire an employee in Italy? Use Remote’s free Employee Cost Calculator to get a breakdown of costs according to Italian labor laws. It’s the perfect tool to help you budget and plan while hiring globally.

Budget your next hire with our free Cost of Employment Calculator

Use the calculator to find the total cost to hire an employee in a new country including all government mandated contributions.

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Statutory employment rights in Italy 

The statutory rights of employees in Italy cover various areas, from maximum working hours to union involvement. 

What is the minimum wage in Italy?

Unlike most of its neighbors, Italy has no statutory minimum salary for workers at any level of expertise. 

While there is no statutory minimum wage, workers are entitled to specific minimum amounts through various bargaining processes. Employees can get minimum wage coverage through collective bargaining. 

However, there are unique cases where the minimum wage may apply to employees without collective bargaining coverage. If an employee takes legal action, the court may deem them worthy of a specific minimum wage. They may rule that the employee must not earn less than the average minimum salary in their industry.

Besides collective bargaining for a minimum pay scale, employees can also get minimum wage coverage through their employment contracts. In this case, the employer and prospective worker will agree to a salary before the professional relationship commences. 

What are the standard working hours in Italy?

Unlike the minimum wage, Italy does impose statutory working hours for workers across various levels. Before recent amendments to the labor laws, the standard customary hours in Italy were eight (daily) and 40 (weekly). Employers must have special authorization from the Italian Department of Labor and Societal Policies to permit employees to work beyond these periods. 

Nowadays, the employer usually determines the maximum working hours, albeit with restrictions. In most cases, Italians work for a maximum of 40 hours a week. Collective bargaining agreements also play a significant role in determining employees’ working hours. Working hours affected by collective bargaining never exceed 40 per week.

The standard working hours law does not cover part-time workers. The employment agreement covers individuals in this category. The employer must abide by the agreed working hours stated in the agreement. 

The law only permits the employer to change the working hours of a part-time worker on two conditions. First, the employee must agree to the change in working hours. Second, the increase in working hours must be followed by an increase in hourly wages.

What is the overtime rate in Italy?

In Italy, duties exceeding the standard working hours become overtime work. Working overtime is optional. Workers must get authorization from the Department of Labor to work beyond 48 hours a week. Overtime also implies that employees will receive additional hourly payments. 

Certain conditions must apply for employers to allow workers to work overtime. An employer must prove that permitting overtime work may be the only way to continue productivity. 

The overtime rate in Italy is 30% over the regular hourly rate. It also applies to allowances, bonuses, and other forms of remuneration besides the basic salary. Collective bargaining allows employees to receive additional pay for working on public holidays and non-working days. 

How do probation periods work in Italy?

Probationary periods in Italy are typically between 45 and 60 days. This is for employees in non-managerial positions. Executive-level employees may get up to six months of probation. These periods are flexible and are sometimes established through the applicable National Collective Labour Agreements (CCNL). 

What discrimination protections does Italy provide for workers?

The Italian government strongly condemns any form of discrimination against workers. Employers must not discriminate against prospective or current employees based on protected character, such as gender, race, religion, and disability.

Employers should ensure equality between male and female workers. In addition, employers must grant equal rights to Italians and expats working in the country.

Can employees in Italy join unions?

The constitution also regulates the activities of unions to ensure they operate legally. Only registered unions can make collective agreements or bargain for employers and employees. 

These unions get their funding from their members’ salaries. Employees make certain deductions from their salaries as dues to the unions. The freedom to join a trade union applies to workers in the public and private sectors, including the Italian police. However, police officers in unions cannot partake in strike actions or activities that may risk national security. 

Are there collective bargaining agreements in Italy?

Collective bargaining is an act of a labor union and one of the benefits of joining one. It occurs when trade unions, on behalf of their members, collectively agree on critical terms such as salaries.

It is important to note that collective bargaining only covers members of unions in agreement. For instance, if a union agrees on a minimum salary, it only applies to employers and employees under the union. 

Can companies drug test employees in Italy?

Drug testing for employees is allowed in Italy. In some industries and for most employees, this practice is mandatory. This test aims to detect chronic drug abusers and occasional users in the workplace to ensure safety at work. By detecting drug users early, companies can protect non-users from potential harm caused by intoxicated workers. 

Drug testing is compulsory for workers in transportation or industrial lines of work, such as drivers and machine operators. 

What is the relevant workers' compensation legislation in Italy?

Article 36 of the Italian Constitution reiterates the Republic’s standing on workers’ compensation and fair pay. The law also ensures that employees get fair compensation.

The Italian Workers Compensations Authority (INAIL) handles all occupational hazard insurance. They ensure that employees with health complications (accidents or injuries) get their rightful compensation. The National Health Service (SSN) covers the cost of health services for such employees.

Managing employee offboarding in Italy

Offboarding employees in Italy is as important as hiring and managing them compliantly. Both processes involve complying with local legislation, and you must understand the processes of terminating an employment contract legally.

Does at-will employment exist in Italy?

Employment at-will does not apply to workers in Italy. Employers must notify a worker beforehand with non-biased reasons before terminating their contract. However, they can terminate an employee before the contract expires for reasons they can justify. These reasons may include breach of contract, abuse, or involvement in criminal activities. 

The worker also has the right to terminate the employment agreement with immediate effect for justifiable reasons such as non-payment of wages or not receiving employee benefits. 

How do you terminate an employee in Italy?

To terminate an employee for a just cause, you must have valid reasons, such as vandalization, fraud, or gross incompetence. Employers cannot terminate employees because of sex, ethnicity, political affiliations, marriage, or language. Termination for such reasons would be discriminatory and illegal.

Termination of an employee in Italy is straightforward for fixed-term employment. Fixed-term employment automatically lapses when the contract expires. You can also terminate temporary employment at any point. 

Are terminated employees in Italy entitled to severance pay?

The “trattamento di fine”is the severance payment workers are entitled to upon dismissal. Unlike in most European countries, the cause of termination doesn’t affect the issuance of severance in Italy. It is an employee’s right as they make these deductions yearly from their salaries. 

Differences between employees and contractors in Italy 

From hiring processes to making payments, there are certain differences between employees and contractors in Italy. 

What regulations separate employees and contractors in Italy?

An employee is an individual who works for an organization within a hierarchical structure. Employees are subject to the organization’s powers and follow its strict regulations for performing their duties satisfactorily. These restrictions include working hours, means of receiving a salary, and direction on performing their duties. 

A contractor performs their tasks autonomously. They decide their working hours, task execution methods, and office location. Subordination regulations do not apply to them. 

What are the relevant rules on contract workers in Italy?

The labor law in Italy permits employers to hire individuals on a short-term basis as contract workers. To hire a contract worker, employers must clearly state the terms of the employment. 

The law permits both parties to agree to a minimum or maximum salary and working hours, among other work conditions. The agreement becomes legally binding when both parties agree to these terms, provided the employer indicates it in the employment contract.

Can employers hire employees on fixed-term contracts in Italy?

Every form of employment under the Italian constitution is indefinite by default, unless stated otherwise. Thus, employers can hire workers on fixed-term contracts. However, they have to justify this hiring model as occasional work, a temporary employee replacement, or extraordinary work.

Fixed-term employment can automatically become permanent if the employer rehires the worker 10 or 20 days before the contract’s expiration. 

What are the misclassification laws and penalties in Italy

Misclassification is a severe offense in Italy and can lead to penalties. Employers must correctly classify contractors and employees and manage them as separate entities per the law. 

Perpetrators of misclassification will face significant tax consequences. First, the court will establish the difference between what the employer paid and what they should have paid to the misclassified employee. Then, the court will order the employer to pay taxes on that amount.

Further, the employer will reimburse the misclassified worker by paying them the monies owed. This is usually the difference between what they received as contractors and what they should have gotten as employees.

The best way to avoid the consequences of misclassification is to partner with Remote. Our global employment specialists have the local expertise to correctly classify your workers and ensure compliance. Read Remote’s guide to employee and contractor misclassification to learn more about this topic.

The fast, simple, compliant way to hire in Italy

There are solid benefits to hiring in Italy and expanding your team in Europe. However, international hiring is not a walk in the park, particularly because of the legal loopholes you’ll have to get through.

While comprehensive knowledge of Italian labor laws and tax practices can help you hire compliantly, it may not be enough as local laws are constantly evolving. Working with an employer of record can help you hire and manage employees abroad quickly and compliantly. Remote also helps minimize misclassification and permanent establishment risks, guaranteeing full legal compliance. 

Hiring in Italy is more straightforward than you think once you partner with us. To find out how much it would cost to hire employees in Spain, use our free Employee Cost Calculator.

References

• The National Labour Law profile: Italy.

• European Court of Justice 

• Italian Department of Labor and Societal Policies

• National Health Service (SSN)

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