Remote Work — 52 min
Attracting educated and skilled employees is a top priority for every business. Considering Italy’s robust cultural and economic strengths, it's no surprise global companies focus their recruiting efforts on remote workers in the country. However, Italy has strict requirements for employers keen to hire remote Italian workers. You'll need to factor in Italian labor laws, tax codes, tax policies, and other regulations your company is obliged to meet.
To support your efforts to hire remote workers in Italy, we've built a comprehensive guide so you can keep track of country-specific requirements and decide whether employing talent from Italy is possible and the best choice for your company. This guide will help you prioritize compliance and employee satisfaction to grow your Italian team with confidence.
Before extending an offer to a remote employee in Italy, consider their employment status. Like many other countries, Italy treats self-employed individuals or contractors and full-time workers differently, and there are risks associated with misclassification.
Suppose a foreign company decides to hire a full-time employee. In that case, it will need a legal entity in Italy or the help of an employer of record (EOR), like Remote, to process payroll, taxes, benefits, and compliance. In some instances, businesses can consider hiring workers as contractors instead. What's best for you?
Let's take a closer look at these three options:
When you hire Italian workers as full-time employees, you must have a legal entity in the country to manage the workforce. You can do so by opening your own local entity in Italy, but this option can be costly and time-consuming. Opening an entity only makes sense only if you have plans to open a permanent office in the country.
If you don’t have the budget or need to open an Italian entity, consider using an employer of record with an already established entity in Italy. An EOR acts as the legal employer on paper, hiring and paying employees on your behalf in a country.
To hire a worker in Italy, you may want to work with an employer of record for several reasons:
You don't want to spend the money and time to open your own Italian entity.
Your immediate hiring plans in Italy include fewer than 25 employees.
You don't have internal expertise in Italian employment law or relationships with local partners to ensure compliance..
You need to complete a project or expand quickly and don't have months to wait.
You can hire workers in Italy as independent contractors instead of full-time employees for fixed-term or occasional projects. As long as your workers are correctly classified as contractors, you don't need an entity in Italy. See Remote’s Contractor Misclassification Tool to assess your contractor misclassification risk.
If you decide to hire contractors in Italy instead of full-time employees, you will need to use an international contractor management solution to pay your team and manage invoices. Remote Contractor Management makes it easy to manage paperwork, process invoices, and convert payments into local currencies like the Euro.
Because Italy is part of the EU, workers expect payment in Euros. Contractors can be paid in multiple currencies if they choose, but most will prefer the Euro. Full-time employees in Italy are required to receive their pay in Euros.
When paying employees in Italy, it's crucial to understand how taxes function in the country. The tax brackets in Italy will affect the salary workers expect to receive and what your company is required to withhold on their behalf. Be sure to manage taxes for remote employees carefully, as noncompliance can lead to a steep bill.
In Italy, there is no "exempt" tax bracket. Anyone who makes money in the country must pay taxes under five tax brackets. You can find these brackets here for the 2022 tax year:
€0 - €15,000: 23% tax rate
€15,000 - €28,000: 27%
€28,000 - €55,000: 38%
€55,000 - €75,000]: 41%
It's essential to remember that Italy's tax brackets are progressive. For example, someone who earns €25,000 a year will be taxed 23% on the first €15,000 and 27% on the next €10,000. In this example, the total tax sum would be €6,150. Tax brackets and compliance in multiple countries can be tricky to navigate, a global EOR like Remote can help you understand your tax obligations for employees in other countries.
Learning how taxes function in Italy is critical. Because the country doesn't have an exempt tax bracket, the entirety of the salary is taxable. However, there are "income tax credits" available that can defray some of those costs.
Here's how Italy taxes salaries and other compensations:
In Italy, the entirety of a person's monetary compensation is taxable. Employer contributions and allowances for rent, cars, and tuition are considered part of salary and are taxable at the same rate. Bonuses and other variable compensations are also taxed at a flat 10%.
Although Italy doesn't offer standard tax exemptions, some deductions and expenses can reduce tax burdens. These include:
Mandatory social security contributions
Complementary pension fund contributions
Medical expenses for people with disabilities
Italy also offers tax credits that cover a certain amount of someone's tax burden. People who make less than €55,000 receive a tax credit covering part of their annual income tax. There are also tax credits for families, students, and people with mortgages.
Typically, per diem is not taxable in Italy. Per diem payments are allowances companies grant employees to cover expenses, typically for things like business travel or meals while working away from the office. Per diem is not a form of compensation but a reimbursement for expenses the company covers or would be expected to cover on the employees behalf.
Italian per diem payments are not taxed in most cases. However, companies still need to list these payments as expenses and not compensation on financial records to ensure employees do not incur taxes on what should not be considered income.
Allowances and reimbursements in Italy are not the same thing. Reimbursements are just that — money given by the company to the employee to cover the cost of something the employee has already paid for. Reimbursements tend to be item- or service-specific, like for the purchase of a new laptop or for the cost of a taxi to the airport. Reimbursements of this nature are not taxable in Italy.
Allowances are a different story. An allowance is a stipend given to an employee to spend in a discretionary way, not a reimbursement for a specific expense already incurred. Companies may offer allowances to employees to cover internet costs or car payments, for example. Allowances are usually considered taxable compensation.
In Italy, like in many countries, employers are responsible for deducting contributions for taxes and certain social programs directly from their employees' paychecks. These funds include income taxes, social support program payments, and local and municipal taxes. Companies may also make deductions to employee paychecks to fund pension schemes.
Insurance is not typically deducted from workers' paychecks in Italy unless a company offers private insurance. Italy offers public healthcare through general and income taxation, so insurance is not a mandatory benefit, and companies are not required to provide employees with supplemental insurance options.
There is no nationwide minimum wage in Italy. Instead, the country relies oncollective bargaining agreements(CBAs) in each industry to determine the minimum wage for that sector. To understand the minimum amount you'll need to pay, refer to the CBA for your industry.
Keep in mind, however, that updates are always in order. The Italian government has reviewed potential minimum wages in the past and may decide to set a new minimum wage via legislation.
Just as Italy manages minimum wage through collective bargaining agreements in most cases, overtime pay is most frequently covered by CBA. Overtime rates cannot be less than 110% of an employee's regular hourly compensation, but many CBAs require overtime to be at least 130% of regular pay. Similarly, night shifts and work on Sundays and holidays must be paid at a higher rate.
Collective bargaining agreements make up a large portion of labor laws in Italy.. However, employers must follow basic rules within every industry to remain compliant.
If you want to hire remote employees in Italy, keep in mind the following:
Employees must be offered and sign an employment contract before beginning work.
Employees cannot be terminated without notice outside of a few specific cases.
Employees must receive overtime pay for working more than 40 hours per week.
Student-workers should not be forced to work overtime on Sundays and must be granted paid days off for exams.
Furthermore, most CBAs require a minimum of four weeks of paid time off per year in addition to holidays. These CBAs also require employers to offer up to a year of employee sick leave.
In some cases, companies may wish to hire independent contractors in Italy instead of hiring full-time employees. Managing independent contractors requires less company oversight, and you can use Remote's Contractor Management tool to handle everything from currency conversions to invoice payments.
However, hiring independent contractors in Italy does have its risks. Italy and the unions in charge of CBAs are strict about maintaining proper employee classification. If you classify someone as a contractor who should be an employee, you could be held liable for back taxes, fines, and withheld benefits. Contractor misclassification can even lead you to lose your intellectual property.
If you have already hired contractors or are worried about converting contractors into employees, Remote can help you understand your next steps. Learn more about how and when to convert contractors to employees in this comprehensive guide, and check out our Contractor Misclassification Calculator to see if you could be at risk.
An Italian employer of record (EOR) simplifies the hiring process and allows you to onboard candidates swiftly and compliantly. Your EOR can hire employees on your behalf, handling their pay, benefits, and taxes. Your only responsibilities are the EOR's management fee (which, if you are working with the right EOR, should be a flat rate with no additional fees or percentages) and your workers' salaries.
Remote's Fair Price Guarantee promises a flat-rate EOR fee in Italy with zero deposits, hidden fees, or unpleasant surprises. With Remote, you can onboard employees in Italy quickly and easily through our local, Remote-owned entity for a low flat rate that never changes based on your employees' salaries or how many employees you have.
Whether you want to onboard one employee in Italy or an entire team in the country, Remote makes it easy and affordable to start immediately as your global employment partner in Italy. The right EOR can provide you with the safest, easiest, and most scalable way to hire employees abroad. Learn more about how to evaluate EOR partners in our guide.
Hiring remote workers in Italy is an excellent choice for any business searching for highly skilled and educated professionals. By working with a trusted partner like Remote, you can remove the complexities of international employment, payroll, benefits, and compliance while minimizing your exposure to risk. Remote monitors evolving Italian labor laws, tracks CBAs, builds custom benefits packages for your team, and keeps your business compliant with Italy’s tax codes.
Thanks to our in-house team of experts in Italy, we can help you hire like a local. Remote makes it easy to hire, onboard, and pay your team members in Italy as you grow.
Contact our expert team if you have any questions on how to hire and pay remote workers in Italy. We can provide you with the professional guidance you need to hire abroad with confidence. If you are ready to start onboarding workers in Italy right away, sign up for Remote now and get started today!
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