How to hire and pay remote workers in Italy

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.

How do foreign businesses pay remote workers in Italy?

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:

Open a legal entity in Italy

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 if you have plans to open a permanent office in the country.

Work with an EOR

If you don’t have the budget or need to open an Italian entity, consider using an EOR 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 EOR 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.

Pay Italian workers as contractors

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.

See also: Remote’s expert guide on how to pay contractors.

Can I hire foreign employees in Italy?

Yes, you can hire employees in Italy who are from another country as long as they meet certain requirements. Before they leave for Italy, for instance, they need to have a passport and European Health Insurance Card. They should also contact the relevant tax authorities, police authorities, and social security institutions to transfer their benefits.

Hiring from within the EU or Switzerland

If your prospective worker is an EU or Swiss citizen, then it’s a little more straightforward to hire them in Italy. They don’t need a work permit, but they need to do the following:

• Make a declaration of presence at a police station in Italy.

• Apply for registration at the public records office of the municipality they live in if they plan to work and live in Italy for more than three months (either as an employee or independent contractor).

• Register and apply for a tax identification number at the Public Revenue Agency office closest to their location in Italy.

• Register with local health authorities and the National Health Service.

Hiring from outside the EU or Switzerland

If you’re planning to hire a non-EU or Swiss citizen in Italy, however, they must secure the following:

• Work permit

• Long-term work visa (nulla osta al lavoro)

• Residence permit (permesso di soggiorno)

The employee must also receive a job offer before taking these steps. As their employer, you must apply for a work permit on their behalf at the immigration office (Sportello Unico per l’Immigrazione) where your employee lives, and they can use it to apply for their own work visa.

A unique factor here is the decreto flussi, a limit Italy imposes on how many non-EU citizens can go to Italy to work every year. For 2024, for example, the total limit is 151,000 people, and it’s further broken down into specific numbers for seasonal workers, self-employed workers, and employees. Your employee can only secure a work visa and permit if the decreto flussi quota hasn’t yet been filled for the year.

What types of contracts are used to pay workers in Italy?

When you hire an employee in Italy, you’ll generally offer them one of two employment contract types: an open-ended contract or a fixed-term contract. Let’s discuss each of them in detail.

Open-ended contracts

Open-ended contracts, called contratto a durata indeterminate or permanent contracts, are essentially standard employee contracts. They can be used for full-time or part-time work. The regulations around them tend to be more relaxed, but it’s still a good idea to create a written document for both parties to sign.

Here are a few things to include in an open-ended contract:

• Job responsibilities

• Level of employee

• Start date of employment

• Details about potential probationary periods

• Salary and payment period

• Place and hours of work

• Vacation days and leave hours

• Termination information

Italy’s Labor Code was amended in 2022, requiring the following additional elements in employment contracts:

• Overtime information

• Shift compensation (if applicable)

• Trial period (if applicable)

While an open-ended contract can (and should) specify a potential probationary period, this period can’t be longer than six months, during which time the worker must still receive their regular salary. You can terminate it for just cause, a justified objective reason related to production activity and the organization of work, or a justified subjective reason (which is a minor breach of contract).

Fixed-term contracts

Fixed-term contracts, also known as contratto a tempo determinato, designate clear employment start and end dates. They must be in writing, include the date the contract will end, and generally can’t last for longer than one year.

In general, these documents can be renewed up to four times but for no longer than two years total. If an employee continues working for the same company after their fixed-term contract is up, they must receive an open-ended contract within 20 days, along with pay for this in-between period.

But if the employee stops working after their fixed-term contract is up, they can’t be re-hired by the same company for 20 days.

As of 2023, you no longer need to provide reasoning to extend or renew these documents. However, the total number of workers on fixed-term contracts at any company can’t exceed 20% of the number of employees on open-ended contracts. And keep in mind that the only way an employer can terminate a fixed-term document is if they have just cause.

While open-ended and fixed-term are the most common contract types you’ll encounter, others include the following:

• Part-time: under 30 hours of work per week

• Internship: no minimum salary requirement

• Apprenticeship: for people aged 15-29

• Freelance: for independent contractors

In what currency do companies pay remote workers in Italy?

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.

What are the tax rates for tax brackets in Italy?

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 three tax brackets. You can find these brackets here for the 2024 tax year:

• €0 - €28,000: 23% tax rate

• €28,001 - €50,000: 35%  tax rate

• €50,001+: 43%  tax rate

It's essential to remember that Italy's tax brackets are progressive. For example, someone who earns €30,000 a year will be taxed 23% on the first €28,000 and 35% on the next €2,000. 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.

Which parts of salary in Italy are taxable?

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:

Components of Italian salary that incur full taxes

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%.

Components of Italy salary that incur partial taxes

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.

Is per diem taxable in Italy?

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 employee’s 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.

Is there a difference between allowance and reimbursement in Italy?

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.

What payroll deductions are employers required to make in Italy?

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.

Want to see a full breakdown of employment costs for new hires in Italy? Check out our free Employee Cost Calculator tool.

What is the minimum wage in Italy?

There is no nationwide minimum wage in Italy. Instead, the country relies on collective 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.

How much is overtime pay in Italy?

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.

Local labor laws to know before you hire employees in Italy

Employers must follow basic rules within every industry to remain compliant with Italian labor laws. If you want to hire 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 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. Employees in Italy are also entitled to 12 public holidays. Paid leave can’t be traded for compensation.

When you hire employees in Italy and send out their contracts, keep in mind that The Ministry of Labor and Social Policies designates that they can’t work more than 48 hours over a period of seven working days (with a few exceptions). They’re also entitled to 11 hours of rest after working 24 hours, and 24 hours of rest after working for seven straight days.

The 2022 Italian Labor Code amendment also made changes to the country’s parental leave policies, including the following:

• Employees can take parental leave until the child is 12 years old.

• Each parent is allowed up to six months of leave, with up to nine months for combined paid leave.

• Single parents are allowed up to 11 months of leave, nine of which are paid.

• Employers must prioritize requests to work from home for employees with children under 12 years old or any age if the child has a disability.

Pay Italian workers as contractors

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 services 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.

How to pay remote employees in Italy with an EOR

An 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.

Hire and pay remote workers in Italy worry-free with Remote

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, Italy payroll regulations, 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 in Italy and pay remote workers. 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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