Expanding your workforce globally is a significant milestone for your company, but hiring full-time employees in Italy can be a complicated process.
One option is to establish your own legal entity. This process can be time-consuming and costly, including attending in-person appointments, needing intricate knowledge of the culture and language, opening a local bank account, verifying and translating documents, and more. Any mistakes made during this process can lead to penalties, legal action, or delays in onboarding new employees.
Employment law in Italy can also be quite complex to navigate, mainly due to the many regulations prioritizing employee rights. Employers must comply with numerous regulatory provisions, including collective bargaining agreements, the Civil Code, and the Italian Constitution.
On the other hand, using an Employer of Record (EOR) service can streamline the process by handling payroll, taxes, and compliance considerations—significantly expediting the hiring process. The best part: You don’t need to master local employment laws on your own.
Follow this step-by-step guide to learn more about hiring through an EOR in Italy.
Step by step: How to hire through an Employer of Record in Italy
Step #1: Decide between an Italian EOR and a legal entity
Should you hire Italian employees through an EOR or set up your own entity? It depends on your company’s resources, size, and plans to scale.
- Legal entity in Italy. Establishing a legal entity in Italy entails registering with local authorities, having knowledge of the language and culture, understanding local collective bargaining agreements, and seeking guidance from local experts to comply with tax, employee classification, and labor laws. Failing to secure country-specific expertise can pose significant compliance risks for your company.
- Italian EOR. An EOR is a third-party service that operates as an employer on a company’s behalf—saving you the effort of having to set up your own entity. Allowing you to hire full-time Italian employees, EORs handle all the legal requirements for complying with Italian laws for payroll, contracts, and benefits. EOR services also include calculating and withholding taxes, onboarding and managing employees, and running payroll.
Pros and cons of EORs vs. setting up a legal entity
Cost & Implementation
✔ Less time-consuming to set up.
✔ You can start hiring within days.
✘ Becomes costlier as you scale.
✘ Takes up to six months to set up—and you’re responsible for registration fees.
✔ More cost-effective once you’ve hired enough employees in a foreign country.
✔ Quickly set up new hires, often within one to 14 days, depending on the provider.
✔ Supports mass expansion into new markets.
✔ Manages all of your compliance work, assumes liability, and creates localized employment contracts.
✘ Can’t customize specific policies, or HR/legal processes to your business needs.
✘ Requires expert knowledge of local laws and tax regulations and internal legal resources, as your company is liable for all legal and compliance infractions.
✔ Can tailor certain policies, and other HR/legal processes, to the needs of your business.
Payroll & Benefits
✔ Quickly pay and insure employees around the world.
✔ Taxes are handled for you.
✘ Must manually keep track of statutory deductions and employee entitlements for every hire.
Step #2: How to choose the best EOR for your business
Before you choose a platform, you should consider the services you will need, and how much you plan to grow your global hiring presence.
- Is the EOR active in the countries in which you need to hire? This is the first and perhaps most obvious consideration when choosing an EOR for global expansion.
- Does the EOR own its own entities in the countries it services? If the EOR doesn’t own the entities, it means they’re partnering with a local or third-party provider.
- How does the EOR protect your sensitive and confidential information? It’s crucial that your EOR provider has the proper data protections in place, along with secure technology that eliminates the risk of private information being disclosed.
- Does the EOR offer automated solutions? You may want to look for an EOR that automates common HR and IT tasks, like onboarding and benefits enrollment.
- What is the EOR’s support model? The EOR solution you choose should have support staff that are both easy to contact and subject matter experts in country-specific regulations.
Get the full checklist in our guide: What is an EOR?
Rippling has everything you need to run a global workforce
With Rippling, you can manage your global team in one system, easily localize onboarding flows, and manage compliance policies for your international employees. See Rippling.
Step #3: How to hire and onboard your Italian employees
Once you’ve picked an EOR that works in Italy, you can begin the onboarding process by collecting the following information from your new employees:
- Full name (matching the account where you’ll deposit their pay)
- Date of birth and start date
- Contact information, including their mailing address in Italy
- Italian Codice Fiscale (Italian 16-digit tax code)
- Bank account information
- Salary to be paid each month in Euros (EUR)
In Italy, each employee must receive a legally compliant, written contract covering all statutory requirements such as compensation, bonuses, working hours, probationary period, notice period, termination and severance pay, and benefits. These employee benefits must include maternity leave, paternity leave, vacation leave, public holidays, and sick leave to stay compliant with local laws and the social security system.
To simplify the process, an employer of record service can handle the creation of employment agreements, localize them to specific areas, and distribute them accordingly.
You can onboard new hires anywhere, end to end, with Rippling. Request a demo today.
Step #4: Run payroll
After gathering the necessary information from the new employee and signing the employment agreement, an EOR will manage the payment of your Italian employees in EUR. The EOR will also ensure that legally required taxes and contributions are withheld from their salaries at the correct tax rate. Contributions include:
- Income taxes
- Local and municipal taxes
- Social security contributions, including the INPS which covers retirement and disability
Italy has one of the highest social security contribution rates compared to other European countries. Employers and employees together contribute about 40% of the employee's salary, with employers paying approximately 30%. Italian employers must also report all employee earnings, taxes, and social security contributions annually in a document called Certificazione Unica dei Redditi (CUD) for payroll purposes.
Frequently asked questions about hiring through an EOR in Italy
How much does an EOR cost?
EORs typically use one of two pricing structures:
- Fixed monthly fee per employee
- Percentage of payroll plus applicable taxes
It is important to note that both methods may have additional fees such as administrative costs, onboarding charges, and other expenses for extra features.
There’s no need to use an EOR for your entire workforce, as you will only be charged for the employees and contractors you choose to employ through the EOR if you decide to use this method.
What is the difference between an EOR and PEO?
A Professional Employer Organization (PEO) co-employs a company’s workforce and provides administrative services like paying employees, handling compliance, and filing payroll taxes. The company’s human resources team and PEO are jointly responsible for the workforce. PEO services don’t, however, allow you to hire in other countries where you haven’t set up a local entity.
An EOR, on the other hand, is the sole employer of the portion of your workforce you use it for, assuming all the associated liabilities. An EOR allows companies with global employment to work in other countries without setting up a legal entity.
Does an EOR protect your sensitive and confidential information?
While outsourcing your payroll management to an EOR can spare you time and compliance risk, sharing your data with companies who use third-party vendors leaves you exposed to data breaches from manual uploads.
Protecting data is crucial as it is a fundamental right for employees under the European Union's General Data Protection Regulation (GDPR). This legislation mandates obtaining consent for data collection and restricts the handling and processing of sensitive employee data.
You should seek out EORs that prioritize data protection, including:
- Compliance with industry-standard privacy regulations in different countries
- Secure infrastructure with around-the-clock maintenance
- Carefully vetted personnel
Employers are responsible under the GDPR to safeguard the personal information of EU residents, including their employees. They must have a legitimate reason for processing data, provide transparent information about the processing, and uphold employee rights.
You can also establish a Data Processing Agreement (DPA) with a payroll service that mandates sound privacy practices and provides legal protection.
Does an EOR help with Italian tax filings?
Yes, an EOR can automatically calculate and file taxes in Italy. Employers and employees must contribute to social security funds, with rates of approximately 30% and 10%, respectively. Income tax is progressive, ranging from 23% to 43%. Tax rates may also vary depending on the Italian municipality and region. The EOR will calculate those tax rates and withhold the correct amounts from pay.
What are the mandatory benefits for Italian employees?
In Italy, the standard workweek is 40 hours a week, Monday-Friday, for full-time employees. Regulated by Italian labor laws and collective agreements, these are the mandatory employee benefits your new hire is entitled to:
- Annual leave for vacation
- Maternity and parental leave
- 12 public holidays, including All Saints’ Day, Labor Day, the Feast of the Immaculate Conception, New Year’s Day, and others
- Sick leave
- 13th month and 14th month salaries
Employment contracts must include details on the probation period, severance pay, and annual bonus details (TFR), a bonus paid to terminated employees.
Healthcare is not mandatory, as Italy offers universal public healthcare to all Italian citizens, but employers can offer supplemental health insurance.
What are the employer costs for full-time employees in Italy?
Employers are responsible for deducting income tax and social security contributions from their full-time employees’ paychecks and staying compliant with the minimum wage rules. Not shown: any work permit costs associated with hiring. Find the details below:
Social security contributions
29.4% – 33%
23% to 43% depending on income
Rippling helps you hire, pay, and manage people worldwide. Request a demo today.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.