10 things employers need to know about Italian labor and employment laws

Published

Aug 3, 2023

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In Italy, employee rights are of the utmost importance. From termination regulations to employee benefits and personal data access, hiring in Italy requires a thorough understanding of Italian labor laws, the EU directive, and the Workers’ Statute.

But, navigating Italian employment laws can be tricky. There are many questions to consider: What role do national collective bargaining agreements play in the hiring process? Are non-disclosure agreements enforced? This guide will assist you in answering these questions (and more), so you can successfully onboard and hire Italian talent.

1. Oral employee contracts are valid within 30 days of the start date

Unlike other countries, an oral job offer is valid following the interview process in Italy. However, there are certain clauses that must be in writing within 30 days of the employee starting their job.

This is why it’s best to provide a written employment contract from the start that includes the probationary period, non-compete agreement, non-disclosure agreement, working conditions, contract start date, employee’s duties, place of work, working days, salary, and so on.

2. Misclassifying workers could cost you millions of dollars in penalties

According to Article 2222 of the Italian Civil Code, independent, self-employed contractors offer their services to a company on a project basis and are not entitled to the same benefits or protections as employees. Full-time employees, on the other hand, receive statutory employment benefits and rights in exchange for a full-time employment relationship under the direction of their employer. Classifying each one correctly can be the difference between a successful working relationship and serious legal penalties.

In 2021, Milan prosecutors and the Italian Labour Inspectorate ordered that four prominent food delivery platforms employ more than 60,000 couriers and pay €733 million in penalties (USD 804 million) for misclassifying their workers. These companies, namely Uber Eats, Glovo, Just Eat, and Deliveroo, had previously classified their workers as independent contractors in Italy from 2017 to 2020. However, they are now required to treat these workers as continuous employees.

Our FREE Worker Classification Analyzer will reveal if you’re risking millions in fines

3. Severance pay is required in all terminations, regardless of cause

Whether an employee resigns or is terminated with just cause, the employer is obliged to provide severance payments. The payment amount is calculated by dividing the total annual salary by 13.5, adjusted annually to keep up with inflation.

4. Italian employees can receive up to two bonuses each year

Other European countries give their employees an end-of-year bonus or 13th-month salary. In Italy, employees can receive up to two bonuses—13th and 14th-month salaries—one during the summer and one at the end of the year. Any details on remuneration and which one the employee will receive are explicitly part of their collective bargaining agreement.

5. Collective bargaining agreements set many employee rights

Collective bargaining agreements (CBAs) are terms between trade unions and employers' associations. These parameters cover particular employment issues and set out overall rules for others, such as vacation time, working hours, leave, information access, and other subjects.

CBAs are only valid for companies that belong to relevant employers' associations. An EOR can help determine which guidelines you must include in your employment contract to comply with the relevant CBA.

6. Probationary periods are set by the national collective bargaining agreements

The length of probationary periods is determined by CBAs and must be in writing within the employment contract to be valid. They’re common, but not required by law. The maximum length of a probationary period is six months.

The company can terminate an employee's employment contract during the probationary period without reason as long as there’s written notice, per Italian law.

7. Non-disclosure agreements are enforceable in Italy (with one condition)

Yes, Italy enforces NDAs in different business settings, including employment relationships. These confidentiality agreements are legally binding contracts governed by the Italian Civil Code.

In order to be effective, an NDA should be specific and clearly identify the confidential information. In 2018, a judgment in the Tribunal of Milan considered a confidentiality clause null and limited its effect due to its vagueness.

8. Avoid collecting excessive personal data during background checks

Italian employers can perform background checks on their employees and contractors only if the information is relevant to their job suitability. Before conducting a background check, the candidate’s consent is required.

Personal data and documentation collection should only be done for lawful and defined purposes in compliance with Legislative Decree No. 196/2003 and the European Union’s Article 88 of the General Data Protection Regulation (GDPR). Non-compliance with these regulations may result in fines and severe penalties.

9. Italy has significant late tax filing penalties

It is essential to note that failing to file your taxes on time in Italy can result in significant penalties, which can vary depending on the period of time that has elapsed since the missed deadline. For instance, not filing your tax return can lead to a penalty ranging from 120% to 240% of the taxes due.

Even if you do not have any tax liability, you may still face minimum penalties that range from EUR 250 to EUR 1,000. If you are an employer who has missed the deadline for filing taxes, it is highly recommended that you seek professional advice to avoid the maximum penalties.

10. Meet the statutory employee benefit requirements

Per the Italian Civil Code, employers must provide certain benefits to their employees. These benefits include annual leave, sick leave, vacation time, parental leave, and social security contributions, among others. Failure to comply with these regulations may result in fines and penalties.

Contractors are not eligible for the aforementioned benefits. While they don’t receive these benefits, they are now protected by certain regulations that came into effect in June 2017. These regulations provide notice periods, payment terms, and protection of intellectual property rights to contractors.

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Frequently asked questions about Italian labor laws

What are the minimum wages in Italy?

Italy has no national mandatory minimum wage, but depending on your industry, you may find guidance set through national collective bargaining agreements and individual employment contracts.

What are the overtime laws in Italy?

Article 36 of the Italian Constitution and CBAs established that the normal weekly working time is 40 hours, made up of eight-hour days. However, employees can work up to 48 hours per week, including overtime, over four months.

Employers must pay for any overtime, as outlined in the employment contract and CBA (usually an additional 15% to 50% increase to the employee's hourly rate of pay). Workers in Italy cannot work more than 250 overtime working hours per year.

What are the required benefits in Italy?

Labor rights in Italy are highly regarded and protected. The national collective agreements, negotiated between trade unions and employers' associations, outline specific employment law terms. In Italy, all full-time employees are entitled to:

Social security contributions. Both employers and employees must contribute to social security by law. Employers pay around 30% and employees pay around 10%. It's illegal not to pay into social security, and employers can face a fine of up to EUR 50,000 and/or up to three years of imprisonment.
Annual leave entitlements. In Italy, employees have the right to receive paid leave, which includes a minimum of four weeks of vacation time and 12 paid public holidays each year.
Sick leave. During the first three days of an employee's sick leave, the employer is responsible for paying their full salary. These initial days are known as "waiting days." Following the third day, the employee will receive a portion of their sick pay from both their employer and the Istituto Nazionale della Previdenza Sociale (INPS). This policy covers up to 180 days of paid sick leave per year for the health and safety of the employee.
Maternity leave. Female employees have the right to take five months of paid maternity leave, including two months before and three months after childbirth. INPS pays the leave at 80% of the employee's salary, and the employer covers the cost. Both parents can divide up to 10 months of optional leave before their child turns 12, with some unpaid leave.
Paternity leave. New fathers in Italy have the right to take 10 days of paid leave provided by the government, which must be used within five months of the child's birth.
Holiday bonus. Employees receive 14 salary payments each year instead of 12, including a bonus payment during Christmas and another one during summer, known as the 13th and 14th months' salaries.
Work-related accident insurance. Employers must pay insurance premiums for their employees in case of work-related accidents and injuries. The INAIL is responsible for managing insurance policies and processing claim payments.
Pension contributions. Employers are responsible for contributing 33% of their employees' salaries towards their pensions, while employees contribute approximately 9%. Employers take care of all the contributions, including deducting the employee's portion from their paycheck.

How do I terminate employees in Italy?

At-will employment does not exist in Italy. Per Italian employment law, lawful termination of employment falls under two broad categories: just cause and justified reason. The notice period is based on the employee’s length of service, position, and level.

Just cause (giusta causa): If an employee commits serious misconduct such as theft, lying, causing harm to someone, or displaying gross negligence, the employer reserves the right to terminate the employee's employment contract without any prior warning.
Justified reason (giustificato motivo): It's important to have objective reasons for dismissal. Justified reasons may include redundancy, relocation of the business, or an employee's poor performance. However, you must follow the notice period before dismissing an employee under this category.

As per regulations, employers are not allowed to terminate an employee's employment while serving as a trade union representative, on parental leave, or until their child turns one.

Dismissing employees who have been married for one year or less without a valid reason is also prohibited. However, if an employee is under a probationary period, the company has the right to terminate their employment contract without reason, as long as they give written notice.

Per the Italian Civil Code, in all cases where an employment contract is terminated, the employer must pay the dismissed employee the following:

Severance pay (trattamento di fine rapporto): Regardless of whether an employee resigns or is terminated with just cause, the employer must provide severance payments in all situations. The payment amount is calculated by dividing the total annual salary by 13.5, adjusted annually to keep up with inflation. This pay is accumulated during their employment and amounts to 7% of their gross salary, which their employer pays.
Pro-rata supplementary monthly payments: If an employee was provided with certain payments during an employment contract, they are obligated to continue until the contract is terminated.
Payment for unused leave: If an employee is terminated from their job but has not used all of their accrued vacation time, they are entitled to indemnity for that time. This payment will serve as a replacement for the unused vacation days that they earned while employed by the company.

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