PEO/EOR employment contracts in Italy
What are the main types of employment contracts (contratto di lavoro) in Italy? Two main types of labor contracts through Professional Employer Organizations in Italy are permanent employment contracts and fixed-term employment contracts.
The permanent contract, which has an indefinite duration, is the most common. Fixed-term contracts can last up to 36 months, including any extension. A trial period can also be included in the employment contract. During this period, both the employer and employee are free to terminate the contract without notice.
Employment contracts regulate the main aspects of the working relationship between employer and employee, including job title, salary, responsibilities and duties, entitlement to sick pay and holidays, and applicable probationary and notice periods.
PEO/EOR employment termination and notice period in Italy
As you may know, employment in Europe is more employee-friendly than employer-friendly in comparison to North America. An example that showcases employee-friendliness is employment "at will”. Employment “at will” is not an option in Italy.
In Italy, the length of the notice period is provided by each collective agreement. In most collective agreements, the notice is as follows (please note that notice periods may depend on the position of the employee within the organization):
- 9 months tenure: 10 – 75 days
- 4 years tenure: 10 – 75 days
- 20 years tenure: 30 – 180 days
Upon termination of an open-ended employment contract, both the employer and the employee are entitled to a notice period. In case of termination due to a decision of the employer, it can exempt the employee from working during the notice period while paying a corresponding payment in lieu of notice. In case of termination due to a decision of the employee, if he/she resigns without giving the notice period provided, the employer has the right to withhold the amount of the payment in lieu of notice.
Italy EOR/PEO employment: Salary, employer costs and working hours
What are the costs of employing employees in Italy through a PEO/EOR provider? In 2022, the average annual gross wage in Italy was $29.153,04. This is lower than the average annual wage in the United States: $53.490,00.
As a PEO/EOR employer in Italy, the actual employer costs are around 29% to 32% higher than the gross annual salary. Based on a $29.153,04 annual salary, the employment costs would be $37.607,42.
The average working week in Italy amounts to around 36 hours a week, with the maximum legal working week set at 40 hours, plus eight hours of overtime. As work tends to be highly structured, an employee typically works Monday to Friday, 8/9 am to 1 pm, take a one or two-hour lunch break and then work from 2/3 pm to 6/7 pm.
Paid vacation leave and public holidays in Italy PEO/EOR employment
The minimum number of vacation days in Italy based on a 5-day workweek is 20. However, many contracts, particularly for state employees, allow for 28 days, or five weeks, of paid leave per year. Employees in Italy are also entitled to so-called permit hours (permessi) that can be used for personal reasons. The amount of hours depends on the particular collective bargaining agreement.
Employees have to take at least 2 weeks of holiday a year. The days that are left at the end of the year can’t be paid out. When someone leaves, the due holiday days are paid out.
In Italy, there are 12 public holidays. There are also some regional holidays that need to be taken into account:
- New Year's Day – 1 January
- Le Befana - Epiphany – 6 January
- Easter Sunday – 9 April
- Easter Monday – 10 April
- Liberation Day – 25 April
- Labour Day – International Worker's Day – 1 May
- Republic Day – 2 Jun
- Assumption Day – 15 August
- All Saint's Day – 1 November
- Immaculate Conception – 8 December
- Christmas Day – 25 December
- 2nd Day of Christmas (St. Stephen's Day) – 26 December
Maternity and paternity leave through EOR/PEO in Italy
When it comes to the statutory maternity leave (congedo di maternità) in Italy, the duration is 5 months or 20 weeks. Employees can choose from two options:
Take 2 months preceding the expected date of delivery and 3 months following the birth.
Take 1 month preceding the expected date of delivery and 4 months after. Mothers need to submit a medical certificate justifying the well-being of the baby will not be harmed were you to allow the leave only 1 month prior.
Looking at the pay, a mother has the right to an allowance equal to 80% of the salary for the entire duration of the maternity leave. If part of a collective labor agreement, the employee can receive a more favorable allowance of up to 100%. It is also a common practice for an employer to pay for the remaining 20%.
Paternity leave (congedo di paternità): 10 days of full paid leave, which can be taken separately and can be claimed within five months of the child's birth.
Find out everything you need to know about maternity leave in other European countries.
PEO/EOR employment benefits in Italy
The TFR and the 13th and 14th salary months are two important topics in Italy.
Firstly, the TFR. In Italy, there is no severance pay or redundancy compensation. However, upon the termination of the employment relationship, the employee receives the so-called TFR (Trattamento di fine rapporto), which is a part of workers' wages whose payment is deferred upon the termination of the employment relationship. This is an amount of approximately 10% of the gross wage, which is collected when the employee resigns from the job or is dismissed.
The TFR, for the employer through Italy PEO/EOR, is one of the workforce costs because it is a part of the benefit which is paid at the termination but which accrues during the relationship. Every month, the employee accrues the worth, and at the termination of the working relationship, the company pays the employee the total accrued amount. This TFR can also be placed in a pension fund.
Secondly, the 13th and 14th salary months. Though uncommon in most countries, according to Italian law, compensation is granted in fourteen instalments, with one extra instalment paid in December. Generally defined by the CBA and depending on the employee´s industry, position, status and seniority, the 14th payment instalment is typically paid in June.
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