Payroll in Italy
What do you think of when you think of Italy? For most, our mind goes to gelato, pasta and the leaning tower of Pisa.
For many businesses, however, Italy is now a prime location for expanding international teams. With a strong economy, a central location and a well-trained, affordable workforce, is it any surprise Italian talent is so in demand?
And if your business wants to secure some of that talent for itself, then you’ll need to have your payroll running smoothly.
Luckily, there are options available to make managing payroll services in Italy easier for you. To simplify the process and save you from stress later down the line, a payroll company like Skuad can make hiring, managing, and paying employees internationally pain-free.
What does the payroll process in Italy involve?
Never handled payroll internationally before? No problem, let’s take a look at the basics.
The payroll process entails quite the same things as it would in most countries. However, there are some vital elements you need to keep in mind, including:
- Onboarding employees. Integrate new employees into the company, familiarize them with the products and/or services and have them sign a legally binding contract.
- Defining payroll policy. A payroll policy covers salaries and schedules and informs employees of payment dates, benefits, how much to expect, and attendance policies.
- Calculating gross pay. This is the amount that you’ve agreed to pay a worker before any deductions such as taxes.
- Calculating hours worked. The responsibility for tracking time (as in the number of hours worked) falls both on the company and the employee.
- Determining contributions and reimbursements. These include the likes of taxes, paid leave and health insurance, which are deducted from wages and then reimbursed.
- Maintaining record. The most important step of the payroll workflow is maintaining accurate and detailed records to protect your business.
Though the payroll process might sound similar to other countries, Italy has its own set of individual quirks that make it a unique place to work (and a more difficult place to manage payroll in).
For instance, Italian law dictates that employers will have to pay salary estimates across 13 monthly installments, not 12, as is customary in many countries.
Confused? No need to be, Skuad has you covered for everything you need regarding your payroll. Let's dive further into Italy's payroll requirements.
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What do you need to know about payroll in Italy?
Now that we know what payroll calculations include in Italy, let’s look at how we get it right. Consider the following comprehensive payroll guide for your employees in Italy — a one-stop shop.
The national currency of Italy is the Euro, equal to 1.90US, and is shown as € or EUR.
Working hours in Italy
Italians have the standard working hours like many countries worldwide for 8 hours per day, 40 hours per week.
The average hours for a business is from 9am to 1pm and then from 2pm to 6pm.
Overtime rules in Italy
Anyone working more than the working hours is eligible to get overtime pay as per the regulations of the employment contract, which is normally set by the employers.
These employers can bargain to get the agreements set as per the company or industry level.
Minimum wage requirements in Italy
The Italian government has not set any statutory minimum wage. The minimum wage is usually determined as per the standards of each particular sector.
Each sector will determine the basic pay in relevant national collective agreements (NCAs). The average minimum wage per month in Italy is around $2255.28.
Severance pay in Italy
Employees in Italy are entitled to get severance pay, whether the employer terminates them for a justifiable reason or they resign. The employers keep some amount of the salary to pay for the severance to an employee.
Termination is a very tricky matter in various countries around the globe — and that goes double for countries such as Italy where employees are entitled to severance.
With Skuad’s help, we can ensure that you deal with the termination matter as per the country-specific requirements.
Italy payroll taxes and deduction
Taxes can be a minefield in any country — even more so in those where you’re unfamiliar with the taxation system. Here’s a brief rundown of taxation in Italy.
Italian individual income tax is called L'Imposta sul reddito delle persone fisiche, or IRPEF. Tax rates are progressive and range from 23% to 43%.
The current tax brackets are as follows:
- Income Up to €15,000 is subject to a tax rate of 23%
- Income from €15,001 to €28,000 is subject to a tax rate of 27%
- Income from €28,001 to €55,000 is subject to a tax rate of 38%
- Income from €55,001 to €75,000 is subject to a tax rate of 41%
- Income above €75,000 is subject to a tax rate of 43%
In addition, the municipalities and regions will also have an income tax, with the rates of 0.9% and 2.03% respectively. As per the Italian payrolls, you need to report all the tax and social security contributions in the Certificazione Unica dei Redditi (CUD).
Another crucial tax that both employees and employers contribute is the social taxes.
This is a vital tax to fund social benefit programs for the employees. It includes the following taxes and benefits you will have to pay for along with your employee:
Pension, disability, and survivors benefits
The employees will have to pay 19%, while the employers will pay 23.81%
The employees will not contribute, while the employers will pay 2.22% to 2.44%
The employees will not contribute, while the employers will pay 0.46% to 0.24%
The employees will not contribute, while the employers will pay 0.04% to 1.3%, depending on the assessed extent of the injuries
The employees will not contribute, while the employers will pay 1.61%
The employees will not contribute, while the employers will pay 0.68%
The top management and the employers will have to make regular contributions to the health care funds and the supplementary pension funds, too.
Now don’t worry, while the Italian taxation system seems complicated, that’s where we come in. Talk to one of the Skuad team today to learn how we can help with your international payroll.
Employee leave entitlement in Italy
There are 12 national public holidays each year in Italy that will need to be factored into employment contracts.
01 Jan 2024, Monday- New Year's Day
06 Jan 2024, Saturday- Epiphany
31 Mar 2024, Sunday- Easter
01 Apr 2024, Monday- Easter
25 Apr 2024, Thursday- Liberation Day
01 May 2024, Wednesday- International workers' Day
02 Jun 2024, Sunday- Republic Day
15 Aug 2024, Thursday- Assumption Day
01 Nov 2024, Friday- All Saints' Day
07 Dec 2024, Saturday- Santo Patrono
08 Dec 2024, Sunday- Immaculate Conception
25 Dec 2024, Wednesday- Christmas Day
26 Dec 2024, Thursday- St Stephen's Day
Besides that, there is another leave entitlement that the employers have to keep in mind. These include:
Employees throughout the county must take 180 days, or 5 months, of maternity leave. Throughout the maternity leave, the mother will receive 80% of their pay from the social security system.
Employees in Italy will get 30 days of annual leave, which they will receive their salary for. It includes two weeks of consecutive leave that the employee can take. Also, the employee can carry forward the 14 days of their holiday for the next one and a half years.
An employee must take the two weeks' leave in the current year they are due. If the employee is quitting their job and terminating their employment relationship, they can choose to take pay instead of annual leave.
Additionally, there may be more public holidays, depending on the region. If a public holiday comes on the weekend, the employees will get an additional day off. If any employee chooses to work on a holiday, they will receive overtime for extra hours.
Sick leave is specified in the collective labor agreements, which give the Italian employees a full day's pay if they fall sick. The National Social Security Institute and the employer will have to pay for the sick leave.
Payroll compliance in Italy
Italian payroll dictates that it is a legal requirement for employers to pay the salaries, taxes, and social security benefits on time. They will report it in the Certificazione Unica dei Redditi (CUD).
Each employer has to give the two original CUD documents to their employees by the 28th of February for the last year's financial reporting.
Have you considered this yet? If not, don’t be alarmed. It doesn’t need to be anywhere near as complicated as it sounds…
Payroll providers in Italy: how to start building your team?
Not sure how to begin with the payroll in Italy? Consider outsourcing. It will give you a hassle-free payroll process while you can focus on growing other core aspects of your business in Italy.
When you partner with Skuad, you can open yourself to numerous benefits such as:
Make your payroll process simple and easy by getting an all-in-one dashboard to manage everything.
Found a sticking point? Don't worry. Skuad is here to give you complete guidance regarding the entire payroll process. Our exceptional customer support service is here to take all your questions and keep your processes moving forward.
With Skuad, you can easily access the global talent pool since we have services in more than 160 countries globally. We offer you complete flexibility to hire the best talent regardless of the location.
Start your journey for hiring the best talent in Italy or anywhere else. Book a demo without incurring any charge to see how Skuad can help your business.