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Italy is a popular destination for growing business due to its expanding economy and vast population. The GDP of Italy had reached 2186.08 billion USD. It is projected to reach 2571.5 billion USD by 2028.
This influx has made it a magnet for multinationals, which in turn has also generated numerous job prospects for its citizens.
Italy boasts a skilled workforce that spans across many industrial sectors. They include textiles and manufacturing, food processing, and tourism.
Before hiring in Italy, you must know the following aspects:
The official currency of Italy is the Euro (EUR, €).
Italian is the official language, but English is the most used foreign language in the country.
The standard working hours in the country are 40 hours a week.
The minimum wage in Italy depends on the industry and region. As per the general rule, the minimum wage in Italy is €7-€9 per hour.
As a business owner wanting to expand and hire in Italy, you need to be familiar with the local employment laws.
You also need to know if establishing a local entity will be wiser than partnering with an EOR.
Instantly check the data-backed global salary insights
Before you hire employees in Italy, ensure you understand their employment status. The country treats full-timers and self-employed staff differently, like many others. Any misclassification can attract legal action and penalties.
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Here are some of the ideal ways to hire employees in Italy:
Setting up a subsidiary in Italy
Hiring employees via EOR
Hiring contractors through AOR
How to hire employees by setting up a local entity
One of the ways to hire employees in Italy is by establishing a local legal entity in the country. This helps with proper staff management, contract extension, and on-time payroll processing.
However, there are several downsides to this option. Setting up a local entity can be time-consuming and may require a large investment from the company.
Startup expenses like administrative setup and legal fees (to hire employees) can amount to $5000 to $15,000 (or even more). This can add up to other operational costs while exposing the company to potential legal and economic risks.
How to hire employees via EOR
To hire employees in Italy without setting up an entity, consider partnering with an EOR (Employer of Record). An EOR can help you hire staff in Italy on your behalf. A reliable EOR like Skuad can also help with onboarding, compliance with local laws, payroll management, and offboarding.
Other reasons to employ in Italy without setting up an entity can be:
You may not have plans to set up a permanent business in Italy
You’re not adept to Italian employment laws
You may not have the required long time or budget to set up a subsidiary
How to hire contractors through AOR
Another option to hire employees in Italy without setting up an entity is to employ via AOR (Agent of Record). When you partner with an AOR, they become your hiring partner in a foreign country like Italy. They also manage employment classification, administration, payments, issuing contracts, NDAs, and much more.
An AOR specializes in worker classification and local laws, making it an ideal option when you want to hire contractors.
When you partner with a good AOR service like Skuad, it helps reduce hiring risks, ensures proper financial and legal compliance, streamlines administrative work, and enhances organizational efficiency.
Thus, from the range of AORs available, choose your option carefully after doing thorough background checks, service reviews, verifying compliance practices, pricing, and client reviews or testimonials.
Cost of Hiring in Italy
You need to consider both direct and indirect costs when hiring employees in Italy.
Wages: The salary of your employees is dependent on their position, their skills, as well as experience, and industry. For more information, explore Skuad’s salary insights tool.
Benefits: According to Italian labor laws, you must ensure your employees receive certain benefits, such as paid time off. You can also provide them with social security and retirement, a healthcare allowance, and other benefits.
Talent acquisition: Sourcing, interviewing, and hiring Italian employees via a recruitment agency will be cost-intensive. You will also have to pay for job advertising and background verification.
Onboarding and training: Once your new employees are onboard, they will need training. This will require additional costs.
Indirect Costs
Administrative: Administrative costs related to running HR operations, managing benefits, processing payroll, and complying with labor law.
Legal: As a new company in a new country, you risk misclassification if you don't partner with a reliable EOR. This can cause you to incur fines and penalties for non-compliance.
Here’s a cost comparison between hiring employees in Italy via a local entity vs. hiring an EOR:
Criteria
Setting up a Local Entity
Partnering with an EOR/AOR
Setup Costs
Initially higher with legal, registration, and office setup
Minimal costs as EOR/AOR like Skuad has already established a presence
Administrative Costs
Includes HR, compliance staff, office maintenance
Compiled into service fees, no need for in-house staff
Employee Taxes, Benefits
Higher as the parent company is responsible for hiring and providing employee benefits
It provides simplified payroll solutions
Compliance Costs
The company may need to additionally hire consultants to remain compliant
It incurs reduced costs, ensures compliance
A Brief About Employment Laws in Italy
The Italian Constitution provides specific laws for hiring employees in Italy, which mandate fair pay, work equality, and much more. Here are some highlights on Italian employment laws:
Employment contracts and conditions: Fixed-term contracts and other special contracts, such as solidarity, part-time, and apprenticeships, are applicable in Italy.
Working hours: Employees should work for at most 40 hours a week.
Overtime pay: At least 15-30% of the basic pay is given to employees as overtime pay.
Annual leave: As per the Italian Civil Code, employees are entitled to 22 days of annual/privilege leave in Italy.
Maternity leaves: As per the Italian Constitution and the Workers' Statute (Statuto dei Lavoratori), female employees are entitled to five months of paid maternity leave.
Statutory benefits: Paid leaves, maternity leaves, old-age insurance, disability benefits, and insurance for work-related illness and injury are mandated by law.
Challenges of Hiring in Italy
Hiring in Italy helps tap into the Italian talent pool. However, it also brings challenges like navigating complex employment laws and managing payroll, which can slow operations and increase costs.
Here are the most common challenges to hiring employees in Italy:
Complex employment laws
Italy does not have a unified labor code. Employment laws are majorly covered by the provisions of labor legislation that span various laws, regulations, and statutes. Navigating the complex nature of the Italian employment laws is the most common challenge you may face while hiring. You need to be on top of various laws that mandate fixed working hours, overtime, pay, paid leaves, benefits, and severance pay.
Foreign businesses may often find these laws overwhelming and need legal guidance to ensure compliance with local laws.
High cost of employment
The major hindrance in Italian payroll management is its progressive tax structure, where the tax rates vary with income levels. You need to take into account the 13th and 14th-month pay, social security contributions (40%), and others while disbursing salaries.
Also, if the employee has resigned, you have to pay the employee trattamento di fine rapporto (severance pay) along with their monthly salary.
You must pay salaries, taxes, and all contributions on time. With that, as an employer, you are required to report the same in the Certificazione Unica dei Redditi (CUD).
As a new business owner looking to hire in Italy, all these processes can be overwhelming and a major hurdle.
Competitive talent landscape
Talent scarcity in a few specific areas contributes to competition in Italy. There’s a high demand for skilled personnel in certain sectors like textiles and chemicals, which makes hiring and retention difficult.
The well-educated workforce in Italy is constantly seeking opportunities abroad, shrinking the labor pool in Italy. Cultural factors like communication style and hierarchy also add to the competition in the job market.
Preference for a hierarchical work environment
In Italy, the way people do business is quite different from other places. They really care about things like work hierarchy, and building strong relationships with each other.
In the local job market, there wasn't much movement, partly because most businesses were small or medium-sized and not set up to handle lots of staff changes. The way companies worked was mainly focused on the boss or owner, who wanted loyalty and respect in return for job security.
Moreover, being on time is super important, but Italians might not be as strict about schedules as some other cultures.
When it comes to conversations, Italians like to be subtle and polite. It's important to pay attention to these cultural hints to work well with Italian colleagues.
Understanding and respecting these differences is key to working together smoothly.
One platform to grow your global team
Hire and pay talent globally, the hassle-free way with Skuad
By now, you must have understood the complexities of hiring in Italy.
From staying competitive in the market to managing payroll and ensuring compliance with local laws, the responsibilities can become burdensome for growing businesses. With a reliable EOR platform like Skuad, you can bid adieu to those worries.
Skuad helps you conveniently employ in Italy without setting up an entity, be locally compliant, and offer on-time payroll to your staff. Our team of experts is present in 160+ countries, offering streamlined services, and is trusted by numerous global brands.
Choose Skuad as your EOR in Italy today! Explore Skuad now!
FAQs
How do I hire an employee in Italy?
You can hire in Italy by choosing any of the three options:
Establishing a subsidiary
Partnering with an EOR to hire full-time employees
Partnering with an AOR to hire contractors
Establishing a subsidiary can be time-consuming. So, if you’re looking for a quick solution, then EORs or AORs are ideal choices.
What is the cost of employing someone in Italy?
The cost of employing someone in Italy includes various costs, such as the minimum wage, salary, benefits, and others.
Italian work culture draws its essence from tradition. It is slow-paced with bits of bureaucracy. Work crews in the country exist like a coherent family, and long lunch breaks act as bonding-connecting sessions. Employees are respectful and love engaging in conversations.
What is a typical workday in Italy?
A typical work day in Italy starts around 9-9:30 am and continues till 6-6:30 pm. Most workplaces offer a lunch break by 1-1:30 pm.
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