Continuing from where we left off, multinational companies will face various challenges when taking on employees. However, in addition to meeting the regulations when establishing or starting work in Italy, there are taxation policies, employee’s social security contributions and compensation for employees alongside the legislation that these aspects bring.
Italian Payroll: Policies for Taxation
This is one of the most complicated attributes when conducting payroll within Italy, ensuring that the company complies with all of Italy’s complicated rules on taxation. It is the responsibility of the employer to deduct taxes from the employee’s paychecks as fit. It is also the employer’s responsibility to ensure that the payments are submitted to the relevant tax authorities on a monthly time period.
Tax deductions are based (if determined or allowed) on an employee’s income over an annual period of time. Other factors are also taken into consideration, such as the number of dependents or any health issues that affect the individual.
What influences the process to make it such a nightmare is the widening number of taxes, each with different rates of taxation based on the gross salary of the individual. The employer must also account for local taxes, which vary depending on where in Italy the employee lives or resides for their time employed within Italian borders.
It is advisable to keep in mind that the government in Italy is currently undergoing an attempt to revise the taxation laws, employers should be aware that these rates can and will change at any point in the future.
Compensation for Employees
Italy’s slightly different from almost all other countries in and without the EU in that there is no outright law regulating the frequency in which an employee can be paid. That is because these issues are determined by the large number of agreed collective agreements and unions over each job position and job sector.
However, in some industries (such as the construction industry) payments are made on a bi-weekly basis while other industries state that payment should be on or before the 27th of each month.
While there are variances in payments terms there is one universal aspect among Italian employers in that most will provide a 13th and/or 14th month bonus to employees, usually paid in December.
Contributions to Social Security
Job category, business sector and the size of the company are subject to the amount of social security deducted from an employee in Italy. All contributions are payable as a percentage of each individual employees total annual gross pay – usually between 8.89 and 9.89 percent. An extra 1% could be added on the amount or income. The employers contribution ranges between 28.375% and 30.78% of the employees salary. The employer will be responsible for ensuring that all payments with the necessary documentation are sent to the relevant authorities by the 16th of each month.