Any expatriate expanding their experience in Italy will find hurdles in their way. One of the biggest is understanding Italian Payroll. In a two part series, we will lead you though the basics and help you gain a full understanding of Italian payroll.
Italian Payroll: Getting Started
In order to set up Italian Payroll within Italy you must register with the Labor Office, Social Security Institute and Insurance Institute. Deadlines for registering with these authorities differ:
The 1st day of employment for the Insurance Institute
The 5th day after employment for the Labor Office
The 16th of the following month for the Social Security Institute
Should you fail to meet these deadlines then you will be issued a penalty, paired with interest if the amount is severely overdue with the possibility of a visit from the authorities for inspection.
In addition to this, the organisation will have to obtain an identification number, which can take anywhere up to 15 working days. This will require signed documentation to be scrutinized in the presence of a notary public. This can often delay any business implementation, as a business cannot take anyone on as an employee without the fiscal code, obtained after the documentation ritual is finished. Furthermore, the employer will need to gain tax advisory support in order to ensure an assigned VAT number is passed over.
Understanding the Italian Employment Law
After being successfully registered and having working operations registered with the relevant authorities, if taking on fellow contractors or sub-contracting then the next hurdle is taking on employees. For expatriates, this means combating Italy’s outdated and complex employment laws.
The complications arise from the reason that the workforces are all under the umbrella of various unions, collective labor agreements and councils; all depending on the job type and sector. Employers hiring in Italy will be required to adjust their Italian Payroll operations in order to account for membership fees to the unions.
The Process of Onboarding
Should hiring take place and new employees be brought onboard then the unions will impact the process. The majority of collective agreements will provide probationary periods, ranging from six months to a mere 20 days, throughout which employment can be terminated without any notice. In order to successfully onboard new employees the company is obligated to provide the employees personal data to the local authorities – no later than their start date. Within five days, employee details must be sent out to the Labor Agency. Failure to do so by the given deadlines will lead to large fines.
Terminating an Employee
Any employee, regardless of what way the contract of employment is terminated, will be entitled to a ‘termination payment’. The actual amount itself is based upon the length of time the employee has been working. The usual process is one month’s salary for each year worked, including any bonus pay due and any unused holiday time.
All relevant bodies must be notified of the development, inclusive of the local employment office within 5 working days of the termination, alongside the National Social Insurance Institute.
This is only the first part of gaining an understanding of Italian Payroll the second part of this series will take a look at taxations, social security and compensations.