Employer of Record (EOR) in Italy

An Employer of Record is the legal employer of a worker in Italy. Often referred to as a Global Professional Employer Organization (Global PEO), this role involves comprehensive management of employment responsibilities, ensuring full compliance with Italy’s labor laws and regulations.

Streamline your global expansion with our Global PEO services in Italy, offering a hassle-free solution without the need to establish a local entity. As your Employer of Record (EOR) in Italy, we ensure legal compliance, establish a local presence, and protect your intellectual property, allowing you to focus on your core business activities. Experience a smooth global mobility process, including work visas, while building a diverse and skilled workforce.

Things you need to know before hiring in Italy

Employment Contracts in Italy

Employment contracts in Italy are a cornerstone of the employer-employee relationship, shaped by a well-defined legal framework that prioritizes worker rights and benefits. Italian labor laws require employers to provide information on the essential terms of employment, including job duties, compensation, working hours, and other key conditions, while collective bargaining agreements in many industries continue to play a central role. Understanding these contractual requirements is essential for both employers and employees, as compliance supports fair practices and a secure working environment.

Dependent Employment Relationship (Legislative Decree No. 81/2015)

In Italy, the subordinate employment relationship is characterized by the employee’s obligation to work under the direction of an employer in exchange for remuneration. This relationship is governed by Legislative Decree no. 81/2015, which outlines various forms of employment:

Permanent Employment Relationship

This is the most stable employment form, characterized by its indefinite duration. It can only be terminated in accordance with Italian dismissal rules, including justified reason or just cause where applicable.

Fixed-term Employment Contract

This type of contract may generally last up to 12 months without specific justification and may extend to a maximum overall duration of 24 months where the conditions set by law or applicable collective agreements are met, such as:

• Temporary and objective needs unrelated to regular business activities.
• Replacement of absent employees.
• Specific needs identified by the applicable collective agreement.

Intermittent Employment Contract

This fixed-term or open-ended contract allows employees to work on an intermittent basis as per the employer’s needs, subject to legal and collective agreement requirements. It is commonly used for activities identified by law or collective agreements and can also be used with individuals under 24, provided the work is performed before the age of 25, or over 55. Statutory limits on the number of days worked may apply.

Temporary Employment Contract

This involves a tripartite relationship where an authorized agency (employment agency), a company (user), and the employee (temporary worker) are involved. It includes both a commercial supply agreement and an employment contract.

Semi-Subordinate Employment

Parasubordinated work represents a hybrid employment model situated between subordinate employment and self-employment. This type of work allows for continuous collaboration that is coordinated with the employer’s organizational structure but does not establish a direct subordinate relationship. It enables flexibility while still ensuring some level of integration within the employer’s operations.

Independent Work

Self-employed individuals operate independently, providing services to clients without entering into a subordinate relationship. The primary types of self-employment in Italy include:

• Employment Contracts with VAT Number: This arrangement applies to professionals who issue invoices for their services.
• Occasional Service Contracts: These are limited engagements for genuinely autonomous occasional work. While the €5,000 threshold is often relevant for social security purposes, it is not a general legal ceiling that automatically defines whether a relationship is validly occasional.

Conditions and Provisions of Individual Employment Contracts According to Italian Law (Contratto di Lavoro in Italia)

The individual employment contract in Italy, as defined under Article 2094 of the Civil Code, entails the employee’s commitment to work under the employer’s supervision for remuneration. For a contract to be valid, the following elements must be present:

• Consent of the Parties: Both employer and employee must have the legal capacity to enter the agreement, typically attained at the minimum working age permitted by law. The consent must be free from error, coercion, or fraud.
• Lawful Purpose: The purpose of the contract must be legal and adhere to public policy and morality.
• Description of Activity: The contract must clearly outline the job description, ensuring that it is:
  • Lawful: Complying with existing laws.
  • Possible: Feasible based on the employee’s qualifications.
  • Determined or Determinable: Clearly defined or able to be defined by reference to collective agreements.
• Favorable Conditions: The contractual conditions must not be less favorable than those stipulated in national collective agreements (Contratti Collettivi Nazionali di Lavoro, CCNL).

Italian Employment Contract Concludes

Typically, prior to formal employment, the employer issues a hiring letter or written employment document that sets out the principal terms of the relationship. This should include crucial information such as:

• Identification of the parties involved.
• Job location and start date.
• Job classification and description.
• Details on the probationary period, salary, holidays, working hours, and notice periods.

While a written contract is strongly recommended to ensure clarity, Italian employers are in any case required to provide written information on the essential elements of the employment relationship.

The Collective Labor Agreement (CCNL) and Its Impact on Employees, Regardless of Union Membership

In Italy, the CCNL serves as a key instrument regulating employment conditions. While primarily negotiated between employer associations and trade unions, case law and employment practice often use the CCNL as a benchmark for fair and sufficient remuneration under Article 36 of the Constitution. This means employers commonly rely on the applicable CCNL to set minimum standards on pay, classification, notice, leave, and other employment terms.

Working Hours

The standard working time is established at 40 hours per week. However, collective labor agreements may specify a shorter duration and can link normal working time to average hours worked over a reference period, subject to statutory limits.

Probation Period

In Italy, the duration of the probation period is generally determined by the applicable CCNL and the employee’s classification. It is usually shorter for non-executive roles and longer for executives, provided the probation clause is agreed in writing.

13th Month Salary

In Italy, the 13th-month salary is a standard entitlement under many national collective bargaining agreements, representing a significant benefit offered by numerous employers. This additional payment, known as the tredicesima, is typically disbursed around the Christmas holidays and generally equates to one extra monthly salary at the end of the year.

The amount of the tredicesima is usually calculated based on the employee’s accrued entitlement during the year. A common formula is:

Tredicesima = Gross monthly salary x Number of months worked ÷ 12

Termination, Severance Pay, and Notice Period

Severance Pay

According to Section 2120 of the Italian Civil Code, employees are entitled to receive a severance indemnity, known as Trattamento di Fine Rapporto (TFR), upon termination of their employment, regardless of the reason for the termination. The annual TFR accrual is generally calculated by taking the employee’s yearly remuneration and dividing it by 13.5, subject to the applicable revaluation rules.

Notice Period for Redundancy

The notice period an employer must provide before terminating an employment relationship is generally determined by the applicable collective bargaining agreement (CCNL), the employee’s classification, and length of service. Notice periods are therefore not uniform across all employers in Italy and should always be checked against the relevant CCNL.

For employees with up to 5 years of seniority:

• Notice periods vary according to the applicable CCNL and employee level.

For employees with over 5 years and up to 10 years of seniority:

• Notice periods vary according to the applicable CCNL and employee level.

For employees with more than 10 years of seniority:

• Notice periods vary according to the applicable CCNL and employee level.

Overtime Pay

Employers are required to compensate employees for any overtime hours worked, as specified in the employment contract and the applicable collective bargaining agreement (CCNL). Overtime premiums are usually set by the relevant CCNL and can vary depending on whether the overtime is performed during daytime, nighttime, weekends, or holidays. In general, overtime is subject to statutory and collective agreement limits.

Employees vs Independent Contractors

In Italy, the distinction between employees and contractors is crucial for understanding workers’ rights, obligations, and benefits. While both groups contribute to the workforce, their working conditions, relationships with employers, and legal entitlements differ significantly. This overview aims to clarify these differences by comparing key aspects of employees and contractors in Italy, enabling better insights into the implications of each classification.

Social Security in Italy

Social security in Italy is a comprehensive system designed to provide financial protection to individuals against various life risks such as unemployment, illness, disability, and retirement. The Italian social security system is primarily governed by the National Social Security Institute (Istituto Nazionale della Previdenza Sociale – INPS), which oversees the collection of contributions and distribution of benefits.

Structure of the Social Security System

Mandatory Contributions

• Social security contributions are compulsory for both employees and self-employed individuals. These contributions ensure that workers are insured against events that could prevent them from performing their work, such as illness, disability, maternity, unemployment, or retirement.
• Contributions are paid periodically and can be deducted from salaries for employees, while self-employed individuals must manage their own payments in accordance with the rules of the relevant scheme.

Contribution Allocation

• For employed workers, the employer pays a significant portion of the social security contributions, while the employee contributes a smaller portion through payroll withholding. The exact split depends on sector, qualification, and the applicable insurance scheme.
• Self-employed workers are responsible for paying their contributions directly to INPS or to the relevant professional fund, based on their income and status.

Benefits Provided

The contributions collected fund a variety of benefits, including:

• Pensions: Social security contributions play a crucial role in providing retirement benefits, calculated based on the total contributions made over an individual’s working life.
• Sick Leave and Maternity Pay: Workers are entitled to benefits during periods of illness or maternity leave, subject to the applicable rules.
• Unemployment Benefits: The system provides financial assistance to eligible individuals who lose their jobs.

Contribution Calculation

The amount of social security contributions is determined by several factors, including:

• Type of Employment: Employees and self-employed individuals have different contribution rates. For standard subordinate employment, the overall contribution cost is often around 30% to 40% of gross salary when employer and employee portions are combined, but actual rates vary by sector, company classification, and employee status.
• Minimum Wage Regulations: Contributions cannot be lower than those calculated on the minimum contributory earnings set annually by INPS, ensuring that all workers receive a fair level of coverage.

Payment Deadlines

• For Employees: Employers must remit social security contributions by the 16th of the month following the pay period. This ensures timely payments and avoids penalties for late contributions.
• For Self-Employed Workers: Payments are made directly by the workers, with deadlines depending on the applicable contribution regime.

Importance of Supplementary Pensions

Given the evolving nature of public pensions and the increasing focus on long-term retirement planning, many workers are encouraged to consider supplementary pension options. These additional plans can help bridge the gap between expected retirement income and actual living expenses, ensuring greater financial stability in retirement.

Payroll in Italy

Italy has a comprehensive regulatory framework governing employment, payroll, social security, and benefits. This framework ensures compliance with national laws and protects the rights of employees while providing businesses with clear guidelines on their obligations. Below is an overview of the key requirements and processes involved.

Government Requirements

Registration Requirements

Ongoing Compliance Requirements

Pension Requirements

Employment Obligations

Payroll Requirements

• Monthly Payroll Processing: Payroll is generally processed monthly, with employees often receiving their salaries in 13 or 14 installments, depending on the applicable CCNL. The payment date depends on company practice and collective agreement rules.
• Pay Slips: Employees must receive payslips on the same day as salary payments, and electronic delivery is generally accepted where properly managed.

Banking Requirements Related to Payroll

Salary Payment Methods

• Net salaries are generally paid through traceable methods such as bank transfer or other permitted payment instruments. Cash salary payments are generally prohibited.
• An Italian bank account is commonly required for paying taxes and social security contributions.

Personal Income Tax in Italy

The Personal Income Tax (PIT), known as Imposta sui redditi delle persone fisiche (IRPEF) in Italian, is a key component of the Italian tax system. It is levied on the income of individuals, encompassing various sources of income, and is characterized by a progressive tax rate structure.

Tax Structure

Tax Rates

The PIT is applied at progressive rates, meaning that higher income levels are taxed at higher rates. For the fiscal year 2026, the rates are as follows:

• 0 to 28,000 EUR: 23%
• 28,001 to 50,000 EUR: 33%
• Over 50,000 EUR: 43%

Calculation of Taxable Income:

Taxable income includes various types of income, such as:

• Employment income
• Business income
• Income from property (e.g., rental income)
• Capital gains
• Foreign income (for tax residents)

Tax Residents vs. Non-Tax Residents:

• Tax Residents: Individuals who are tax resident in Italy are generally taxed on their worldwide income.
• Non-Tax Residents: Individuals who are not tax resident in Italy are generally taxed only on income sourced in Italy.

Additional Tax Considerations

Regional and Municipal Income Taxes

In addition to the national income tax, individuals are also subject to:

• Regional Income Tax: Rates vary by region of residence and applicable local rules.
• Municipal Income Tax: Rates vary by municipality, with local authorities able to set their own rates within legal limits.

Filing Requirements

• Tax residents must file an Italian tax return annually where required, declaring all relevant sources of income, both domestic and foreign.
• Non-residents are generally only required to report income sourced in Italy when filing is required.

Employee Benefits in Italy

Italy, with its complex labor laws and diverse workforce, offers a variety of employee benefits that are essential for attracting and retaining talent. At Mercans, we understand the importance of navigating the intricacies of employee benefits in Italy, which can vary based on sector, employee demographics, and regional regulations. Here’s a comprehensive overview of the employee benefits landscape in Italy.

Mandatory Employee Benefits

In Italy, certain benefits are mandated by law and are applicable to all employees. These include:

National Health System (Servizio Sanitario Nazionale – SSN)

Employees and residents with access rights under Italian law are entitled to healthcare services funded through the national system.

Pension Contributions

Employees are required to make pension contributions that can differ by profession or activity type. These contributions support the national pension system and are shared between employers and employees.

Workplace Accident Insurance

Employees must be covered by state-mandated insurance for workplace accidents, managed by the Istituto Nazionale per l’Assicurazione contro gli Infortuni sul Lavoro (INAIL).

Sickness Benefits

Employees are entitled to sickness protections, but the employer and INPS treatment can vary depending on the worker category and the applicable collective agreement. The specific pay percentages and waiting days should therefore be checked against the relevant rules and CCNL.

Sector-Specific Requirements

Individual labor contracts in specific sectors may impose additional mandatory benefits, such as specialized insurance coverage.

Supplementary Employee Benefits

In addition to mandatory benefits, many employers in Italy provide supplementary benefits, often guided by collective labor agreements specific to their industry. These benefits enhance employee satisfaction and contribute to a competitive employment package.

Key Sectors Influencing Employee Benefits

• Manufacturing: Includes sectors like pharmaceuticals.
• Commerce: Encompasses technical services and IT.

Employee Groups Impacting Benefit Design

• Executives
• Middle Managers
• Employees
• Blue-Collar Workers

Sector-Specific Benefits

Executives

Middle Managers, Employees, and Blue-Collar Workers

• In both sectors, mandatory benefit requirements depend heavily on law and the applicable CCNL. Pension and TFR obligations continue to apply where required.

Importance of Collective Agreements

Collective labor agreements are crucial in defining employee benefits across various sectors in Italy. These agreements ensure that employees receive fair treatment and adequate compensation tailored to their specific roles and industries. Employers must stay informed about the relevant agreements affecting their workforce to ensure compliance and competitiveness in the labor market.

Work Permit in Italy

If your company is expanding its operations into Italy, understanding the work permit process is essential for successfully relocating employees or hiring new talent. Italy has specific requirements and regulations that must be adhered to for foreign workers to legally live and work in the country.

Types of Work Permits

In Italy, non-EU nationals generally require prior work authorization, typically through a Nulla Osta al lavoro, together with the appropriate work visa and residence permit, unless they qualify for a specific exemption. Citizens of EU, EEA, and Swiss states can generally work in Italy without a work permit.

Requirements for a Work Permit

To obtain a work permit in Italy, employees must usually have a confirmed job offer. The employer is responsible for initiating the application process, which includes securing the Nulla Osta where required. Here are the key requirements:

• Job Offer: Candidates must generally have a job offer in Italy before applying.
• Supporting Documents: The employee will need to provide various documents, including:
  • A signed employment contract or contractual offer.
  • The original and a copy of the Nulla Osta, where applicable.
  • A valid passport.
  • Recent passport-sized photos.
  • A completed long-stay visa application form.
  • Proof of accommodation in Italy, where required.
  • Proof of payment for the visa fee.
  • Relevant diplomas and certificates, where required for the role or visa category.
  • Supporting documents requested by the relevant consulate or immigration office.
• Application Process: The employer normally applies through the competent immigration channel in Italy. Once the authorization is issued, the employee applies for the work visa at the competent Italian embassy or consulate, if visa-required.

Duration and Renewal

The work authorization is typically linked to the employment arrangement and immigration category. After arrival in Italy, employees must also apply for a permesso di soggiorno within the deadline set by law.

Additional Considerations

• Quota System: Italy operates an annual quota system under the decreto flussi for many categories of non-EU workers. For 2026, the authorized entries include 76,200 for non-seasonal subordinate work, 650 for self-employment, and 88,000 for seasonal subordinate work.
• Highly Skilled Workers: Certain categories of highly skilled workers may use alternative immigration routes and may not be subject to the ordinary quota limits, depending on the permit category.

Get Professional Assistance

Navigating the intricacies of work permits in Italy can be complex and time-consuming. That’s where Mercans comes in. Our team of experts can assist your organization with the entire process, ensuring compliance with all regulations and streamlining the transition for your employees. Whether you’re relocating existing staff or hiring new talent, Mercans can provide the support you need to facilitate a smooth and efficient move to Italy.

EOR Solutions in Italy

Best Employer of Record Italy

Mercans is the Leading Employer of Record Services in Italy because:

• Compliant with The Italian Ministry of Labour and Social Policies (Ministero del Lavoro e delle Politiche Sociali): Mercans ensures strict adherence to regulations set by Italy’s Ministry of Labour and Social Policies, maintaining full compliance in employment practices, payroll, benefits, and HR administration.
• Independent Entity: Operating independently in Italy, Mercans delivers reliable and consistent employment services, providing tailored support without third-party reliance.
• Supports All Employment Types: Mercans expertly manages diverse employment categories, including full-time employees, freelancers, contractors, and expats, ensuring flexibility for various workforce requirements.
• Ideal for Large Enterprises: With sophisticated, scalable services, Mercans is designed to meet the unique needs of large enterprises in Italy, effectively supporting complex organizational structures.
• Payroll in Multiple Currencies: Facilitating multi-currency payroll, Mercans provides smooth, accurate financial operations, catering to global businesses operating in Italy.
• Global Reach with Multi-Country Payroll Expertise: Through an extensive network, Mercans manages multi-country payroll, ensuring seamless and compliant operations for international companies expanding into Italy.
• GDPR, SOC 1 & SOC 2 Compliant: Mercans prioritizes data security, adhering to GDPR, SOC 1, and SOC 2 standards to safeguard both employee and client information.
• ISO 20000 & ISO 27001 Certified: Holding ISO 20000 and ISO 27001 certifications, Mercans ensures the highest standards in IT service management and information security.
• OWASP ASVS 3.0 Standards Compliance: Mercans employs robust security practices in application development, meeting OWASP ASVS 3.0 standards to enhance data protection.
• HRBlizz: Streamlined Payroll and Talent Management: Mercans’ proprietary HR Blizz platform provides payroll and talent management solutions, seamlessly aligned with Italian labor laws and regulations. With 1,000+ specialists, it brings deep local knowledge to clients.
• G2N Nova: Advanced Global Payroll Processing: G2N Nova, Mercans’ global payroll engine, offers gross-to-net payroll processing in over 100 countries and integrates smoothly with HCM and Workforce Management systems.