Italy: Pay and benefits

Original author: Massimo Pallini
Updating author: Luciano Racchi
Consultant author: Claudia Pengue, BFEA

Summary

  • Pay rates are set by collective agreements or the individual employment contract. (See General)
  • Employees are entitled to a 13th-month payment, equal to one-12th of their earnings in the calendar year. (See General)
  • Wages must generally be paid monthly, and employers must give employees a written statement of gross wages. (See Payment of wages)
  • Save for certain exceptions, employers may not make deductions from employees' wages. (See Deductions)
  • Male and female employees must receive equal pay for "like work". (See Equal pay)
  • Italy does not have a statutory or agreed national minimum wage, although collective agreements set out minimum rates. (See Minimum wages)
  • All employees must be insured under the compulsory state pension scheme, and collective agreements may require the employer to pay a proportion of an employee's wages into an occupational pension scheme. (See Pensions)
  • Employers are obliged to deduct income tax from employees' pay. (See Income tax and social security)
  • There are various rules regarding pay for employees absent from work due to sickness. (See Sick pay)

General

All employees are entitled to receive from their employer an annual 13th-month payment (tredicesima), as it forms part of their annual contractual salary. The 13th-month payment is equal to one-12th of the employee's earnings in the calendar year and is paid in December each year. Entitlement to the 13th-month payment continues to accrue during absence from work due to sickness, accidents at work or maternity. When the employment relationship terminates for any reason, the employee is entitled to receive a proportion of the 13th-month payment calculated on the basis of the proportion of the year worked.

Pay rates are normally set by collective agreements. Collective agreements apply if the employee is a member of a trade union that is party to the agreement and the employer is a member of an employers' association that is party to the agreement, or where the parties to the individual employment contract have agreed on the application of a specific collective agreement. At present, collective agreements - primarily at sector level, with company agreements (mainly in larger firms) generally building on sectoral provisions (see Italy: Industrial relations > Collective bargaining and agreements) - apply to around 80% of the workforce.

If no collective agreement applies, pay is laid down in the individual employment contract. Even in such cases, the pay rate cannot be less than the minimum rate established for the relevant category of employee (managerial, white collar, blue collar, etc) by a national collective agreement signed by the most representative trade unions (see Italy: Industrial relations > Trade union rights) in the sector concerned. This is because case law has established that a rate of pay lower than the agreed sectoral minimum would infringe the right of workers, laid down in the Italian Constitution, to "remuneration commensurate with the quantity and quality of their work, and in any case sufficient to ensure to them and their families a free and honourable existence". Individual employment contracts or agreements that set pay below the relevant minimum rate laid down in the sector's national collective agreement are null and void even if expressly accepted by employees.

Collective agreements or individual contracts may link a part of an employee's annual remuneration (over and above the relevant minimum rate) to their specific results or productivity.

Employees may receive various bonuses on the basis of "company practice" rather than the terms of their employment contract or a collective agreement. If the employer repeats such payments on a regular basis without explicitly stating that they are discretionary (or that the payments are linked to objectives that can be changed from year to year), then the bonuses become a stable part of the employment contract.

A 14th-month payment may be payable in some sectors where a national collective agreement is in place that provides for such a payment.

The duty to pay wages is a fundamental aspect of an employer's obligations. If an employer fails to do so, or if the pay is below the relevant minimum rate (see above), the employee may bring a claim for unpaid wages in the labour courts. This must be done within five years of the date when the failure to pay wages occurred.

Payment of wages

The payment of wages in cash is prohibited unless it is provided for in the contract of employment or in a collective agreement. Wages should be paid by bank or postal transfer, or cheque.

Employers are obliged each month to give employees a written statement of gross wages (or a payslip) specifically indicating all the amounts paid (including any fringe benefits and expenses reimbursed) and all relevant deductions.

Deductions

Employers may not make deductions from wages, except for:

  • income tax (see Income tax and social security);
  • social security contributions (see Income tax and social security); and
  • if requested by employer and employee, certain occupational pension contributions (such pension contributions deducted from pay are partially free of income tax - see Pensions); and
  • employee subscriptions to a trade union.

Up to one-fifth of the wage may be attached by a third party or by the employer to meet an employee's debts.

Equal pay

There is no obligation on employers to pay employees equal pay for similar work or work of equal value. Temporary agency workers (ie staff who are leased) have the right to receive equal pay with comparable workers by the user organisation (see Italy: Employee rights > Temporary agency workers).

Minimum wages

Italy does not have a statutory national minimum wage. For workers covered by collective agreements, minimum rates are laid down in these agreements. The minimum rates set by national collective agreements are considered "generally applicable" to all employees and employers in the sector concerned, including those who are not members of the signatory organisations, because case law has found that lower rates would be unconstitutional (see General).

Legislation on seconded employees from abroad (see Italy: Employee rights > Seconded workers), requires employers to apply the minimum pay rates set by the relevant national collective agreement to them (irrespective of their nationality) during their period of working in Italy.

Pensions

All employees must be insured under the compulsory state pension scheme. The total contribution rate varies depending on the national collective bargaining agreement applicable and on the relevant category of employee (managerial, white collar, blue collar, etc). The contribution is between approximately 38% and 45% of gross pay. For employees who started working after 31 December 1995, the contribution is capped at an annual ceiling (€100,324 in 2017). The contribution rate is around 9.50% for the employee and between 30% and 38% for the employer, and is paid in addition to gross salary.

Collective agreements may provide for the employer to pay a proportion of the employee's wages into an integrated pension scheme (known as a "closed pension fund") and to make a matching contribution. Employees may also choose to contribute to individual or collective pension schemes provided by private insurance companies, but employers are not obliged to make any contributions into such schemes. Employees' pension contributions may be deducted directly from gross pay and are not subject to tax if they do not exceed €5,164.67 per year. Once the employee has retired, the pension is subject to tax.

In the event of a change of employer, employees who are members of a "closed" pension fund governed by a collective agreement may ask their new employer to continue with these existing pension arrangements. There is no obligation on the new employer to do so, unless it applies the same collective agreement.

Income tax and social security

Employers are obliged to withhold income tax at source from employees' pay. Tax is calculated on the monthly gross pay, after deduction of social security contributions (see Pensions), and subject to personal allowances in respect of non-working spouses and dependent children.

At present, the first €8,000 of annual income is free from tax. Above this level, the tax rate is 23% on income from €8,001 to €15,000, 27% from €15,001 to €28,000, 38% from €28,001 to €55,000, 41% from €55,001 to €75,000 and 43% on income above €75,000.

As well as statutory social security contributions (see Pensions), sickness, unemployment and maternity insurance are compulsory. The contribution rates total 8.27% of gross pay for employers and 0.3% of gross pay for employees. The pensions and social security system is managed by the National Social Security Institute (Istituto Nazionale della Previdenza Sociale, (INPS)).

Occupational accident and illness insurance is mandatory for all employers and employees and is managed by the public Italian Workers' Compensation Authority (Istituto Nazionale Assicurazione contro gli Infortuni sul Lavoro (INAIL)). The insurance contributions are paid only by employers and vary according to the industry sector, in line with their degree of risk, and from company to company, in line with their accident rates.

Sick pay

From the fourth day of sickness absence, employees are entitled to statutory sick pay amounting to 50% of normal net pay for the first 20 days and 66.66% thereafter, up to a maximum continuous absence of 180 days in a calendar year. Employers pay statutory sick pay to their employees, and are reimbursed by the National Social Security Institute (Istituto Nazionale della Previdenza Sociale, (INPS)). Almost all collective agreements provide that employees are entitled to full pay from the first day of sickness absence and for a period longer than 180 days, generally up to one year, with the additional cost met by the employer.

Collective agreements usually lay down the maximum period of (continuous or cumulative) sickness absence permitted for employees, generally from 180 days up to one year.

In the case of sickness absence of executives, the employer pays 100% of their pay, without any reimbursement from the social security authorities. Collective agreements usually set the maximum period of continuous or cumulative sickness absence permitted for executives, which is generally one year.

Sources/references

The main items of legislation regulating pay are art.36 of the Italian Constitution and arts.2099-2108 of the Civil Code (Codice Civile). Equal pay is mainly governed by art.36 of the Constitution and art.141 of the Treaty establishing the European Community, which is directly applicable in Italy. Minimum pay rates apply in certain sectors on the basis of Dlgs of 17 July 2016 no.136. State pensions are mainly governed by Act no.335 of 8 August 1995 and Dlgs no.503 of 30 December 1992. Occupational pension schemes are regulated by Dlgs no.252 of 5 December 2005. Income tax is regulated by Dpr no.917 of 22 December 1986, and sick pay by art.2110 of the Civil Code and Act no.138 of 11 January 1943.