Working as an employee full time in Italy
Liability of the employer to Italian social security
- under EU rules if the employee is a posted worker, or working and living in different EU countries);
- under the EU Framework Agreement on cases of habitual cross-border telework (remote work) for individuals who work less than 50% of the time in the country of residence , spending the majority of their working time in the country where their employer is established.
- under a specific bilateral agreement (e.g. the U.S./Italy Social Security Agreement)
- the terms of the Protocol on Social Security Coordination under the UK/(EU Withdrawal Agreement and the EU Trade and Cooperation Agreement and possibly the UK/Italy social security treaty
depending on nationality, the facts and, sometimes, choice.
Apart from pension and healthcare contributions employers with staff in Italy need to make payment of premiums for statutory insurance covering accidents at work, and possibly, provide additional welfare/life insurance contributions.
Application of Italian employment law
The parties will need to evaluate whether Italian employment law applies to the employee/employer relationship – and especially whether TFR is due. Even if the parties agree to apply a law other than Italian law to the contract of employment they need to be aware that certain mandatory terms of Italian employment law may apply anyway to the contract by operation of law. Examples of these terms are: the provisions governing minimum wage, minimum notice periods, maximum probation periods, maternity/paternity benefits, remuneration for sickness, remote-working, data protection and worked holidays.
Obligation to withhold tax at source
In contrast to the rules governing social security contributions there is not necessarily an absolute legal obligation for a foreign employer to make withholding of income taxes via an Italian payroll. An employee is allowed to pay his or her Italian taxes, via an annual personal income tax return in Italy, as long as the employer has no permanent establishment (PE, see below) in Italy. However it is possible to arrange matters so that the employer withholds income tax at source via the payroll, even if the employer does not have a PE in Italy.
The PE (permanent establishment) issue
Hiring through a staff agency or employer of record
Recent years have seen a growth in businesses – both at international and local level – offering to hire an Italian employee, manage all of the payroll, tax and social security compliance, recharging the cost with a mark-up. These businesses can offer a cost effective and flexible alternative to hiring an employee directly.
If you are thinking of hiring an employee in Italy, or moving someone who already works for you to Italy and would like to speak to a specialist, please click here.
