Using an employer of record in Italy

A lot of US and European-based businesses are usually enthusiastic about hiring talent in Italy, owing to high levels of education, skill, and the strong work ethic of Italian workers.

However, hiring and paying employees in Italy can be complex, especially when navigating the country’s evolving labor regulations, social security contributions, and sector-specific collective bargaining agreements (CBAs). 

Italian employment law offers strong worker protections and detailed compliance requirements, which can make international hiring time-consuming and legally risky for companies unfamiliar with local rules.

That’s where an Italy employer of record (EOR) like Payoneer Workforce Management (WFM) can help. 

An EOR acts as the legal employer on your behalf, managing all HR, tax, and payroll responsibilities while your team focuses on day-to-day operations. 

With an Italy EOR, you can hire full-time employees in Italy without opening a local entity or worrying too much about regulatory pitfalls.

Whether you’re hiring your first software developer team or building an entire cross-functional team in Italy, Payoneer WFM helps you grow quickly and compliantly. From employment contracts and onboarding to payroll and leave management, our EOR Italy solution simplifies the entire process.

Want to simplify hiring in Italy? Get started with Payoneer WFM, or keep reading to learn how EOR services in Italy can help you scale quickly and compliantly.

How to hire employees in Italy

When expanding into Italy, companies have three main options for hiring talent:

• Set up a local entity: Establishing a legal entity in Italy allows you to hire employees directly, but it involves navigating registration procedures, tax requirements, local employment laws, and ongoing administrative responsibilities.
• Engage independent contractors: Hiring contractors can be flexible and cost-effective, but it carries legal risks if the role aligns more with that of an employee. Misclassification can result in penalties and back payments.
• Working with an employer of record in Italy: One of the fastest, most streamlined approaches to hiring full-time employees without incorporating locally, an EOR in Italy manages all HR, legal, and payroll obligations while your team focuses on day-to-day operations.

Partnering with an employer of record in Italy

An employer of record is a third-party organization that becomes the legal employer of your workers in a foreign country. While your company directs day-to-day tasks, the EOR handles local employment obligations.

An EOR in Italy typically handles:

• Drafting and maintaining compliant employment contracts
• Processing payroll and ensuring accurate tax withholding
• Managing employee benefits and social contributions
• Administering statutory leave entitlements
• Navigating complex employment regulations
• Supporting with onboarding and offboarding

Hiring through an EOR, Italy-based or otherwise, allows global companies to quickly access Italian talent while mitigating risks tied to misclassification, payroll errors, or noncompliance with local laws.

How to onboard employees in Italy

Onboarding remote employees in Italy involves several key steps to ensure productivity and a smooth integration into your team:

• Enroll in benefits and payroll: Register the employee with payroll and statutory benefits to comply with Italian regulations.
• Provide orientation: Introduce company policies, tools, and expectations to help new hires understand how your organization works.
• Team introductions: Schedule meetings or virtual calls with colleagues and key stakeholders to build rapport and collaboration.
• Set up devices and accounts: Ensure laptops, software, and work-related platforms are properly configured and delivered before the start date.
• Support ongoing integration: Check in regularly during the first weeks to answer questions and address challenges.

A structured onboarding process helps employees feel supported and stay compliant from day one.

Pay employees in Italy

In Italy, employees are typically paid monthly, with payment usually made by the 27th. The fiscal year runs from January 1 to December 31.

There is no statutory minimum wage in Italy. Instead, minimum salaries are established through National Collective Bargaining Agreements (NCBAs), which vary by sector and job classification.

Key payroll considerations include:

• Tredicesima (13th-month bonus): This is an additional monthly salary paid in December, standard in most NCBA agreements.
• Quattordicesima (14th-month bonus): In some sectors, a 14th-month salary is paid in June, as outlined in specific NCBAs. Employers must check the relevant collective agreement to determine if the quattordicesima applies to their employees.
• INPS (National Social Security Contributions): This covers pensions, maternity, unemployment, and sickness benefits. Both the employer and the employee contribute.
• IRPEF – L’Imposta sul Reddito delle Persone Fisiche (Personal Income Tax): This is withheld at source by the employer and paid monthly to the government. Rates are progressive based on income.
• Regional and municipal taxes: Additional local income taxes vary by region and municipality.

An employer of record in Italy simplifies payroll, aligns necessary contributions, and helps businesses avoid non-compliance. 

Employment laws in Italy

Hiring employees in Italy means adhering to a well-defined set of labor laws. 

These rules are laid out in several sources, including the Italian Constitution, the Civil Code, national labor legislation, and sector-specific CBAs.

Companies must comply with all the following legal requirements when employing talent in Italy, whether directly or through an employer of record:

Working hours

The legal limit is 40 hours a week. Any time worked beyond this is considered overtime and must be compensated according to applicable agreements. The maximum daily working time cannot exceed 13 hours, including overtime, rest, and breaks.

Rest days

Employees are entitled to at least 1 full day of rest each week, generally on Sunday. Weekly rest must include 24 consecutive hours, typically in addition to the daily rest period.

Remuneration frequency

Salaries are paid monthly. Most employers issue payment by the 27th of each month, although this can vary slightly depending on internal company policy and collective agreements.

Probation period

Probation periods vary based on the contract length:

• For fixed-term contracts up to 6 months, the probation period may not exceed 15 days.
• For fixed-term contracts longer than 6 months and shorter than 12 months, the probation period may not exceed 30 days.
• For open-ended, full-time contracts, the maximum probation period is generally 3 months for white-collar workers and 6 months for executives.

Minimum wage in Italy

In Italy, the minimum wage is not set by national law but is determined by CBAs, which establish wage levels based on industry and job position. 

These agreements are negotiated between employer associations and trade unions and are legally binding for companies operating in the relevant sectors.

It’s essential to specify wages in employment contracts to comply with the applicable CBA and avoid potential disputes or legal issues. Since CBAs are periodically reviewed and adjusted to reflect changes in inflation and the cost of living, employers must stay informed about the latest minimum wage rates.

For example, under different CBAs:

• An entry-level software developer might have a minimum annual salary of around EUR 25,000.
• A customer support representative could earn closer to EUR 21,000 annually.

The easiest way to keep up with these updates and stay compliant is to work with an employer of record Italy provider. 

An EOR handles all wage adjustments and legal requirements on your behalf, allowing your company to focus on growth without worrying about local wage regulations.

Employment contracts in Italy

While Italian employment law permits both written and oral contracts, written contracts are strongly recommended to clearly define terms and mitigate disputes.

Contracts should include:

• Contract type (fixed-term or indefinite)
• Start date of employment
• Employee compensation, including bonuses and benefits
• Work hours and statutory leave entitlements
• Probation period (if applicable)
• Termination conditions, including notice periods and severance pay

For more details, consult the Italian Ministry of Labor’s pages on employment contracts and required information.

Leave policy in Italy

Employers in Italy are required to comply with national labor regulations regarding employee leave entitlements. These rules apply across industries, though specific terms may vary depending on CBAs or individual employment contracts. 

Below are the key types of statutory leave:

• Public holidays: Employees are entitled to 12 public holidays each year, including national celebrations and regional holidays.
• Annual leave (Vacation PTO): Employees are entitled to a minimum of 4 weeks of paid vacation each year.
• Sick leave: Sick leave entitlements vary based on the employee’s contract, job classification, and length of service. 
• Maternity leave: Pregnant employees are entitled to 5 months of paid maternity leave, usually split into 2 months before and 3 months after childbirth.
• Paternity leave: Fathers are entitled to 10 days of paid leave, which can be taken during the 2 months before or 5 months after the birth of the child.

Partnering with an Italy employer of record ensures your business remains aligned with all mandatory leave entitlements, helping you manage employee benefits compliantly and efficiently.

Work permit in Italy

Non-EU nationals must obtain the appropriate work authorization before beginning employment in Italy. The process involves coordination between the employer, the Italian government, and, in some cases, the consulate in the worker’s home country.

Types of permits include the EU Blue Card (for highly skilled workers), intra-company transfer permits, and standard subordinate work permits under Italy’s annual quota system.

Employers must first obtain a nulla osta (work authorization) from the immigration office. Once approved, the employee applies for a visa at their local consulate. Processing can take several weeks or months, depending on the type of permit and government workload. Most work permits are issued for up to 2 years and can be renewed under certain conditions.

Working with an employer of record in Italy helps streamline the visa process and reduce administrative complexity during onboarding.

Background check in Italy

Background checks in Italy are legally permitted but subject to strict regulations to safeguard personal data and candidate privacy. 

Candidates must provide informed consent before any checks are performed, usually following a conditional offer of employment.

Employers in Italy usually screen for:

• Employment history and education verification
• Criminal records, but only with the candidate’s explicit consent and when directly relevant to the role
• Professional references

Certain checks are not allowed under Italian law. Employers may not investigate a candidate’s political beliefs, religious affiliation, or union membership, as these are protected under privacy laws.

Employment termination in Italy

Employment termination in Italy is highly regulated and generally favors employee protections. Employers must follow specific procedures based on the type and terms of the employment contract.

Notice periods typically range from 15 days to several months, depending on the employee’s role and seniority. Dismissals are permitted for just cause, business-related reasons, or serious misconduct.

Employees are entitled to severance pay, known as Trattamento di Fine Rapporto (TFR), which accrues over time and is paid out upon termination. For voluntary resignations, employees must submit their notice through an official government online portal.

Company registration in Italy

To hire employees directly, companies must register a legal entity. This includes:

• Choosing a company structure (e.g., SRL, SPA)
• Registering with the Chamber of Commerce
• Obtaining a VAT number and tax ID
• Enrolling in the National Social Security Institute (INPS)

However, using an Italy EOR is a much simpler and easier option for most U.S.-based companies.

PEO in Italy

A PEO (Professional Employer Organization) co-employs your staff and helps with HR functions, but unlike an EOR, it requires you to have a legal entity in the country.

An employer of record in Italy acts as the legal employer, allowing your company to scale faster without entity setup. This distinction makes an EOR the better fit for businesses testing new markets or hiring internationally for the first time.

Payoneer WFM: Leading employer of record service in Italy

With Payoneer WFM, companies gain access to reliable, transparent, and efficient EOR services in Italy.

From compliant hiring and onboarding to payroll and employee management, our platform helps you hire quickly and operate legally without setting up a local subsidiary.

Explore our solutions and get support from one of the best EOR services in Italy.

FAQs about Italy employer of record 

1) Is an employer of record legal in Italy?

Yes, working with an Italy EOR is a legal and efficient way to hire employees without registering a company in Italy. The EOR becomes the legal employer and assumes responsibility for HR, tax, and compliance.

2) How much does an employer of record in Italy cost?

Employer of Record Italy costs depend on the service provider, ranging from $799 to $2000 per month. For instance, Payoneer WFM offers EOR services at $649 per month. Overall, the cost of working with an EOR is far lower than the cost of setting up a local legal entity.

3) What is the RAL in Italy?

RAL stands for Reddito Annuo Lordo, or gross annual income. It includes the employee’s base salary, bonuses, and any additional compensation subject to tax.