Looking for an employer of record in Italy? Here’s what you need to know

A lot of U.S. 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.

Typically, an employer of record (EOR) may help in foreign countries; however, the EOR model may not be permitted or recognized in Italy, so you can use a workforce management platform like Payoneer Workforce Management instead. 

Payoneer Workforce Management offers support with managing all HR, tax, and payroll responsibilities while you can focus on day-to-day operations. 

With a workforce management platform, you can onboard full-time employees in Italy without opening a local entity with assistance as per local employment regulations.

Whether you’re hiring your first software developer or building an entire Ops team in Italy, Payoneer Workforce Management helps you expand. From employment contracts and onboarding to payroll and leave management, our solution helps streamline the process.

Want support to simplify hiring in Italy? Get started with Payoneer Workforce Management, or keep reading to learn what hiring in Italy involves.

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 a workforce management platform in Italy: This offers a streamlined approach to hiring full-time employees without incorporating locally. A workforce management platform in Italy helps manage HR, legal, and payroll obligations.

Read more about hiring employees in Italy.

Partnering with a workforce management platform in Italy

Generally, 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. However, the EOR model may not be permitted or recognized in Italy, so you may use a workforce management platform instead.

It typically helps handle:

• 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

Partnering with a workforce management in Italy allows global companies to quickly access Italian talent while mitigating risks tied to misclassification, payroll errors, or noncompliance with local laws.

Payoneer Workforce Management provides services in Italy to support startups, SMBs, and enterprises with scalable growth in accordance with local employment regulations.

How to onboard employees in Italy

Onboarding 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 aligned with local requirements.

Pay employees in Italy

In Italy, employees are typically paid monthly. 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.

A workforce management platform in Italy assists with payroll, aligns necessary contributions, and helps businesses in accordance with local regulations. 

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 the support of a workforce management platform:

Working hours

The legal limit is 40 hours a week, with overtime capped at 250 hours annually. 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. Although payment dates vary slightly depending on internal company policy and collective agreements.

Probation period

Probation periods are typically 6 months for managers and 2–3 months for other employees.

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.

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 – although fixed-term contracts are generally not permitted unless legally justified under Italian law.)
• 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 is paid for up to 180 days, with the employer covering the first 3 days and INPS covering the remainder. 
• Maternity leave: Pregnant employees are entitled to 5 months of maternity leave at full pay, with 80% reimbursed by INPS, 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 a workforce management platform may help businesses manage leave entitlements in accordance with local regulations

Background check in Italy

Background checks in Italy may be 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).

TFR is calculated at 7.4% of annual gross salary, 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)

PEO in Italy

Typically, 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 acts as the legal employer, allowing your company to scale faster without entity setup. However, the EOR model may not be permitted or recognized in Italy, so you may use a workforce management platform instead.

Try Payoneer Workforce Management

With Payoneer Workforce Management, companies gain access to talent in Italy without setting up a local entity. From compliant hiring and onboarding to payroll and employee management, our platform helps you streamline the process.

Book a demo today to learn how we can help.

FAQs

1) How can a workforce management platform help in Italy?

A workforce management platform, like Payoneer Workforce Management, offers an efficient way to onboard local employees without registering a company in Italy. It offers support with the responsibility for HR, tax, and compliance.

2) 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.