In order to compensate employees correctly and remain compliant, it is essential to have a comprehensive understanding of the country’s taxation and payroll laws.
Taxation rules in Italy
Income tax in Italy is progressive, meaning the higher the income, the higher the rate of tax payable. Social security contributions vary based on the industry sector and management level.
- EUR 15,000 or less: 23%
- EUR 15,001 to EUR 28,000: 25%
- EUR 28,001 to EUR 50,000: 35%
- EUR 50,001+: 43%
While there are different rates for social security contributions based on industry sector and management level, the mandatory social security contribution is 33% of the gross salary, of which 23.81% is paid by the employer and 9.19% is paid by the employee.
One of the most challenging parts of setting up payroll in Italy is following the country’s complex taxation laws. As an employer, you’ll be responsible for deducting the correct taxes from every employee’s paycheck and submitting them to the proper tax authorities each month. You must also account for local taxes based on where your employees live.
Italy payroll options for companies
Every company differs in size, function, and activity level. You can choose from 3 Italy payroll options to find the best fit for your company. These include:
- Internal payroll: If you operate a larger company, internal payroll at your Italy subsidiary is a viable option. You will need to hire the necessary staff and learn all the country’s employment laws.
- Italy payroll outsourcing: You can also outsource with a local payroll processing company in Italy. Although this company will pay your employees, you’ll remain liable for any mistakes.
- Working with an EOR like G-P: We take payroll one step further. With our Global Growth Platform™, companies can automate, customize, and manage every HR function such as payroll, currencies, in-country benefits, PTO, expenses, and more.
How to set up a payroll in Italy
Once you choose the best Italy payroll option for your company, you or your EOR will have to set everything up. First, your company or a legal representative will need to register with the Labor Office, Social Security Institute, and Insurance Institute. If you fail to register by the respective deadlines, you will face a variety of penalties.
You’ll then need to get a company identification number and fiscal code by signing documents in front of a notary public. Your employees cannot begin work until you receive the fiscal code.
Entitlement/termination terms
National Collective Bargaining Agreements (NCBAs) are prevalent throughout Italy and may provide specific termination and entitlement terms. The maximum limit of the probationary period for middle manager (quadro) and executive-level employees is 6 months.
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G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.