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Italian payroll round-up for January 2016
Following is a summary of recent payroll changes in Italy
The rules and contribution exemptions for employees hired on open-ended contracts have changed – reducing the contribution bonus and length of time the benefit is applicable.
An employer who hires an employee between 1 January – 31 December 2016, on an open-ended contract with the same conditions as the previous year, is exempt from paying 40% of total social security contributions. This excludes INAIL bonuses, at an annual capped amount of EUR 3,250. For employees hired in 2015, the thresholds set by the previous law will apply for the entire three-year period. The longest period contribution benefits apply for is 24 months.
This cannot be combined with other exemptions or reductions of financing rates provided for by current law.
Tax relief on productivity bonus
After a year of suspension, the de-taxation link to wages and productivity bonuses has been reintroduced. The existing regulatory framework still applies.
This applies to private sector employees with income derived from subordinated employment that did not exceed EUR 50,000 in the prior year.
This condition is certifiable by the beneficiary in writing, in case the withholding agent required to apply the substitute tax is not the same that issued the Certificazione Unica (Certification on income) in the previous year.
The government announced that the productivity bonuses of a variable entity, where payment is linked to increases in productivity, profitability, quality, efficiency and innovation, is measurable and verifiable on defined criteria by a Decree to be issued within 60 days from 1 January 2016. These amounts are subject to substitute additional regional and local taxes as well as IRPEF (Personal Income Tax), amounting to 10% but no more than EUR 2,000.
Productivity bonuses must be paid in compliance with territorial or business contracts.
The maximum de-taxable amount cannot exceed EUR 2,500 for companies that involve employees in work, in accordance with the terms defined by the Ministerial Decree.
Services or works voluntarily offered to all employees, categories or to relatives, for recreational, educational, social and health purposes will not count as part of the income tax base of employees.
Paternity leave for employed fathers was trialed in 2015. It will be extended in 2016, and needs to be used within five months of the child’s birth. The same applies to optional paternity leave.
The application of part-time pre-retirement is now ruled. However, it raises several concerns and requires further clarification.
Employees hired with full-time open-ended contracts, who will accrue the right to receive age pension (must meet the minimum requirements to be eligible) up until 31 December 2018, can agree with the employer a transformation of their contract from full-time to part-time.
When an employee moves to a part-time contract from a full time one, the employee will accrue the right to figurative pension coverage related to the activity performed. The employer does not pay the lost contribution, but will pay the employee directly. The reduction of working hours could be between 40-60% of full-time working hours.
Additional financing of social safety nets in derogation
In 2016, the government will increase the funds allocation for social safety nets, with a budget of Euro 250 million.
The treatment of wage integration in derogation, from 1 January – 31 December 2016, is granted for a period no longer than three months in a year. The mobility treatment in derogation to current legislation cannot be granted to employees who, on the starting date of the treatment, have already received benefits of mobility schemes for at least three years (continuous or non-continuous).