Italy

While there are several ways to employ workers across borders, not all options are compliant or practical in the long term. Below is an overview of the most common ways to engage workers in Italy and their potential drawbacks.

HQ country employment & payroll

Under this model, the worker in Italy is employed and paid through the company’s headquarters entity abroad. While this may appear simple, it can create tax, payroll, and social security compliance risks if the employee performs their work primarily in Italy. In many cases, employers may be required to register for Italian payroll taxes and social security contributions (INPS).

Independent contractor agreements

Individuals in Italy may operate as self-employed contractors (lavoro autonomo) or through their own companies and invoice for services. However, Italian authorities strictly regulate false self-employment (misclassification). If the contractor works under conditions of subordination or organisational control, the relationship may be reclassified as employment, which may result in tax liabilities, social security contributions, and penalties.

Direct local employer setup

A company may establish a local legal entity in Italy and employ workers directly. This ensures compliance with Italian employment law, tax, and social security obligations. However, establishing and maintaining a local entity can be time-consuming, costly, and administratively complex, requiring ongoing compliance with labour regulations and collective bargaining agreements.

Partnering with an Employer of Record (EOR)

An Employer of Record (EOR) hires employees on behalf of a company and manages payroll, taxes, and compliance in Italy. This allows companies to hire workers without establishing a local entity. While this approach simplifies compliance, service fees may be higher than direct employment once a company has a local presence.

Generally, registering a company in Italy can take anywhere from a few days to a few weeks, depending on the complexity of the company structure and the completeness of the application.

However, the difficult part comes after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, and changes in rules and regulations followed.

While many employers practice employing remote workers as independent contractors, it’s a bad practice. If an individual is giving their full and undivided attention to your company in Italy, treating them as an independent contractor is likely a breach of Italian employment laws and of those in your country.

Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefits, maternity benefits, or other legal measures. Since the individuals you are working with do not receive the benefits of local employment laws and protections that are often afforded to people working full-time hours.

When you hire employees in Italy, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices.

Complying with local employment law in Italy is fundamental for the correct running of your business, not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but also to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, and working hours regulations.

As with every other country, there are certain costs associated with employing a worker in Italy that come on top of the gross salary you are offering.

It means that Boundless is the legal employer of the individual, as far as the Italian government, tax, and employment authorities are concerned.

We are responsible for:

• informing you about any pre-employment requirements
• ensuring employment is compliant with Italian employment law
• informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
• providing a locally compliant employment contract
• processing local payroll
• filing employment-related tax returns
• issuing payslips to the employee
• distributing salary payments
• payments to the local tax authorities

Customers who work with an Employer of Record in Italy are responsible for:

• sourcing and recruiting their own workers
• managing the employee’s day-to-day workload
• contributing to the personal/professional development of the employee through their work
• following any guidance we give on employment and HR best practices or legal obligations in Italy, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
• ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Boundless as the Employer of Record files all pertinent taxes and social security contributions as they relate to the compliant employment of an individual in their home country.

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Italy. They ensure the Italian employment contracts and any other relevant documents required for new employees comply with the local jurisdiction.

We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice periods or work-from-home regulations. Whenever a potentially sensitive issue arises in Italy, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

The company remains responsible and informs employees of the day-to-day management of the people and teams employed through Boundless, including any disciplinary or performance issues. Boundless ensures compliance with Italy-specific procedures, practices, and labour laws while employing people and teams on behalf of the company.

Any new employee who is locally employed through an Employer of Record gets full employment rights and benefits as specified in the Italian employment law. They get a locally compliant employment contract, statutory parental leave, annual leave, illness benefits, any relevant tax credits, and many more.

In Italy, both employers and employees have to pay social security contributions. For employers, these range from 28% to 33% of gross salary, while employees contribute around 9% to 10% of their salary, depending on the sector and on the applicable collective agreement. In addition, employees pay personal income tax on a progressive scale ranging from 23% to 43%, depending on their salary.