While the onset of Covid-19 encouraged the culture of remote working, today, despite considerable subsidence of the infectious viral strain, many companies are interested in hiring remote employees. Their interest primarily stems from their decision to tap professional talent in areas beyond state lines to develop a distributed workforce.
One region to benefit from the remote work culture in Europe is Italy. One of the most significant labour forces in the EU, Italy has a large number of skilled workers looking for a job. This provides international companies with a large pool of job candidates to choose from!
Companies looking to hire remote workers may find Italy an attractive option due to its relatively low labour cost. According to reports, the average hourly labour cost in Italy is around 29.1 Euros, which is 20% cheaper than in other European countries such as France or Sweden.
But how exactly do you hire remote employees in Italy? What factors must you consider before you commence?
This is precisely what this article addresses. Read on to learn more!
Key Facts to Understand the Hiring of Remote Employees in Italy
On an apparent level, hiring remote employees in Italy may seem like a no-brainer. But the reality is more technical than what we perceive. Here are some key facts you need to grasp well to understand the hiring of remote employees in Italy:
1. Labor legislation protects remote employee rights
In Italy, the labour legislation has been subject to several reforms (Riforma Biagi in 2003, Riforma Fornero in 2012, Jobs Act in 2015) to make the labour market more flexible and appealing to employers. Italy's legislation still provides more protection for workers than in many other countries inside and outside the European Union. This makes hiring remote employees a challenging endeavour necessitating the involvement of highly specialized consultants called Consulenti del Lavoro.
In Italy, labour laws have come to be influenced by collective bargaining agreements (CBA).
Some of the factors you need to keep in mind if you plan to hire remote employees in Italy are:
- An employer must provide an employment contract in Italian (it can also be bilingual, but it cannot be in English only, and the Italian language will prevail in case of litigation).
- Employee contracts cannot be terminated without notice unless there's a specific reason.
- Employees are to be registered with the Ministry of Labour.
- Employees are eligible for overtime pay if they work more than 40 hours per week.
- Employers must make an advance payment to INAIL (Mandatory Accident Insurance) and INPS (mandatory Pension Insurance) using an Italian bank account
- Employers must provide the workers with CU (an official and mandatory tax document to be provided by the employer to the employees once a year).
- Pay timely salaries to employees.
- Arrange a mandatory safety training with a registered and qualified provider to be completed within 60 days from the start date.
- Arrange mandatory medical examination with a registered labour doctor who is not far from the employee’s work location.
2. National culture influences remote employee performance
We know that culture shapes how we interact with others and influences our decisions. It also defines professional business practices, which can majorly impact a company's internal structure, behaviour, and relationships with employees.
Like in any other part of the world, the national culture is a binding factor in Italy. The attitude of management towards cultural values plays a significant role in how efficient and effective management control is.
Companies tend to perform better when management practices correspond to the national culture. This is because the organization's culture consists of the values that people in the company share. Organizations can create a more harmonious and effective work environment for remote employees by aligning management practices with the Italian culture and values.
3. Health regulations compliance is mandatory for remote employee safety
Employers must comply with strict health and safety regulations when hiring a worker in Italy. This is even true when the employee will be working from home. The employer must guarantee a healthy and safe working environment for all employees. By investing in the safety of your employees, you are investing in the success of your business.
This means taking care of their physical and mental health. As an employer, it is your responsibility to ensure the safety and well-being of your employees. One way to do this is by appointing a registered and licensed health and safety consultant. This consultant will organize mandatory online training (usually 16 hours per employee, valid for a few years).
The employer is responsible for ensuring that their employees are healthy and safe while working. This includes arranging for a medical examination with a registered practitioner, who will decide if further tests or checks are needed based on the job responsibilities. Home-based workers usually only require a video test, but this is at the doctor's discretion.
4. Italian tax is chargeable on remote employee salary.
There is no exempt tax bracket. So if you're living in Italy, it's likely that the government will deem you a tax resident.
The amount you pay in taxes every year can vary depending on your income. Those who make a lot of money working as remote employees may end up paying close to half of their earnings in taxes. For the year 2022, the applicable tax percentages for different salary brackets are as follows:
- Salary up to 15,000 EUR = 23%
- Salary between 15,000 EUR to 28,000 EUR = 25%
- Salary between 28,000 EUR to 50,000 EUR = 25%
- Salary exceeding 50,000 EUR = 43%
It also needs to be noted that tax deductions apply depending on personal and family status.
Also, as a remote employer, you will be expected to pay social security contributions to the Italian Social Security Authority. Exceptions are rare and only apply to posted workers.
5. Employment-related expenses in Italy
Different employers have different policies regarding the reimbursement of business expenses. Some employers will reimburse employees at cost, while others may provide a per diem allowance to cover expenses. Per diem allowances are subject to strict regulation and may be taxable depending on the employer's policy.
6. EOR as a mode to pay remote employees in Italy
Remote employees in Italy must be paid according to the country's employment and payroll laws. This is different from how workers are paid in other countries. Employers need to be aware of these differences to ensure they are compliant. This involves being well-familiar with the fluctuating currency changes and the local payroll and tax laws in Italy.
For instance, in Italy, workers are entitled to an extra salary in December (known as the 13th), and, depending on the CBA applied, they might also be entitled to a 14th salary paid in June, which must be stated in the employment contract.
So, if you're considering hiring a worker in Italy, you should be aware that you may need to pay one or two extra yearly salaries. The payment will depend on the salary level of the position being offered. If the monthly salary is above the minimum monthly wage established by law, then the annual stipend can be divided by 13 (or 14) without requiring any extra payments. However, if the monthly salary offered is equal to or below the minimum, an additional 13th (and 14th) salary will need to be factored in.
You have two main options available for paying remote employees in Italy:
Set Up a Subsidiary
Opening up your entity is beneficial if you have long-term plans of hiring many remote employees in Italy. However, this means that you will then be responsible for the entirety of your Italian business, compliance with labour laws, processing of payroll as well as the administration of benefits.
Avail an EOR
A successful alternative is to work with an employment partner representing your employer of record in Italy. An employer of record (EOR) can be a helpful solution for companies who want to establish a presence in Italy. The EOR manages the hiring process for your company, taking care of employee pay, benefits, and taxes. You must pay the EOR's management fee and workers' salaries. Working with the right EOR can save you time and money.
NoHQ believes that while there are multiple global PEO companies offering EOR services, involving a truly local one that caters to the needs of the Italians is a promising way to employ local talent seamlessly and reliably.
PeoItaly is a proud provider of distinguished EOR services. They have built trust with many distinguished organizations and can provide the boost you need for success. Book a consultation call with them today.