By Globalization PartnersMarch 2021
Reading Time: 9 minutes
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Many people think of Italy as an amazing tourist destination. The country is home to 55 UNESCO world heritage sites — more than any other country. Italy certainly has a rich history, but it also has a bright future. The Italian economy continues to grow, and this country has begun attracting companies looking to build international teams. Our guide to hiring employees in Italy can help you understand employment laws and hiring practices in Italy, so you can navigate the process with more confidence.
What to Know Before Hiring in Italy
Our tips for hiring in Italy center on understanding the labor market and the laws that govern workers’ rights. Italian workers are covered by extensive protections, so remaining legally compliant can be a challenge. Unless you choose to work with an employer of record (EOR), you will likely need legal assistance to help you avoid violating any laws, but the following overview can help you get started.
1. Labor market considerations
The biggest sectors in Italy include manufacturing, agriculture, trade, service, and tourism. Italy’s manufacturing sector is particularly known for metallurgical and engineering, chemicals, and textiles.
Italy is the world’s eighth-largest economy, and, yet, it is not without its challenges. The Italian unemployment rate rose steadily following the 2007-2009 global economic crisis but began to fall after peaking in 2014. Today, it sits at 9.1 percent — a positive sign for international companies trying to draw job applicants.
However, part of Italy’s challenge lies in its lack of needed skills. Italy has the second-lowest percentage of university graduates in the European Union (EU). Companies within the manufacturing sector in particular are struggling to find workers with the necessary skills. If you find it difficult to attract qualified applicants in Italy, a solution your company may want to consider is training eager workers, possibly students, to help them develop the skills necessary to work for your company.
The Italian labor market also stands out for its high number of workers who are self-employed or have a non-standard job. This sort of flexibility in the market can be helpful if you’re hiring remote workers in Italy — the opportunity to work from home may be more appealing to independent Italian workers.
2. Languages spoken
Italy’s official language is Italian, and this is the language you’ll hear spoken by the vast majority of the population. Companies used to operating in English will learn that English is the second most widely spoken language in Italy. Just 1.31 percent of Italians speak English as their first language, but 12.43 percent speak English as a second language. Many Italians will understand at least some English since 99.6 percent of Italian high schoolers study English.
You will likely still need to hire a translator to assist with drafting contracts and other documents in Italian, but you may not need a translator to assist with interviews and other communication if you select applicants who are fluent in English.
3. Collective bargaining agreements and contracts
Collective bargaining agreements (CBAs) are common across industries in Italy. CBAs are sets of terms negotiated and agreed upon between trade unions and employers’ associations. Fortunately, it is easy to know if a CBA applies to your company since national CBAs are only binding for companies that belong to the relevant employers’ association.
If you don’t belong to an Italian employers’ association, then you don’t need to comply with a CBA. However, you can still choose to adopt the terms of a CBA and reference it in your employment contract.
Employment contracts are legally required in Italy, but they are not required to be in Italian. The key is ensuring your employees can understand their contracts. We’ll look at Italian employment contracts in more detail when we discuss the hiring process at the conclusion of this post.
Italy does not have a national minimum wage, nor do any of its geographical regions. Instead, employers typically look to CBAs for minimum wage requirements. The Italian Constitution entitles employees to a salary that is appropriate for the quantity and quality of the work they do. It is also enough to provide a decent lifestyle for themselves and their families. Of course, this is a fairly subjective standard.
When the court is involved, legal experts are likely to reference minimum wage rates set by national CBAs within your sector, so even if your company is not subject to any CBAs, it is still smart to offer wages that are in line with industry norms. Offering higher wages is an effective way to attract top talent.
Note that many Italian employees are used to receiving their salaries in 13 or 14 installments rather than 12 for each calendar month. The 13th-month installment is paid in December, and the 14th is paid in June. Employees’ CBAs should specify whether they are entitled to these extra annual payments.
5. The workweek and time off
The standard workweek in Italy is 40 hours, though CBAs may impose a different standard. The maximum working week is 48 hours, calculated as an average across four months. The only stipulation on overtime hours is that they cannot exceed 250 hours per year. Other aspects of overtime work and pay are determined by CBAs.
In addition to Italy’s 12 public holidays, employers must give their Italian employees at least four weeks of paid vacation time each year. Some CBAs call for a more generous holiday entitlement. Italian employment law also allows employees to transfer their unused annual leave to coworkers under special circumstances.
6. Taxes and social security
Italian employees pay income tax according to a progressive tax rate. Italy uses a Pay As You Earn (PAYE) system, so employers are obliged to withhold the correct amount of taxes from employees’ paychecks.
Employees and employers must also pay into social security. The rates for social security depend on the type of company and the employee’s position within the company. Employers contribute an amount equal to approximately 27-28 percent of an employee’s gross annual earnings. The current rate for employees is 9.19 percent, or €102,543 if 9.19 percent of their salary is higher than that total.
The Cost of Hiring an Employee in Italy
When you’re hiring new employees in Italy or any other country, you need to consider the cost of labor, as well as the costs involved in the recruitment process. The cost of labor largely depends on the industry and position, but as a point of reference, the estimated hourly cost of labor in Italy is €28.80 — just €1.10 higher than the average for the EU. International recruitment costs can entail a list of expenses, including:
- Paying tax to register your company in Italy
- Consulting with an Italian law firm to help you remain legally compliant throughout the hiring process
- Advertising job positions, except in the case of free postings
- Paying referral bonuses to employees with connections in Italy
- Recruiting through a hiring agency
- Paying an in-house hiring committee
- Traveling to and from Italy, including hotel stays, meals, and transportation
- Partnering with a translator to draft documents or facilitate conversations
- Utilizing a background check service for screening candidates
What Does a Company Need to Hire Employees in Italy?
Before hiring someone in Italy, you must first establish your company in the country. Many international companies choose a business structure known as a societá a responsabilitá limitata (SrL) for their Italian subsidiary. In many ways, an SrL is the equivalent of a private limited liability company. Some key requirements for establishing an SrL include:
- Documents: You will need to sign company by-laws and a public deed of incorporation in the presence of a notary.
- Tax: You will also need to pay a government grant tax and the registration tax for establishing your company.
- Company VAT number: Your company will need to request a VAT number online from the Agenzia delle Entrate.
- Tax codes: Your directors and shareholders will also need an Italian tax identification number from the Agenzia delle Entrate.
- Bank account: Once you are officially incorporated, you must open a bank account in Italy.
Depending on factors like your business structure and industry, there may be other steps you need to take before you can begin hiring employees. For example, you may need to apply for special permits or licenses. The process to establish a company in Italy can take up more time and expense than you want to give.
Before hiring Italian employees, consider partnering with an EOR in Italy. This will save you from all the above steps, allowing you to start hiring right away without undertaking all the complexities of setting up your company and ensuring legal compliance. It also saves you from navigating Italian tax and employment laws and CBAs. With an EOR, you can still choose your new hires, and they will work for your company, but they will be on the EOR’s payroll.
You outsource all the HR tasks for your Italian employees and avoid setting up a local entity. You may still decide to establish a subsidiary in Italy in the future, but using an EOR initially gives you a chance to ensure a successful global expansion into the Italian market and secure top talent for your international team.
The Steps to Hiring in Italy
To hire in Italy, you will follow the same basic sequence of steps you’re probably used to in your home country. However, the specifics of each step may look a bit different based on the laws and customs in Italy. Let’s look at the hiring process in Italy.
1. Reach job seekers with your ads
You can compose job ads in your native language, Italian, or both. Italian job seekers are likely to look for positions online on major job aggregator sites, as well as on industry-specific job boards. More recently, job seekers may look to social media channels, as well. The number of LinkedIn users in Italy, for example, more than doubled from 2014 to 2018. Italy’s internet penetration rate is 70.4 percent, so most Italians are likely to take advantage of online job postings.
However, you can also publish print ads in newspapers and industry-specific magazines. Another popular recruitment channel in Italy is personal recommendations. If you have business connections in Italy already, consider personally inviting some people to apply.
2. Review applications
Highlight top applicants by building tasks such as questionnaires or skill-based tests into the application process. Or, if you want to review a broader range of applicants, you can simply ask them to submit a cover letter and their curriculum vitae (CV). Italian CVs have more in common with North American resumes than they do with typical CVs in some other countries. For instance, Italian CVs tend not to include the applicant’s personal hobbies and are capped at two pages.
Applicants should list all their relevant education and work experience. Keep in mind that if you’re looking for applicants to have certain degrees, you may need to amend those expectations if you can’t find applicants with that degree. You may want to try recruiting through a university with that degree program or offer a training program to promising but underqualified applicants.
3. Interview standout candidates
Once you’ve narrowed down your talent pool, you can schedule interviews with your top candidates. If you’re hiring remote employees in Italy, consider interviewing through an internet video call. This saves your team from having to make a trip to Italy and procuring a location to conduct interviews. Make sure you schedule with the potential time difference in mind, as Italy is in Central European Time.
During interviews, you can engage in friendly conversation, but be careful to avoid questions that interviewees could view as too sensitive. Italy has a long list of protected classes in their anti-discrimination legislation, such as religion, sexual orientation, political opinion, and ethnic, national, or social origin.
4. Extend job offers and draft contracts
Once you’ve selected the most qualified candidates, you can offer them a position. They may want to view their contract at this point, though legally, your obligation is to share it with them within 30 days of their start dates. The contract should be in line with all legal requirements and any relevant CBA or offer more generous terms. Contracts must cover:
- Identity of employer and employee
- Work location
- Start date
- Fixed-term or permanent duration
- Probationary period, if applicable
- Job category or title
- Number of paid holidays
- Typical working hours
- Length of the notice period in the case of termination
5. Onboard your new employees
If you work with an EOR, the onboarding process is taken care of, including establishing payroll and completing the necessary paperwork. Employers must also notify the competent Labor Office (DPLMO) whenever they employ workers.
If you haven’t already gone over the employee’s contract, make sure you do that during onboarding and review any additional information the employee should know about your company policies and their job duties. You may also need to train new hires to help them start their jobs with your company.
Employing Italian Workers Through Globalization Partners
Globalization Partners is a global EOR with a presence in 187 countries around the world, including Italy. If you want to hire employees in Italy and test out your entrance into the Italian market without having to establish a subsidiary, Globalization Partners offers the solution you need.
We’ll place your Italian employees on our payroll and handle all the complex tasks involved in international HR, abiding by relevant laws and CBAs in the process. This means you can hand off the responsibility of legal compliance and still enjoy a strong working relationship with your Italian employees. Request a proposal to get started.