Gross-net calculator for Italy - including labor costs

In Italy, salaries are stated in both gross and net amounts. The gross salary is the contractually agreed amount before deductions, whereas the net salary is the amount actually paid out at the end of the month. Several items are deducted from the gross salary in the payslip to determine the net salary.

First, social security contributions are deducted, which are borne directly by the employee – these amount to approximately 9 to 10% of the gross salary and go to the national social security system NISF. The employer pays additional contributions, which do not affect the net salary.

The next major component is income tax (IRPEF), which in Italy is progressive. This means: the higher the income, the higher the tax rate. The IRPEF currently ranges between 23% and 43%. In addition, there are regional and municipal taxes, which can range from 1% to 3% depending on the place of residence.
However, various tax deductions and tax credits – for example, for employees, family members or low income – significantly reduce the actual tax burden. These so-called “tax deductions” increase the net salary.

In Italy, the actual labour costs for an employer significantly exceed the gross salary stipulated in the employment contract. In addition to the gross salary, mandatory employer contributions must be paid, particularly to the social security system. Depending on the sector and collective agreement, these contributions typically amount to around 30 to 35 percent of the gross salary and cover pension, health, unemployment and accident insurance.

An essential component of the labour costs is also the so-called TFR – the employee’s severance pay entitlement (Trattamento di Fine Rapporto). This amount is accrued monthly by the employer and paid out upon termination of the employment relationship. However, employees have the option to pay their TFR entitlement fully or partially into a supplementary pension fund (fondo pensione). In this case, the corresponding amount is not retained by the company but transferred to the selected fund. For the employer, however, the TFR remains a fixed component of ongoing labour costs.

Depending on the applicable collective agreement, location or company-specific arrangements, additional costs may arise, such as contributions to company pension schemes or training funds. The difference between gross salary and actual labour costs is therefore substantial in Italy and should be carefully factored into every staffing decision.

In Italy, the employment contract regulates the rights and obligations between employer and employee. It can be fixed-term or open-ended and must comply with legal requirements and national collective bargaining agreements (CCNL).
Typical contents include:

• Type of contract (fixed-term, open-ended, part-time, etc.);
• Working hours and remuneration;
• Holiday entitlement;
• Probationary period (depending on the position);
• Notice periods and reasons for termination;

The employment contract must be in writing and clearly understandable. Particularly important is compliance with the applicable collective bargaining agreements, which often set minimum standards for wages, working hours, and protection against dismissal.

The annual gross salary is divided into 13 or 14 monthly salaries (depending on the collective agreement). If approximately 40 - 45 % is added to the annual gross salary, this results in the costs for the company.

In Italy, both employers and employees are required to pay social security contributions. These contributions fund the national social security system, which provides benefits such as pensions, health insurance, unemployment benefits and maternity leave.

In Italy, the social security institute NISF is the sole statutory institution for employees. Unlike in countries such as Germany, there are no multiple public institutions to choose from. However, private health insurance schemes also exist in Italy. Contributions to these are not an alternative to NISF contributions, but rather an additional, voluntary option.

The state-funded benefits include, among others:

• health insurance,
• pension insurance,
• unemployment insurance,
• retirement benefits,
• wage compensation (short-time work),
• maternity benefits, etc.

Work-related accidents, on the other hand, are covered and financially compensated by a separate institution known as INAIL.

In Italy, various tax deductions reduce the taxable income and therefore lower the overall tax burden. By decreasing the calculated gross tax liability, these allowances directly result in a higher net salary.

Important: Tax allowances can only be claimed once, even if an employee holds multiple jobs.

These allowances are gradually reduced as income increases. In other words: the higher the income, the lower the applicable allowances. Tax allowances are granted for each calendar day (up to a maximum of 365 days per year) on which taxable income is paid. This includes public holidays, weekly rest days and other non-working days (such as vacation, maternity leave, etc.).

To apply for tax allowances, employees must complete the official form provided at the time of hiring together with the employment contract. In the event of any changes, the form must be updated and resubmitted.

The Italian income tax (IRPEF) is a progressive tax levied on the income of individuals. It is withheld directly from the employee’s monthly gross salary by the employer and paid to the tax authorities.

As of the 2024 tax reform, the following three tax brackets apply:

• 23% for annual income up to €28,000
• 35% for income between €28,001 and €50,000
• 43% for income above €50,000

This reform simplified the previous multi-tier system and especially reduced the tax burden for middle-income earners.

In addition to IRPEF, local surtaxes apply:

• The regional surtax (addizionale regionale) varies by region and typically ranges between 0.7% and 3.3%;
• The municipal surtax (addizionale comunale) can be up to 0.8%, depending on the employee’s registered place of residence.

These additional taxes are also withheld directly by the employer. Payroll accounting includes these deductions each month, while any annual adjustments or tax credits can be claimed by the employee through their annual tax return (Modello 730 or Modello Redditi).

In addition to the national income tax (IRPEF), employees in Italy are also subject to a regional surtax and a municipal surtax on their income. The exact rates of these taxes depend on the employee’s place of residence, as both regions and municipalities set their own tax levels independently.

The regional surtax is determined autonomously by each region and typically ranges between 1% and 3% of taxable income. It helps fund regional healthcare and social services and forms a standard part of the overall tax burden.

The municipal surtax is also income-based and varies by municipality, often following a progressive structure or falling within a defined local range.

While both taxes have a noticeable impact on the employee’s net income, they do not affect the employer’s labour costs. Because rates are locally defined, the actual tax deduction may vary even among employees earning the same gross salary, depending on where they live.

The payslip (also referred to as a pay slip, payroll statement, or salary statement) is a document that details the breakdown and calculation of an employee’s net salary for a given monthly period. It is generated based on the attendance records (such as timesheets or presence lists) submitted by the employer to the payroll advisor. The payslip provides a complete overview of all salary components (e.g. base salary, overtime, travel allowances) and the applicable deductions borne by the employee (such as social security contributions and taxes).

Since 1953, Italian law requires employers to issue a monthly payslip to all employees.

There is no mandatory official format for payslips. However, payslips prepared by our firm include all essential data, such as:

• Employer and employee master data;
• Employment details (start date, length of service, etc.);
• Breakdown of gross pay (base salary, contingency allowance, seniority bonus, etc.);
• Accrued and used vacation and leave;
• Current vacation/leave balance;
• Days and hours worked;
• Current time account balance;
• Applicable collective agreement;
• Job classification according to the collective agreement, including job description;
• Employee-borne social contributions and taxes;
• Net salary.

The duration of the probation period is defined by the applicable collective agreement. It serves as a trial phase for both the employer and the employee. During this period, the employment relationship can be terminated at any time, without notice and without stating a reason. However, both parties may also agree to waive the probation period entirely.

Seniority refers to the uninterrupted duration of the employment relationship between an employee and the same employer. The calculation of seniority begins with the employee’s official registration and ends with their deregistration from employment.

Different collective agreements define varying rules regarding the periodicity of seniority increments. For example, in the construction sector, seniority bonuses are granted every two years, while in the tourism sector they are awarded every three years. Seniority can only accrue up to a certain maximum, depending on the applicable agreement (e.g. a maximum of 10 seniority bonuses under the collective agreement for commerce and services). The amount of the seniority bonus is also determined by the collective agreement and varies depending on the employee’s classification.

Working time in Italy is regulated by law and generally amounts to 40 hours per week, with a maximum of 8 hours per day. However, many collective agreements provide for shorter weekly working hours (e.g. 37 or 38 hours), depending on the sector.

Overtime is permitted but must not exceed legal or contractually defined limits. It must be either compensated financially or offset with time off in lieu.

By law, employees are entitled to a minimum rest period of 11 consecutive hours between working days, and to at least one day of rest per week, typically on Sunday. Italian labour law also provides for breaks during long shifts and guarantees paid annual leave.

In Italy, employees are entitled to continued salary payments during periods of illness, provided they report their sick leave properly. Notification must be made on the first day of illness, and the medical certificate is submitted electronically to the National Social Security Institute (INPS) by the attending doctor.

Depending on the sector and employment contract, salary payments during sick leave are made by the employer, INPS, or a combination of both. The duration and amount of the compensation depend on the employee’s length of service and the applicable collective agreement.

During medical leave, employees may be subject to home medical checks. Therefore, they are required to be available at designated times for potential visits by INPS-appointed physicians.

When an employee works additional hours, these must normally be classified as overtime and paid with the applicable surcharges. Conversely, underworked hours are usually deducted from the employee’s vacation entitlement. To allow for more flexibility in scheduling, many workplaces use a working time account model.

A working time account records the difference between contracted working hours and actual hours worked. This allows employees to build up time credits when they work more than the agreed hours. In this model, no or only minimal overtime surcharges are applied. If the employee works fewer hours than agreed, time deficits arise, which are offset against the accumulated hours – meaning they are not deducted from vacation days.

The specific rules governing the working time account – such as whether hours are compensated 1:1 or whether a maximum limit applies – are defined by the applicable collective agreement. Some collective agreements do not provide for working time accounts at all. In such cases, or if deviations from the agreement are desired, a separate agreement must be negotiated with a trade union.

If no working time account is in place, any additional hours must be treated as overtime and paid with the legally or contractually required surcharges.

In Italy, severance pay, known as TFR (Trattamento di Fine Rapporto), is a mandatory salary component granted to all employees, unlike in many other countries. It should not be confused with termination compensation or a settlement payment; rather, it functions as a legally required deferred compensation scheme – essentially a form of retirement or long-term savings benefit. TFR is paid out at the end of the employment relationship, regardless of the reason for termination (resignation, dismissal, expiry of a fixed-term contract, etc.).

TFR typically corresponds to approximately one month's salary per year, though certain salary components (such as overtime or reimbursed expenses) are excluded from the calculation base. The severance entitlement is calculated and accrued monthly, and either set aside by the company or paid into a pension fund (fondo pensione). If retained in the company, the amount is revalued annually based on inflation. This revaluation is subject to a 17% tax, which must be paid in two instalments: an advance by December 16 and the balance by February 16 of the following year.

Each employee may choose to transfer their TFR (or a portion of it) into a pension fund. Typically, both the employer and employee must be registered with the selected fund, though the decision to join is solely the employee’s. Once enrolled, monthly TFR contributions (including any mandatory supplementary employer contributions) are paid to the fund according to its rules—either via bank transfer or F24 form, and on a monthly or quarterly basis. In such cases, no TFR payout is made at the end of the employment relationship; the pension fund pays it out later, usually upon retirement.

If the TFR has not been transferred to a pension fund, the accrued amount including revaluation is paid to the employee when the employment ends. Since the final inflation index for the last month must be known, the TFR is generally paid one month after termination, and shown on a separate payslip.

For companies with more than 25 employees, there is a legal obligation to grant a TFR advance of up to 70% in specific cases (e.g. purchase of a first home, serious illness), provided the employee has at least eight years of service. However, with employer consent, the TFR may also be paid out early in full (100%) at any time, without the need to provide a reason.

Pension funds are also required to allow partial TFR withdrawals under certain conditions (e.g. home purchase, illness), though the procedures differ and must be requested directly from the fund, not through the employer or payslip.

Meal vouchers are a widely used voluntary employee benefit in Italy, offered by many employers to help cover the cost of meals during the working day, particularly lunch.

A typical meal voucher has a value between €4 and €8 per day, though higher amounts are possible. Employers may provide vouchers in paper format or as an electronic card, which can be used in restaurants, cafés, supermarkets, or with food delivery services. Meal vouchers cannot be exchanged for cash and may not be used to purchase alcohol or non-food items.

Meal vouchers benefit from favourable tax treatment: for employers, they are considered deductible business expenses up to a certain threshold, and for employees, they are exempt from income tax and social security contributions within specific limits (as of 2025: up to €8 per day for electronic vouchers).

Although not mandatory by law, meal vouchers are a popular fringe benefit in Italy and are especially common in the office and service sectors.

This refers to an additional salary component voluntarily granted by the employer. Unlike a discretionary bonus or one-off payment, a pensionable salary component (verrechenbares Lohnelement) can be offset against future wage increases, such as those arising from collective agreement adjustments, reclassification to a higher job category, or other salary upgrades—until the amount is fully absorbed.

The only exception is the seniority bonus, which cannot be offset against this component.

In Italy, expense reimbursement refers to the repayment of business-related costs incurred by an employee on behalf of the company—for example, for travel, meals, or accommodation. Such expenses must be verifiable, usually through receipts or invoices.

Reimbursements may be based either on actual expenses (supported by documentation) or lump-sum allowances, depending on company policy and the applicable collective agreement. Reimbursed expenses are tax-exempt for the employee, provided they remain within the legal limits.

All reimbursement procedures must comply with Italian tax regulations and require careful documentation—especially for international business travel.

In Italy, employees are entitled to a minimum of four weeks of paid vacation per year. This statutory minimum can be extended through collective agreements (CCNL) or individual employment contracts.

Vacation is generally taken in agreement with the employer, taking into account the company’s operational needs. Unused vacation can, in certain cases, be carried over to the following year, but should be used within 18 months to avoid expiration.

The number of additional monthly salaries is determined by the applicable collective agreement (CCNL). In general, employees in the commerce and services, liberal professions, and tourism sectors are entitled to 14 monthly salaries, while those in industry and craftsmanship sectors typically receive 13. The only exception is the construction sector, where additional monthly salaries are not paid by the employer, but instead by the construction workers' welfare fund (Cassa Edile).

For each month in which the employee has worked more than 13 paid days (i.e. at least 15 calendar days), 1/12 of the monthly gross salary accrues toward the 13th salary and—if applicable—another 1/12 toward the 14th salary.
An exception applies in the tourism sector, where both the 13th and 14th salaries—as well as vacation and leave—are calculated based on the actual number of paid days per month.

The 13th salary (Christmas bonus) is usually paid in mid-December, and the 14th salary (holiday bonus) in mid-June. Upon termination of the employment relationship, any accrued portions of these payments are paid out to the employee.

Entitlement to these payments remains in place during absences due to mandatory maternity leave, parental leave (in some collective agreements), illness and accidents, marriage leave, vacation, and paid leave.
No entitlement exists during periods of absence due to strikes, unpaid leave, or suspension from work without pay.

Italy offers attractive tax incentives under the so-called “immigration bonus” (regime degli impatriati) for individuals who transfer their residency from abroad to Italy and take up employment or self-employment in the country. This scheme is designed for qualified employees, freelancers, and entrepreneurs who have previously lived outside of Italy and now wish to start or continue their professional activity within the country.

The aim of this regulation is to attract or bring back highly skilled professionals, stimulate innovation, and foster economic growth. Eligible individuals can benefit from significant tax reductions for several years: a large portion of their income earned in Italy is exempt from taxation.

Access to the immigration bonus is subject to specific conditions, such as minimum periods of prior residence abroad and the start date of professional activity in Italy. In addition, applicants must submit a formal self-declaration (autocertificazione) confirming that they meet the personal and professional eligibility requirements.

Please note that the exact conditions of the scheme may vary depending on the individual case and are subject to change. It is the responsibility of the applicant to seek accurate and up-to-date information from the relevant authorities or official sources. We strongly recommend clarifying your eligibility in advance to fully benefit from the available advantages and ensure compliance with legal requirements.

Fringe benefits are non-cash benefits granted by employers in addition to regular salary—for example, company cars, vouchers, meal tickets, or contributions toward household utilities such as electricity and gas.

These additional benefits are tax-exempt up to a certain threshold. Under normal rules, the standard tax-free limit is €258.23 per year.

For the years 2025 to 2027, the tax-free threshold for fringe benefits has been increased to €1,000, or €2,000 if the employee has dependent children.

If the total value of fringe benefits exceeds the applicable threshold (€1,000 or €2,000) within the calendar year, the entire amount—including the portion that would otherwise have been exempt—becomes fully subject to income tax and social security contributions.

In Italy, employees who volunteer to donate blood (minimum 250 ml) are entitled to a fully paid day off on the day of the donation. This leave is paid directly by the employer through the employee’s payslip, and the employer can later reclaim the cost from INPS (National Social Security Institute).

The right to paid leave does not apply to the following categories, even if they donate:

• Self-employed individuals;
• Workers enrolled in the separate pension scheme.

INAIL (Istituto Nazionale per l’Assicurazione contro gli Infortuni sul Lavoro) is Italy’s national institute for insurance against work-related accidents, established in 1933. Anyone performing a high-risk, employee-like activity—whether permanent or temporary—must be insured through INAIL. This includes craftsmen, apprentices, and even family members who work in the business more than ten times per year or more than twice per month. Freelancers and sole proprietors (except artisans) are exempt from mandatory coverage. The insurance premium is calculated annually based on the previous year's total payroll, reported electronically to INAIL, and paid using Form F24 with a due date of February 16. The premium amount depends on the level of occupational risk and is entirely borne by the employer. For example, a construction worker must be insured at a higher rate than an office employee.

Since 2022, occasional freelance workers in the arts and music sectors are also subject to mandatory coverage. Employers can benefit from reduced premium rates if specific workplace safety requirements are met or if no accidents are reported for several consecutive years. Conversely, reported accidents may result in increased premiums. The premiums paid to INAIL are used to finance compensation for absences due to workplace accidents or occupational illnesses, as well as permanent disability benefits.

If an employee is injured during working hours or while commuting to or from work, it is considered a workplace accident. The employee must obtain a medical certificate specifically for work-related injuries (distinct from a regular sick note) and forward it immediately to the employer. In contrast to sick leave for illness or non-work-related injury, there is no legal requirement for the employee to remain at home during specific hours while recovering from a workplace accident.

The employer is obligated to report the accident to INAIL within 48 hours using the official electronic reporting procedure. To ensure timely reporting, it is essential that the injury certificate and the fully completed accident report form, including a detailed description of the incident, are sent promptly to the company’s payroll advisor. Delayed reporting may result in penalties, and the period in question may not be covered by INAIL, meaning the employee would not be compensated for those days.

The first four days of absence (the day of the accident plus three additional days) are fully paid by the employer. From the fifth day onward, INAIL covers 60% of the employee’s salary, and from the ninety-first day, the coverage increases to 75%. Whether the employer is required to supplement the employee’s income during this time depends on the applicable collective agreement (CCNL), similar to the rules governing sick leave.

The labour costs of an employee in Italy consist of several components and go well beyond the gross salary. For employers, the actual cost of employment is significantly higher than the agreed wage, as various contributions and charges must be added.

On top of the employee’s gross salary, employers must pay substantial social security contributions, which in Italy are largely borne by the employer. These include contributions to pension insurance, healthcare, unemployment insurance, and accident insurance. Depending on the industry and company size, these charges can amount to 30% to 40% of the gross salary.

Additional costs may arise from holiday bonuses, Christmas bonuses, and in some sectors, a 14th monthly salary. Non-cash benefits such as meal vouchers, company phones, or transport allowances also increase the total employment cost.

Labour-related overheads in Italy are relatively high, which makes them a crucial factor in workforce planning. Nevertheless, many companies continue to offer additional benefits to attract and retain qualified talent.

The obligations of employees in Italy are defined by the employment contract as well as the Italian Civil Code. Key responsibilities include the proper performance of assigned duties, compliance with working hours, and adherence to the employer’s instructions, as long as they fall within the scope of the agreed employment terms.

Employees are also required to demonstrate loyalty to their employer, meaning they must refrain from any conduct that could harm the company. This includes the protection of trade secrets and confidential information. Furthermore, employees must observe health and safety regulations and use the tools and equipment provided with due care.

Violations of these duties may lead to disciplinary action, including warnings or even termination of employment, depending on the severity of the breach.

Termination of employment in Italy is governed by law and must meet specific legal requirements. In principle, an employment relationship can be terminated either by the employer or the employee, with different rules applying depending on the situation.

If the employer initiates the termination, there must be a justified reason. A distinction is made between personal reasons, such as serious misconduct by the employee (so-called “just cause”), and business-related reasons, such as economic difficulties or company restructuring. In either case, the termination must be submitted in writing.

An employee may also resign, but must observe the notice period set out in the employment contract or applicable collective agreement. This period varies depending on the sector and the employee’s length of service.

In certain cases, such as unjustified dismissal, the employee has the right to challenge the termination through legal channels and may be entitled to reinstatement or compensation. Italian labour law provides strong protections for long-term employees and, in some cases, support from trade unions or labour courts is available.

Occupational health and safety is a core element of Italy’s labour protection system and is governed by a comprehensive set of legal provisions aimed at ensuring the safety and well-being of employees. The central legal framework is Legislative Decree No. 81/2008, also known as the Consolidated Act on Health and Safety at Work. This decree requires employers to assess workplace hazards, implement appropriate safety measures, and provide regular training for their staff.

A key principle of the Italian safety system is prevention. Employers are required to carry out risk assessments, provide protective equipment, ensure regular maintenance of machinery, and promote ergonomic workplace design. Employees have the right to a safe working environment and the duty to comply with all safety regulations.

Training is also a critical component: employers must ensure that all workers are informed about potential risks in their specific roles and know how to protect themselves effectively. The national authority INAIL (Istituto Nazionale Assicurazione Infortuni sul Lavoro) plays an important role in accident prevention and provides financial coverage in cases of workplace injuries or occupational illnesses.

Despite these comprehensive measures, challenges remain in fully implementing safety standards—particularly in small businesses and the construction sector. Nevertheless, the Italian government continues to strengthen the country’s safety culture through stricter inspections and awareness campaigns.

Unemployment benefit in Italy is provided through the NASpI scheme (Nuova Assicurazione Sociale per l'Impiego), which offers financial support to individuals who become involuntarily unemployed. NASpI was introduced in 2015 and replaced previous forms of unemployment assistance.

To be eligible for NASpI, certain conditions must be met. The individual must not have resigned voluntarily, unless under exceptional circumstances such as health issues or serious family-related reasons. Additionally, they must have paid social security contributions for at least 13 weeks within the last four years prior to unemployment. The applicant must also register with the public employment services and actively participate in labour market reintegration measures.

The amount of the benefit is based on the average gross salary of the last four months prior to unemployment. Typically, the benefit amounts to around 75% of the previous salary, up to a legally defined maximum. Starting from the third month of payment, the amount is reduced by 3% per month. The duration of the benefit corresponds to half the number of contribution weeks paid over the previous four years, up to a maximum of 24 months.