With Circular No. 25/E of 2023, the Italian Revenue Agency provided clarifications with respect to the identification of the tax residence and the taxability of the income earned by remote workers (so-called ‘smart workers’), confirming the application of Articles 2 and 3 of the TUIR, i.e. the ordinary provisions relating to the ‘tax residence’, also with respect to this case.
According to the Revenue Agency’s reading, in fact, the place where the remote work is performed does not affect the criteria for determining tax residence. In determining the tax residence of remote workers, therefore, Article 2 of the TUIR, which sets out the ordinary criteria for establishing tax residence, will still be taken into account.
The Italian Revenue Agency, moreover, has clarified that the tax relief for ‘impatriate’ workers is not precluded for those who transfer their residence to Italy, even if to work remotely on behalf of a foreign employer.
The Ministry of Labour and Social Policy, in its communication of 4 July 2023, explained that Italian Law no. 85 of 3 July 2023, in converting with amendments Italian Decree-Law no. 48 of 4 May 2023, extended the rights of certain categories of workers to work remotely.
Reference legislation
Remote working (or smart working), as regulated by Italian Law no. 81 of 22 May 2017, is a different way performing the employment relationship characterised by the absence of place and time constraints.
Italian Decree-Law no. 48 of 4 May 2023, the so-called Employment Decree, later converted into Italian Law no. 85 of 3 July 2023, extended, until 30 September 2023, the rights of vulnerable workers in the public and private sectors to work remotely.
The right to remote working was also extended to 31 December 2023 to:
For the above-mentioned categories, remote working until the extended dates is permitted even in the absence of the formalisation of the individual agreement entered into with the employer, which remains mandatory for all other workers, as provided for by Article 19 of Italian Law no. 81/2017. The agreement must cover certain specific elements, such as:
Under Article 23 of Italian Law no. 81/2017, moreover, the employer must electronically notify the Ministry of Labour and Social Policy of the names of the workers and the date of commencement and termination of the remote working, in accordance with the procedures identified by the same Ministry in Italian Decree no. 149 of 22 August 2022.
The electronic communication must be made through the application available, via Public Digital Identity System (Sistema Pubblico di Identità Digitale, ‘SPID’) and Electronic Identity Card (Carta d’Identità Elettronica, ‘CIE’) authentication, on the Servizi Lavoro – Cliclavoro portal, and remains mandatory also for workers subject to the extensions detailed above.
The communication must be provided within five days after the start of remote working or, in the case of an extension, from the last day communicated before the extension of the period. In the event of failure or late notification, an administrative sanction ranging from EUR 100 to EUR 500 per individual worker is provided for, as regulated by Article 19, third paragraph, of Italian Legislative Decree no. 276 of 10 September 2003.
With Message no. 2564 of 7 July 2023, the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) provided operating instructions for the exercise of the voluntary contribution option to the contribution-based system exercised at the same time as the application to buy-back periods which determine if the pre-conditions for exercising the option are fulfilled.
In its message, INPS reiterates what has already been clarified in practice, with particular reference to its instructions provided in Circular no. 54 of 6 April 2021. This confirms that if the option to make the voluntary contributions to the contribution-based system provided for in Article 1, paragraph 23 of Italian Law no. 335 of 8 August 1995, is exercised at the same time as the buy-back application, the buy-back periods are relevant for the purposes of determining if the contribution requirements for exercising the option are fulfilled.
INPS also notes that the option to make voluntary contributions to the contribution-based system provided for by Article 1, 23 of Italian Law no. 335/1995, can be exercised during the course of a person’s working life or at the same time as applying for a pension and is subject to the following contribution requirements:
a) less than 936 weeks (equal to 18 years) of contributions on 31 December 1995 (payment of pension benefits exclusively under the contributory regime rules is, however, granted to those who can claim a contribution period of at least 18 years on 31 December 1995, provided they have exercised their option right by 1 October 2001);
b) at least 780 weeks (equal to 15 years) of which at least 260 weeks (equal to five years) are after 1 January 1996;
c) at least one contribution before 1 January 1996.
The operating instructions set out in Message no. 2564 of 7 July 2023, apply in cases in which the person concerned fulfils the requirements for exercising the option to make voluntary contributions to the contribution system provided for in Article 1, paragraph 23 of Italian Law no. 335/1995 (less than 18 years as of 31 December 1995, at least 15 years of which at least five are after 1 January 1996, at least one contribution prior to 1 January 1996), only if the buy-back periods are considered already acquired (e.g. the person concerned reached 15 years of contribution or acquired seniority prior to 1 January 1996 only taking into account the periods subject to buy-back).
The administrative process and procedural instructions on the buy-back application
With Message no. 2564 of 7 July 2023, the INPS provides operating instructions addressed in particular to those involved in the processing of buy-back applications through exercise of the option to make voluntary contributions. The Message also contains instructions on the internal procedures to be followed for buy-back applications, aimed firstly at ascertaining the existence of the contribution requirements to exercise the voluntary contribution option in relation to the contribution-based pension calculation system and identifying the applicable calculation system.
Once the application to make voluntary contributions and buy-back further periods have been submitted at the same time, it is then necessary to check whether the conditions to exercise the voluntary contribution option are met, which determines the type of buy-back that applies.
Therefore, in the absence of contributions prior to 1996, the buy-back fee is determined:
If the requested buy-back period is also decisive for meeting the requirement to be able to exercise the voluntary contribution option (15 years of contribution, of which at least five years after 1 January 1996), the cost is calculated with the percentage calculation (‘deemed’, if required), except for the minimum contribution of one month necessary to acquire the status of person enrolled in the contribution-based regime on 31 December 1995, which is the only one to be calculated with the mathematical reserve criterion.
Fees for buy-back periods
The portion of the fee relating to the buy-back periods which lead to the fulfilment of the requirements for exercising the option (both for acquiring the status of contributor on 31 December 1995 and for reaching the requirement to exercise the option) must be paid in a single instalment, while the remaining cost is charged to the instalments of the payment plan.
In Message no. 2564/2023 INPS gives the example of a contributor who was not a contributor on 31 December 1995 and who, on the date of application, has only 14 years of contributions (obviously from 1996 onwards) and who applies for buy-back for his/her degree course of 4 years (48 months) before 1 January 1996.
Of these 48 months, the minimum contribution must be calculated using the mathematical reserve criterion, i.e. by determining the annual salary portion of the pension that would be due if all 48 months were subject to buy-back using this criterion.
The coefficient corresponding to the sex, age, and contribution seniority reached after buy-back is applied to this value (in the case 18 months – Table annexed to Italian Ministerial Decree of 31 August 2007 – for employees, and 22 April 2008 for the self-employed).
The result must be divided by the number of months (48) or the number of weeks (208 in the case of private employees) to obtain the minimum contribution, which must be paid within 90 days.
Of the 48 months, 12 months are required to enable the voluntary contribution option to be exercised: consequently, the equivalent of 12 months (including the minimum contribution counted with the mathematical reserve) will have to be paid within 90 days in a lump sum and the equivalent of 36 months remaining can be paid in instalments.
Finally, once the lump sum payment has been made, the exercise of the voluntary contribution option becomes irrevocable.
Failure by the person concerned to pay the fee in a lump sum within 90 days from the date of service of the order is considered to be a waiver of the buy-back request, which may, however, be resubmitted at another time.
The National Labor Inspectorate (INL), with note No. 5056 of July 13, 2023, focuses its attention on the protection of workers for the risks related to heat damage due to the particular climatic conditions.
in this regard, it is necessary to provide extra attention during the inspection supervision phase as well as during the information and prevention activities aimed at employers and workers in order to to provide useful information on the effects of temperatures The European Commission’s Green Paper on the Environment, Public Health and Consumer Protection sets out the main objectives of the Directive.
in particular, the Inspectorate reports that the excessive exposure to thermal stress increases the risk of accidents and, at the same time, work performance is exposed to vulnerable situations.
The tasks most affected by this phenomena are those involving outdoor activity, especially in the sectors most exposed to risk such as civil and road construction, agricultural sector, maritime and seaside sector.
It should be pointed out that the company has the opportunity, in the case of recorded or “perceived” high temperatures due to the particular type of work in progress, to request for the ordinary redundancy fund by evoking the causal “weather events.”
In Circular No 58/2023 the INPS provided operating instructions for the management of social security obligations connected to contributions’ exemption for the recruitment of female workers, under Article 1, paragraph 298, of Italian Law No 197 of 29 December 2022 for the period 1 January – 31 December 2023.
Article 1, paragraph 16 of the 2021 Budget Law (Italian Law No 178/2020), granted a 100% contribution exemption up to a maximum limit of EUR 6,000.00 for the recruitment of disadvantaged female workers between 1 July 2022 and 31 December 2022.
The 2023 Budget Law (Italian Law No 197/2022) confirmed the exemption also for new recruitment, on fixed-term or permanent contracts, and for conversions of fixed-term to permanent contracts, of disadvantaged female workers carried out between 1 January 2023 and 31 December 2023. The maximum amount limit has been raised to EUR 8,000.00 per year.
The aforementioned exemptions apply to the recruitment of ‘disadvantaged female workers’, i.e. they apply to the following categories:
From this it follows that, for the grant of the benefits under discussion, female workers of at least 50 years of age must be long-term unemployed (over 12 months) or, in combination with further provisions, ‘without regular paid employment’.
The incentive in question is also granted to agency supply contracts while, on the contrary, it is not granted to intermittent work contracts. Apprenticeships and domestic work contracts are also excluded from the benefit.
Finally, with reference to the duration of the exemption, it is clarified that the incentives have a duration of:
On this second point, it should be specified that in the event that a fixed-term contract which is subject to the exemption is converted into a permanent contract, then the exemption applies for a total of 18 months from the date of recruitment.
In the event of the conversion of a fixed-term contract which does not benefit from the exemption into a permanent contract, the exemption applies for a total of 18 months but starting from the conversion date.
The incentives are also due in the event of an extension of the relationship, up to the overall limit of 12 months.
In the case of part-time employment relationships, the maximum relief must be proportionally reduced.
It should also be noted that the ability to suspend the period of use of the incentives is granted only in cases of compulsory absence from work due to maternity leave, thus allowing the exemption period to be deferred.
The right to use the incentives in question is subject to the following general conditions:
The application of the general principles on employment incentives as governed by Article 31 of Italian Legislative Decree No 150 of 14 September 2015.
The contribution exemptions do not apply where one of the following circumstances intervene:
Finally, we should point out that if the mandatory electronic communications are provided late, this gives rise to the loss of the part of the incentive relating to the period between the start date of the relationship which benefits from the relief and the date of the late communication.
The text converting Italian Decree-Law No 48/2023 into law, also known as the ‘Employment Decree’, was published in the Italian Official Gazette on 3 July 2023. We set out below our comments on some of the main changes in the social security and welfare sphere.
As known, Italian Decree-Law No 48/2023, also known as the ‘Employment Decree’, in force since 5 May 2023, had introduced, among other things, measures aimed at reducing the tax wedge, combating poverty and social exclusion and promoting active employment policies, introducing certain incentives for employers who hire particular categories of workers, i.e. Inclusion Allowance recipients, so-called ‘NEETs’ and the disabled, and providing for an increase in the partial exemption on the old-age/survivor’s pension (indennità vecchiaia e superstiti, ‘IVS’) contribution paid by employees and the tax and social security exemption threshold of fringe benefits.
With the publication of Law No 85/2023 in the Italian Official Gazette of 3 July 2023, converting the ‘Employment Decree’, the legislator has not changed the initial structure of the Decree-law in question, fully confirming the measures indicated above, and has also introduced some significant initiatives regarding the reduction of employment costs for employers operating in the tourism/hotel sector.
The Inclusion Allowance (which comes into effect from 1 January 2024) is a financial support measure granted to households meeting specific income requirements and where at least one of the members of the household is, alternatively:
The Law converting the ‘Employment Decree’, confirmed the provisions of Article 10 of the Decree which introduce, from 1 January 2024, a contribution exemption which may be used up to a maximum of 12 months. This can be extended to 24 months if a fixed term contract is converted into a full-time contract, in the case of recruitment by an employer of future beneficiaries of the Inclusion Allowance.
The contribution relief is a 100% exemption from the social security contributions payable by the employer, with the exclusion of premiums and contributions due to National Institute for Insurance against Accidents at Work (Istituto Nazionale Assicurazione contro gli Infortuni sul Lavoro, ‘INAIL’), up to a maximum limit of EUR 8,000 per year for 12 months. The exemption applies to permanent employment contracts, whether full-time or part-time, and apprenticeship contracts.
The relief is also granted to private employers who recruit Inclusion Allowance recipients under a fixed-term or seasonal employment contract, for a maximum period of 12 months – unless a shorter contract is envisaged. In this case, the exemption is 50% of the total social security contributions payable by an employer, up to a maximum limit of EUR 4,000, excluding INAIL premiums. The provision is also confirmed whereby, in the event that a temporary employee is taken on full-time, the relief in question may be applied for a total of 24 months of which the first 12 refer to the fixed term contract (maximum EUR 4,000.00 per year) and, if the contract is converted to a full-time contract, for a further 12 months (maximum EUR 8,000.00 per year).
The ‘Employment Decree’ has introduced further relief for private companies who recruit ‘NEETs’ (persons ‘Not in Education, Employment or Training’) from 1 June 2023 to 31 December 2023, i.e. young people under 30 who are not engaged in instruction, work or training courses, subject to the obligation to register in the ‘Youth employment initiative’ national operational program.
The ‘Employment Decree’ conversion Law also confirms the provisions which grant the incentive to private employers, subject to an online application to be submitted to the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’), who recruit NEETs under permanent contracts – including under agency supply contracts – or under vocational or trade apprenticeship contracts. The duration of the incentive is 12 months, during which the employer is paid a contribution of 60% of the gross monthly salary taxable for social security purposes, for new recruitment of young people:
From an analysis of the text of the Law converting the ‘Employment Decree’, it is believed that the ‘NEET’ relief may be used with the other incentives and tax exemptions provided for by current legislation, in particular with the ‘Under 36’ incentive due to the ‘common’ scope of application. In the event of accumulation of several incentives, the ‘NEET’ incentive will be reduced from 60% to 20% of the gross monthly taxable salary for social security purposes for each ‘NEET’ employee recruited.
With the aim of boosting the professional skills and labour market inclusion of young people under 35 with disabilities, the provisions of Article 28 of the Employment Decree are confirmed by the Law converting said decree. These provisions established a fund for third-sector entities, voluntary associations, and non-profit organisations that are willing to enter into permanent employment contracts between 1 August 2022 and 31 December 2023 with persons with disabilities.
With a view to increasing employees’ net pay due to the cut in the social security contribution or ‘tax wedge’ (cuneo fiscale) the provisions of Article 39 of the Employment Decree are confirmed by its conversion Law. These provisions raised by 4% the partial exemption on the portion of social security contributions for IVS borne by employees for pay periods from 1 July 2023 to 31 December 2023, excluding the 13th month’s pay. In the light of this provision, the already provided exemption is then increased to 7% if the taxable salary does not exceed EUR 1,923.00 per month and to 6% up to EUR 2,692.00 a month.
With the aim of ensuring permanent employment and to make up for the exceptional lack of job offers in the tourism, accommodation and spa sector, the ‘Employment Decree’ conversion law introduced a new Article 39 bis. This article provides that, for the period from 1 June 2023 to 21 September 2023, private sector employees in the tourism sector, including spas, who earned employment income of less than EUR 40,000.00 in the 2022 tax period, will be paid a special supplement, which does not contribute to the calculation of income, of 15% of gross wages paid in relation to night work and overtime work, under Italian Legislative Decree No 66/2003, carried out on public holidays. The substitute tax regime must be requested in writing by the employee, with a declaration of the amount of the employee income earned in 2022, while the withholding agent offsets the credit accrued under the special supplement by offsetting through the F24 form.
With the Law converting the ‘Employment Decree’, for 2023 only and derogating from the provisions of Article 51, paragraph 3, of the Italian Income Tax Consolidation Act (Italian Presidential Decree No 917/1986, Testo unico delle imposte sui redditi, ‘TUIR’), the provisions of Article 40 of the Decree are confirmed. Under this provision, for a single employee with dependent children for tax purposes under Article 23 of TUIR – including if recognised (riconosciuti) or adopted children – or whose income does not exceed the threshold for being considered tax dependent, equal to EUR 2,840.51 or EUR 4,000.00 if they are under 24 years old, the tax exemption limit for fringe benefits is to be raised from EUR 258.23 to EUR 3,000.00 per year per individual employee. The benefits can also be paid ad personam and can include sums reimbursed or paid by the employer for the payment of domestic utilities for the integrated water service, electricity and natural gas.
The decree provides for a reduction of administrative sanctions in the event of non-payment of social security withholding taxes. In the event of failure to pay social security withholding taxes of less than EUR 10,000.00, the new fine is set at one and a half times to four times the amount not paid (previously, the fine was EUR 10,000.00 to EUR 50,000.00).
Furthermore, for breaches arising from failure to pay from 1 January 2023, notice of details of the breach must be given by 31 December of the second year following that of the year of the breach.
As from 15 June, the employers who were forced to suspend their activities due to the floods that hit Emilia-Romagna, Marche and Tuscany can submit a simplified application to access the one-off social safety net introduced by the Floods Decree, i.e. Decree-Law no. 61 of 2023.
The social safety net is intended to protect the employers and workers damaged by the floods and to cope with the emergency.
In this regard, INPS [Italian Social Security Office] Circular No. 53 of 2023 provides the corresponding operating instructions . In particular, employers are exempt from the obligation to inform and hear the trade unions as well as from paying additional contributions (Legislative Decree no. 148/2015). In addition, the decree introduces a derogation in the timing of the submission of applications, for which an information flow, exclusively in CSV format, must be completed.
In its Circular No 49/2023, and on the basis of the regulatory changes that have taken place in recent years, the INPS implemented the extension of provisions to favour the provision of company welfare measures to employees. In the Circular the INPS analysed the regulatory framework and its impact on performance bonuses transformed into welfare measures for the purposes of social security contributions.
Reference legislation
The Legislator, with Italian Law No 208/2015 and Italian Law No 232/2016 (2016 Budget Law and 2017 Budget Law, respectively), essentially introduced the concept of ‘performance bonuses’ (hereinafter, also ‘PB’) – i.e. sums of a variable amount paid to employees linked to increases in productivity, profitability, quality, efficiency and innovation, as well as sums paid in the form of participation in the company’s profits.
The remuneration in question is subject to a 10% substitute tax as against Italian personal income tax (Imposta sul reddito delle persone fisiche, ‘IRPEF’) and the relevant regional and municipal surcharges, for a total gross amount of EUR 3,000.00. Workers in the private sector who hold an employment contract, whether fixed-term or permanent, and who, in the year preceding the year in which the bonus is received, have received employment income of no more than EUR 80,000.00 are eligible for the favourable tax treatment.
In addition to the direct cash payment of the performance bonus due to the employee, Italian Law No 208/2015 provided for the possibility, at the worker’s request, of converting the amount due under the PB and receiving it in the form of company welfare, if any. The aforementioned subsidised sums may therefore be replaced by one or more services exempt from social security contributions for both employer and employee.
In addition to the conditions to be met by the worker, to apply the favourable regime the legislation provides that the performance bonus must be:
Article 1, paragraph 63 of Italian Law No 197/2022 (2023 Budget Law) provided that, for the 2023 tax year only, the amounts paid as performance bonuses to workers will be subject to 5% substitute tax.
On the other hand, there is no single legislative framework for corporate welfare. Corporate welfare is considered to be the goods and services that an employer provides – on the basis of an agreement concluded with trade union representatives, or under a unilateral regulation – to its employees to satisfy certain needs of a non-work nature.
The area of corporate welfare developed through the combination of certain tax regulations laid down by Italian Presidential Decree No 917/1986, the Italian Income Tax Consolidation Act (Testo Unico delle Imposte sui Redditi, ‘TUIR’). These are mainly contained in Article 51, where a number of goods and services are excluded from taxable remuneration, and in Article 100, which provides for the deductibility of ‘expenses relating to work or services that can be used by all employees or categories of employees voluntarily incurred for specific purposes of education, training, recreation, social and health care or worship’.
Under Article 51, paragraph 1 of the TUIR, ‘all sums and amounts in general, for whatever reason, received during the tax period, including in the form of charitable donations, in connection with the employment relationship’ fall within income from employment and are therefore subject to ordinary taxation and social security contributions. Exceptions to this principle of remuneration which is taxable in full are the explicit exceptions provided for in Article 51, paragraph 2 of the TUIR.
Conversion of performance bonuses into corporate welfare
The 2017 Budget Law, making some amendments to the 2016 Budget Law, provided that the following types of income are not included in employee income, nor are they subject to substitute tax if, in lieu of performance bonuses, they are received or enjoyed by the worker, at his or her choice:
In relation to subparagraph a) above, therefore, the exemption is extended so that sums paid as performance bonuses and profit-sharing are not included in employee income, nor are they subject to substitute tax, even if they are contributed to complementary pension schemes. The legislation also provides that bonuses may be deducted from personal income even if they exceed the limits. The Italian Revenue Agency, in its Circular No 5/E/2018, clarified that ‘the tax-free substitution of the performance bonus with contributions to the complementary pension scheme […] was already possible under the ordinary rules for determining employee income, since such contributions withheld by the employer fall within Article 51, paragraph 2, letter h)’.
With regard to the applicable social security regime, on the instructions of the Ministry of Labour and Social Policy, under Article 12 of Italian Law No 153/1969, the contributions paid at the employee’s request to complementary pension schemes, in lieu of all or as part of the PB, is subject to a 10% solidarity contribution (contributo di solidarietà) (an additional pension contribution) payable by the employer.
The same considerations apply to subparagraph b) since, also in this case, the amounts of the PB that are converted into contributions to be paid to welfare funds are excluded from employment income. Moreover, for contribution purposes, paragraph 4 of the aforementioned Article 12 of Italian Law No 153/1969, provides that contributions to ‘professional funds, funds, schemes provided for by collective agreements or company agreements or regulations, for the purpose of providing supplementary social security or welfare benefits for employees and their family members during or after termination of the employment relationship’ are subject to the 10% solidarity contribution payable by the employer.
Finally, with reference to the case of the replacement of performance bonuses with shares offered to all employees referred to in subparagraph c), it is noted that the legislator has introduced an exception to Article 51, paragraph 2, subparagraph g) of the TUIR. The exception applies both to the value limit of the shares that are not included in employee income, and to the conditions that require the shares to be granted to all employees and the non-transferability of the shares by the employee before the three-year period, as well as – including after that period – to the employer or the issuing company.
By its Circular No 46 of 17 May 2023, the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) provided some important clarification on the liquidator’s information and contribution obligations on the termination of permanent employment relationships in the cases governed by Italian Legislative Decree No 14/2019, amended by Italian Legislative Decree No 83/2022 (implementation of EU Directive 2019/1023), containing the ‘Business Crisis and Insolvency Code’ (Codice della crisi di impresa e dell’insolvenza, ‘CCII’), which entered into force on 15 July 2022.
In particular, in its circular the INPS highlights the regulatory changes introduced by the new Italian Business Crisis and Insolvency Code and provides operational guidelines for the management of the New Social Insurance for Employment (Nuova Assicurazione Sociale per l’Impiego, ‘NASpI‘) contribution due for interruptions of permanent employment relationships in the light of the provisions of the CCII.
Reference legislation
As a preliminary remark, it should be noted that the Business Crisis and Insolvency Code, as regulated by Italian Legislative Decree No 14/2019, includes specific provisions on the management of employment relationships, in particular in Articles 189 and 376.
In particular, Article 376 of the aforementioned Italian Legislative Decree No 14/2019, by amending Article 2119 of the Italian Civil Code, states that ‘The compulsory administrative liquidation of the undertaking does not constitute just cause for termination of the contract. The effects of a compulsory winding-up by the court on employment relations are governed by the crisis and insolvency code’.
In this respect, according to Article 189, the initiation of compulsory winding-up proceedings against the employer does not constitute grounds for dismissal.
However, the liquidator must give notice of dismissal when the conditions and reasons indicated in the same Article 189 are met, i.e. ‘if the continuation or transfer of the company or a branch thereof is not possible, or in any event there are clear economic reasons inherent in the organisation of the work’.
Therefore, employment relationships in place at the date of the declaratory judgment remain suspended until the employees are given notice of the liquidator’s takeover or withdrawal, which takes effect from the date of the start of the compulsory winding-up proceedings.
The suspension of employment relationships is intended to allow the liquidator to assess the possibility of continuation of the business activity (directly or indirectly) and continues until the liquidator takes over the employment relationship or orders the dismissal of the employee or in cases where the latter does not resign.
That said, the ‘suspended’ relationships are in any event considered to be terminated by law four months after the date of the start of the compulsory winding-up proceedings.
The suspension may be extended for a maximum of eight months if the conditions set out in Article 189, paragraph 4 of the CCII are met, i.e. by order of the bankruptcy Judge, following a petition that may be submitted by the liquidator, by the director of the Local Labour Inspectorate of the area where the compulsory winding-up proceedings have been started or, finally, following a petition submitted by individual workers. In the latter case, the extension takes effect only in respect of the applicant workers.
Finally, an employee’s resignation during the suspension period, which is understood to be resignation for just cause within the meaning of Article 2119 of the Italian Civil Code, takes effect from the date of the start of the compulsory winding-up proceedings, provided that the worker is not the beneficiary of wage guarantee payments (under Titles I and II of Italian Legislative Decree no. 148/2015), since, in that case, the resignation is not considered to be for just cause and will not have retroactive effect.
Carrying on the debtor’s business
With reference to employment relationships, Article 189, paragraph 9 of the Italian Business Crisis and Insolvency Code provides that while the liquidator carries on the debtor’s business in the compulsory winding-up, existing employment relationships continue, unless the liquidator suspends them or dismisses the employees under the applicable ordinary employment regulations.
Therefore, in the event of suspension, the above-mentioned provisions of Article 189 on withdrawal by the liquidator, termination of employment and resignation by the employee for just cause apply in so far as they are compatible.
Collective redundancies
In the case of collective redundancies, the employment relationships are terminated from the date on which the liquidator gives notice of the termination.
In this respect, the reference regulatory provisions do not change and remain those set out in Articles 4 and 24 of Italian Law No 223/1991. However, it is worth noting that the Italian Business Crisis and Insolvency Code sets out a specific simplified procedure for collective redundancies occurring during liquidation proceedings.
Moreover, in cases of collective redundancies, once the trade union agreement has been reached, or the procedure has been exhausted, the liquidator takes any consequent action under Article 4, paragraph 9 of Italian Law no 223/1991. Consequently, termination by operation of law (with effect from the date of the start of the compulsory winding-up proceedings) does not apply when the liquidator has commenced the collective redundancy procedure.
Finally, termination by operation of law at the end of the suspension period of four or eight months does not apply when collective redundancy procedures already started by the liquidator are pending.
The contribution obligation under the ‘redundancy ticket’ (ticket di licenziamento)
In the event of termination of employment described above, whether due to withdrawal by the liquidator, resignation of the employee during the period of suspension – if they fall within the cases considered for just cause – as well as termination by law at the expiry of the period of suspension of employment, the question arises as to whether or not it is necessary to pay the ‘redundancy ticket’ payment under Article 2, paragraphs 31 to 35 of Italian Law No 92/2012 as amended.
Article 2, paragraph 31 of Italian Law No 92/2012, which introduced the redundancy ticket, states that this contribution is always due on termination of a permanent employment relationship for reasons which, regardless of the contribution requirement, could, even potentially, give rise to the right to receive NASpI.
That said, given that Article 190 of Italian Legislative Decree No 14/2019, which governs the Italian Business Crisis and Insolvency Code, states that termination of employment under Article 189 of the same decree constitutes involuntary loss of employment and therefore gives rise to the right to NASpI, with its Circular No 46/2023 the INPS confirms that the obligation to pay the ticket exists for each type of termination referred to in the aforementioned Article 189 of Italian Legislative Decree No 14/2019.
However, in the cases of termination of employment provided for in Article 189 of Italian Legislative Decree No 14/2019, the amount of the NASpI ticket is admitted to the statement of liabilities as a claim prior to the start of the compulsory winding-up proceedings, and the liquidator cannot in fact proceed with the payment.
Therefore, the relevant UNIEMENS forms flows must in any case be sent within the month following the month in which the notice of termination of employment was given, while it will be the responsibility of the local competent INPS offices to manage recovery of the claim.
On the contrary, for employment terminations occurring during the carrying on of the debtor’s business in compulsory liquidation, the relevant claims are satisfied before distribution under Article 221, paragraph 1, letter a), and Article 6, letter d) of the Italian Business Crisis and Insolvency Code.
Italian Legislative Decree No 48/2023, also referred to as the ‘Employment Decree’, amended, among other things, the incentives provided for employers who hire particular categories of workers, namely Inclusion Allowance recipients, so-called ‘NEETs’ and people in receipt of invalidity benefit.
In general, the Inclusion Allowance constitutes economic support payable to households consisting of, at least one of the following (i) a disabled person, (ii) a minor, (iii) a person over sixty years of age, or (iv) a person in receipt of invalidity benefit.
For future beneficiaries of the Inclusion Allowance (to come into effect under Article 1 of the Employment from 1 January 2024), the law provides, in cases of hiring by employers of these individuals, a social security contributions exemption usable up to a maximum of 12 months extendable to 24 months in case of transformation of the contract in question [from a fixed-term contract to a permanent one].
In this regard, Article 10 of the Employment Decree with reference to economic incentives granted to private employers hiring individuals benefitting from the above allowance, provided an incentive of exemption from payment of 100% of the employer’s social security contributions, excluding premiums and contributions due to National Institute for Insurance against Accidents at Work (Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro, ‘INAIL’), up to a maximum of EUR 8,000 per year for 12 months as financial incentives for private employers who hire those in receipt of above-mentioned allowance. This exemption will be granted for permanent employment hires, whether these are full-time or part-time, including through an apprenticeship contract.
The relief is also granted to private employers who recruit recipients of the Allowance under a fixed-term or seasonal employment contract, for a maximum period of 12 months, provided that the contract is of shorter duration. In this case, the exemption is 50% of the employers’ total social security contributions, excluding INAIL premiums, up to a maximum of EUR 4,000 per year.
Examination of the rule shows that the incentive may apply for a total of 24 months in the case of stabilisation of the fixed-term employee the conversion of fixed-term contracts into permanent ones, of which the first 12 refer to fixed-term (maximum of EUR 4,000.00 per year) and, in the case of transformation, for an additional 12 months (for EUR 8,000.00 per year).
Additional incentives are provided for private companies who recruit young people ‘under 30’ who are Not in Education, Employment or Training (‘NEETs’) provided they are registered with the Youth Employment Initiative’ national operational program.
Under Article 27 of the Employment Decree, the incentive is granted to private employers who hire NEETs on permanent contracts, including under agency supply contracts, or on vocational or trade apprenticeship contracts.
The incentive in question lasts for a period of 12 months. Under it the employer is awarded a contribution equal to 60% of the gross monthly salary taxable for social security purposes, for new recruitment from 1 June 2023 to 31 December 2023 of young people:
The ‘NEET’ incentive is cumulative with other incentives and contribution exemptions provided by current legislation, among which of particular interest due to the ‘common’ scope of application is the ‘Under 36’ incentive, extended by Article 1, paragraph 297 of the 2023 Budget Law. In the event of accumulation of several incentives, Paragraph 2 provides for the reduction of the ‘NEET’ incentive from 60% to 20% of the gross monthly wage taxable for social security purposes for each ‘NEET’ employee recruited.
With the aim of boosting the professional skills and labour market inclusion of young people under 35 with disabilities, Article 28 of the Employment Decree established a fund for third-sector entities, voluntary associations, and non-profit organisations that enter into permanent employment contracts between 1 August 2022 and 31 December 2023 with individuals with disabilities.
With a view to increasing employees’ net pay due to the cut in the social security contribution or ‘tax wedge’ (cuneo fiscale) Article 39 of the Employment Decree raised by 4% the partial exemption on the share of social security contributions for IVS (disability, old age and surviving partners) borne by employees for pay periods from 1 July 2023 to 31 December 2023, excluding the 13th month’s pay.
In the light of this provision, the already provided exemption is increased to 7% if the taxable salary does not exceed EUR 1,923.00 per month and to 6% up to EUR 2,692.00 a month.
For employees with dependent children for tax purposes only, and limited to the 2023 tax period, the tax exemption limit for fringe benefits is to be raised from EUR 258.23 to EUR 3,000.00 per year per individual employee. The increase in the limit only affects workers with children who are dependent for tax purposes under Article 23 of Italian Presidential Decree No 917/1986 (‘Italian Income Tax Consolidation Act’ or ‘Testo unico delle imposte sui redditi’, ‘TUIR’).
Derogating from the provisions of Article 51, paragraph 3, of the TUIR, and only for the employees involved, the value of goods sold, and services provided to employees with children for tax purposes, as well as the sums disbursed or reimbursed to those employees by employers for the payment of domestic utilities for integrated water service, electricity and natural gas, do not constitute employee income, within an overall limit of EUR 3,000.00.
By message No 1450 of 18 April 2023, the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) provided some important clarification on eligibility for employment incentives under current legislation in the case of new recruitment under an ‘expansion contract’ (contratto di espansione).
In its message, the Entity summarises the regulations relating to the general principles for employers who are recruiting to take advantage of these incentives. The message focuses first on the eligibility of employers who requested the usual recruitment incentives under our system, to actually obtain them during the expansion contract, in light of certain provisions of Article 31, paragraph 1, letters a) and c) of Italian Legislative Decree No. 150/2015. These provisions respectively provide that:
The expansion contract was introduced on an experimental basis, limited to 2019 and 2020, by Article 26-quater of Italian Decree Law No 34/2019. This provision incorporated it into Article 41 of Italian Legislative Decree No. 148/2015, thus repealing job-creation agreements (contratto di solidarietà espansivo).
Originally, the expansion contract was aimed exclusively at large companies with workforces above 1,000 employees. It sought to incentivise reindustrialisation and corporate reorganisation through, (i) the introduction of new staff into the workforce, (ii) staff retraining to update individual and collective skills, and (iii) the recruitment on a permanent basis of new skilled employees.
With Italian Law No 178/2020 (2021 Budget Law), the legislator, on an experimental basis, extended the duration of expansion contracts to 2021. The range of employers was also expanded to those with not less than 500 working units. The provision extended incentives to those who take early retirement within five years of their theoretical retirement date to those employers with at least 250 employees. The number of employees is calculated as an average over the previous six months. For permanent groupings of undertakings with a single production or service purpose the overall number of employees is aggregated (INPS Circular No 48 of 24 May 2021).
Subsequently, by Italian Law No 234/2021 (2022 Budget Law), the expansion contract provision was extended for 2022 and 2023. For this period only it can also be accessed by employers with a workforce of not less than 50 working units calculated on the same basis as set out above, i.e. an average over the previous six months and in aggregate for permanent groupings of undertakings (INPS Circular No 88 of 25 July 2022).
As a result of the above amendments made by the Budget Law 2022, employers with a workforce of not less than 50 working units may also, for the years 2022 and 2023, initiate a consultation procedure to enter into an expansion contract with the Ministry of Labour and Social Policy and the comparatively most representative trade unions at national level (or with their company trade union representatives or with the joint trade union representative).
As is well known, Article 31, paragraph 1 of Italian Legislative Decree No 150/2015 dictates the general principles for the use of incentives by employers relating to recruitment.
On the basis of this legislation, in message No 1450/2023, INPS focuses first on Article 31, paragraph 1, letter a) of Italian Legislative Decree No 150/2015, which states that ‘incentives are not payable if the recruitment arises under a pre-existing obligation established by a legal provision or collective bargaining’.
Taking into account the opinion of the Italian Ministry of Labour and Social Policy, with the message under discussion INPS clarified, firstly, that an undertaking to recruit workers with an open-ended contract (or professional apprenticeship), to which the employer has subjected itself in negotiations and included in the expansion contract, does fall within a ‘pre-existing obligation’ as defined in the general principles in the above-mentioned regulatory provision. Rather the INPS’s view is that such an undertaking gives rise to an employer obligation under the bargaining agreement signed at a governmental level during the consultation procedure to conclude the expansion contract.
Following this logic, according to message No 1450/2023, the obligation to recruit thus constitutes a clause in the contractual procedure to which the employer voluntarily submits. Therefore, from this perspective, recruitment does not constitute the implementation of a legal obligation, but the mere fulfilment of the contractual provision.
That said, with the message under discussion, INPS confirmed that new recruitment by the employer as an essential element of the expansion contract is not to be considered as implementing a legal obligation. The employer can therefore benefit from the applicable incentives, where they are payable, regardless of whether the Extraordinary Wage Guarantee Fund (Cassa Integrazione Guadagni Straordinaria, ‘CIGS’) under Article 41, paragraph 7, of Italian Legislative Decree No 148/2015 is used.
The issue regarding the eligibility for the proposed recruitment incentives is also analysed by INPS in light of the above-mentioned principle expressed in Article 31, paragraph 1, letter c) of Italian Legislative Decree No 150/2015, according to which ‘the incentives do not apply if there are ongoing work suspensions related to a company crisis or reorganisation at the employer or the user through an agency contract, except in cases where the recruitment, transformation or agency contract is aimed at recruiting employees with a different level of qualification from that held by the suspended workers or who will be employed in different production units.’
According to the clarification provided by the Institute, the particular characteristic of the expansion contract also emerges in this case. This is because the use of this type of contract presupposes that the concerned employer carries out a structural process of reindustrialisation and reorganisation in the context of which new recruitment constitutes an essential element of the contract itself, both through (i) generational turnover in relation to the replacement of so-called ‘departing workers’, (Article 41, paragraph 5-bis, of Italian Legislative Decree No 148/2015), and (ii) as a result of upgrading the professional skills of existing staff, the pursuit of technological progress and development, and the acquisition of new professionals consistent with the business reorganisation and reindustrialisation process.
Hence the special nature of the expansion contract and, with it, by implication, the new recruitment provided for in the bargaining agreement.
That said, with the message under discussion, INPS confirmed that the employer can therefore access the incentives even where reductions in working hours are in place, with recourse to CIGS, under Article 41, paragraph 7, of Italian Legislative Decree No 148/2015. INPS does not, therefore, consider that there is an actual conflict with the rationale behind the provision of Article 31, paragraph 1, letter c) of the above-mentioned Italian Legislative Decree No 150/2015.
With Order No. 8913 of 29 March 2023, the Court of Cassation affirmed that the payment of the social security contribution to the National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) is also due on the sums not paid to the worker when, following a conciliatory agreement, the worker waives compensation in lieu of notice.
A company appealed against an assessment report issued by the INPS, relating to the payment of the unpaid contributions and due on compensation in lieu of notice which was not paid to dismissed workers. The Bologna Court of Appeal repealed the first instance ruling and accepted the company’s application.
The employment relationships of the above-mentioned workers had been terminated through the use of voluntary resignation incentives, agreed in trade union conciliation. At the conciliation, therefore, the workers involved had waived, among other things, the compensation in lieu of notice provided for by the collective bargaining agreement.
In these circumstances, the Bologna Court of Appeal considered that the parties, in being able to waive the contractual element of the compensation in lieu of notice, had exercised an alienable right. In relation to this, and since no amount was paid on that ground, a contribution obligation could not arise.
The INPS, in appealing against the decision of the Bologna Court of Appeal, argued that, in its opinion, the prerequisites had been met for breach or misapplication of Article 12 of Italian Law no. 153/69 and Article 1 of Italian Decree Law no. 338/1989, on the subject of ‘minimum contribution’. According to the appellant, in fact, the economic-contractual elements provided for by law such as ‘compensation in lieu of notice’ provided for by Article 2118 of the Italian Civil Code, although not paid under the agreement reached between the parties, would still be subject to the contribution obligation.
In particular, Article 1 of Italian Decree Law no. 338/1989 provides that the remuneration to be assumed as the basis for calculating social security contributions cannot be lower than the remuneration established by law. The rule, therefore, refers to the limits of legal remuneration and not that actually paid to the worker. In this regard, for example, defaults by the employer in relation to the employee in the payment of wages are irrelevant. From this, therefore, it is inferred that the social security obligation is independent of the remuneration obligation.
By way of example, the Court of Cassation judges retraced their way through some previous rulings concerning agreements for the reduction of working hours or relating to the temporary suspension of performance and the subsequent omission of pay. These agreements, ultimately, “are not enforceable against the INPS” (Court of Cassation no. 15120/2019, Court of Cassation no. 13650/2019), firstly, as they refer to the employment relationship and not to the separate social security relationship. Secondly, since the latter is autonomous with respect to the former, as well as subject to the minimum contribution rule, under which the remuneration due by law is relevant for contribution purposes.
In the light of the law considered, the court has reiterated that the social security rights that arise as a result of legislation are not available between contractual parties. Consequently, any waivers of the sums due are not relevant for the purpose of determining social security contributions.
The company, therefore, despite having consensually terminated the employment relationships under the conciliation agreement that followed the notice of dismissal, is required to pay the contributions relating to the compensation in lieu of notice that should have been paid in the absence of an agreement.
The Bologna Court of Appeal, according to the Court of Cassation judges, did not apply the principles of law mentioned above. In fact, the appeal judgment spoke of “consensual termination of the relationship” and of “waiver of the right to compensation in lieu of notice”, without considering that while this is relevant to the employment relationship, it is not relevant to the separate social security relationship, since the settlement, and therefore the waiver of the right, is unenforceable against the INPS.
The Court of Cassation also observed that the INPS did not request the payment of contributions on the sums paid in compliance with the settlement. Instead INPS demanded, based on the rule of the minimum contribution to which the remuneration due according to law is relevant, the payment of “sums that would have been due specifically under the law (Article 2118 of the Italian Civil Code) and arising from the employment relationship, regardless of what the parties later established in the settlement“.
In conclusion, and accepting the INPS’s appeal, the Court of Cassation ruled that the Bologna Court of Appeal should have established whether, given the company’s desire to withdraw, the compensation in lieu of notice had been due to the workers, regardless of the fact that this was not paid because the aforementioned workers accepted sums in a different capacity, that is, as a voluntary resignation incentive.
Il CCNL ha previsto, in favore dei lavoratori in servizio nel periodo compreso tra settembre 2021 e febbraio 2023, l’erogazione di arretrati. Il pagamento è erogato a decorrere dalla mensilità del mese di marzo e l’importo totale è compreso tra Euro 1.607,41 e Euro 803,70, suddiviso in 10 rate mensili.
Con decorrenza dalla data del 1° dicembre 2021, anche a integrale copertura del periodo trascorso a titolo di carenza contrattuale 2019-2021, in favore del personale in forza nelle aziende associate nel mese di dicembre 2021, la retribuzione tabellare lorda riferita al parametro B1 è incrementata dell’importo di Euro 65,00 lordi mensili, da riparametrare sulla base della scala applicata e a cui detrarre l’I.V.C. già corrisposta dalle aziende.
A decorrere dal 1° gennaio 2021, ai dipendenti di aziende che non abbiano stipulato accordi di secondo livello alla data del 31 dicembre 2020, e sempreché gli stessi lavoratori non percepiscano trattamenti economici, anche forfettari, individuali o collettivi, in aggiunta al trattamento economico già fissato dal C.C.N.L., erogato un importo annuo, in cifra fissa pari a euro 400 lordi, da corrispondere entro il 31 maggio 2021, e così per ogni anno successivo.
Il Contratto Collettivo Nazionale di Lavoro Intersettoriale 20 luglio 2020 per i dipendenti delle aziende del Commercio, Terziario, Servizi, Turismo e Pubblici Esercizi decorre dalla data del 1° giugno 2020 e scade il 31 maggio 2023. Le Parti si impegnano, durante tutto il periodo di vigenza del presente C.C.N.L., a rivedersi con cadenza annuale al fine di armonizzare, rispetto ai futuri andamenti, l’attuale disciplina economica e normativa.
Nel mese di maggio 2023 è prevista l’erogazione di importi a titolo di “una tantum” per i dipendenti i cui rapporti di lavoro sono disciplinati dai seguenti CCNL:
The Italian National Social Security Institute (Istituto nazionale della previdenza sociale, ‘INPS’), with Circular No 32/2023, provided administrative instructions for accessing the New Social Insurance for Employment (Nuova Assicurazione Sociale per l’Impiego, ‘NASpI’) unemployment benefit in cases of resignation of a working father who has taken compulsory paternity leave. This area is governed by the new Article 27 bis of Italian Legislative Decree No 151/2001 (Testo Unico in materia di tutela e sostegno della maternità e della paternità, Maternity and Paternity Protection and SupportConsolidation Act, the ‘Consolidation Act’), as already provided for in cases of resignation of a working father taking alternative paternity leave, under Article 28 of the Consolidation Act.
It should be recalled that Article 28 of the Consolidation Act regulates alternative paternity leave taken in lieu of the mother’s leave in the presence of particularly serious situations, such as the death or serious infirmity of the mother, the abandonment of the child by the mother or when the child is in the exclusive custody of the father.
With the introduction of Article 27 bis of the Consolidation Act, the right to access the NASpI allowance is therefore also extended to working fathers who have taken the period of compulsory leave and who voluntarily resign within the first year of the child’s life.
In its circular, INPS reviews the regulations on paternity leave. It focuses first of all on the amendments that Italian Legislative Decree No 105/2022, in force from 13 August 2022 and containing the provisions aimed at improving work-life balance for parents and caregivers, made to the Consolidation Act. In particular the circular makes reference to the introduction of Article 27-bis, relating to ‘Compulsory paternity leave’, and to the amendment of paragraph 7 of Article 54 on the prohibition of dismissal, by which the prohibition was also extended to a working father who has taken compulsory leave (Article 27-bis of the Consolidation Act).
The new Article 27-bis of Italian Legislative Decree 151/2001 introduced compulsory paternity leave. This requires working fathers to abstain from work for a period of 10 working days, to be taken from the two months preceding the presumed date of birth and within the following five months.In cases of multiple births, the duration of the leave is doubled, thus increasing to 20 working days.
The Institute also specified that the 10 working days are not divisible into hours but may be used on a non-continuous basis. In the same way, the leave is also available in the event of the perinatal death of the child.
This leave is also available during the working mother’s maternity leave and is also compatible with alternative paternity leave under Article 28 of the Consolidation Law.
Articles 54 and 55 of the Consolidation Act regulate the prohibition on dismissal and resignation of mothers and fathers during the maternity and paternity protection period.
In particular, Article 54 of the Consolidation Act provides that working mothers may not be dismissed from the beginning of the pregnancy period until the end of the period of compulsory leave from work, and in any case until the child is one year old.
With the additions made to these rules by Italian Legislative Decree No. 105/2022, and also in cases of taking compulsory paternity leave (Article 27-bis of the Consolidation Act), the prohibition on dismissal also applies to working fathers for the duration of the leave itself and is extended until the child is one year old.
Accordingly, the latter provision – which already in its original wording provided for the protection of the prohibition on dismissal of the working father in the event of taking alternative paternity leave under Article 28 of the Consolidation Act – extends the prohibition on dismissal also in the event of taking of compulsory paternity leave under Article 27-bis.
Article 55 of the Consolidation Act also provides that in the event of voluntary resignation submitted by the working mother during the period for which the prohibition on dismissal applies, the working mother is not required to observe the notice period and is entitled to the indemnities provided for by legal and contractual provisions in the event of dismissal. In this regard, it should be noted that these provisions also apply to a working father who has taken alternative paternity leave.
With regard to the above, following the concurring interpretation of the Ministry of Labour and Social Policy of the above mentioned legal provisions, INPS has clarified that by reason of the generic reference to ‘paternity leave’ and in the absence of a specific qualification thereof the protections provided for by Article 55 are to be understood as covering the working father both in the case of taking compulsory paternity leave and in the case of taking alternative paternity leave, governed respectively by the aforementioned Articles 27-bis and 28 of the Consolidation Act.
Before the aforementioned amendments to Articles 54 and 55 of the Consolidation Act, access to NASpI in the event of resignation during the period in which dismissal is prohibited and until the child is one year old was granted to the mother, and also to the father, but only in the case of alternative paternity leave, which can be taken ‘such as the death or serious infirmity of the mother, the abandonment of the child by the mother or the child is in the exclusive custody of the father’.
As a result of the abovementioned amendments, a father who has taken compulsory paternity leave and/or alternative paternity leave is entitled to NASpI unemployment benefit, subject to compliance with all other legislative requirements.
The position remains that, in the event of resignation submitted by a worker who takes (compulsory or alternative) paternity leave in the subsequent protected period until the child is one year old, the employer is required to pay the so-called redundancy payment to finance the NASpI unemployment benefit.
In implementing the indications contained in its circular, INPS also specified that applications for NASpI unemployment benefits submitted by working fathers following resignations occurring during the period in which the prohibition against dismissal applies, and rejected pending the publication of the circular itself, may be re-examined on application by the parties concerned to be forwarded to the competent INPS office.
The National Labour Inspectorate (Ispettorato Nazionale del Lavoro, ‘INL’) has issued Note No 453/2023, in which it provides clarification on the possibility of lodging an appeal under Article 17 of Italian Legislative Decree No 124/2004 before the Labour Relations Committee in the event of fraudulent internship.
The internship (tirocinio), also known as an ‘stage’, does not take the form of a subordinate employment relationship, since the underlying aim of the contract is training that enables the intern to gain temporary experience in the world of work to enrich his or her professional knowledge and offer himself or herself for future recruitment. At the same time, the internship is an opportunity for the employer to train, according to its needs, a potential resource to be employed later within its organisation.
To regulate the manner in which this form of contract is used, Italian Law No 234/2021 (“Budget Law 2022”), in Article 1, paragraphs 720 to 726, introduced a series of measures aimed at curbing the improper use of this form of contract.
The legislation in question has provided that, for extracurricular internships continued and/or concluded after 1 January 2022, the sanctions set out in Article 1, paragraph 723, apply if the internship is carried out fraudulently. For an internship to be considered ‘fraudulent’, it is sufficient to prove that the internship relationship was actually an employment relationship, since fraudulence consists, according to the regulatory provisions, in the use of employees in the fictitious capacity of interns.
Paragraph 723 of the aforementioned Article, after reaffirming that an internship is not an employment relationship and that it cannot be used as a substitute for employment, namely provides for a fine of EUR 50.00 for each intern involved and for each day of internship.
Since this is a criminal sanction, punishedwith a fine, it is subject to the mandatory statute of limitations under Article 20 of Italian Law No. 758/1994, that terminates an existing relationship which breaches of the principles governing it. This is without prejudice to the possibility, in addition to the imposition of the penalty, and at the intern’s request, of recognising the existence of a subordinate employment relationship from the date of the judicial ruling. If the hosting entity complies with the requirement issued by the inspectors and pays the fine, the offence is administratively extinguished.
As regards the correct determination of the applicable sanction, in light of the principles set out in Articles 1 and 2, paragraph 1 of the Italian Criminal Code as well as the relevant case law, is it considered that the offence referred to in paragraph 723 can only be committed as from 1 January 2022, with the sanction accordingly being applied only for the days starting from that date.
The National Labour Inspectorate, with the note under discussion, once again deals with the new regulations on internships, with particular regard to the sanctions introduced by Italian Budget Law 2022 to avoid any overlapping of judgments with criminal authorities.
Having ascertained the sanction regime applicable to the non-compliant use of the internship, therefore, the INL wished to clarify what remedies may be available to the hosting entity and whether or not the hosting entity may bring an appeal under Article 17 to ascertain whether, in relation to an internship, there is actually an employment relationship.
It should be pointed out that, under Article 17 of Italian Legislative Decree No 124/2004, the Labour Relations Committee assesses administrative appeals ‘against the assessment measures of the National Labour Inspectorate and the assessment measures of the Social Security and Insurance Institutions concerning the existence or classification of employment relationships’.
Notwithstanding the provisions of the legislation, in the present case, the Inspectorate wished to exclude the possibility of an administrative appeal to the Labour Relations Committee to avoid overlapping with judgments by the criminal authority. In fact, the incorrect qualification of the employment relationship in terms of subordination is directly sanctioned by a criminal law provision, under which the inspectors proceed with the drafting of the specific mandatory measure setting out the statute of limitations.
Moreover, the Inspectorate had already ruled out, in Note No 1551/2021, the possibility of lodging an appeal under Article 17 in the cases of unlawful outsourcing under Article 18, paragraph 5-bis, of Italian Legislative Decree No 276/2003. In that context no employment relationship is created since, also in this case, the choice of taking legal action to for a finding as to the existence of an employment relationship on the part of the beneficiary, under paragraph 3-bis of Article 29 and 4-bis of Article 30 of Legislative Decree no. 276/2003, is always devolved to the worker concerned.
The National Labour Inspectorate (Ispettorato Nazionale del Lavoro, ‘INL’), in its circular No 1 of 15 February 2023, stated that, in the context of transnational posting, proof of posting is provided by the delivery of the Model A1 application at the inspection stage. This document is to be regarded as equivalent to a compulsory communication, and can be used to prove the establishment of an employment relationship.
In its document, the Inspectorate reiterates the definition of transnational posting, which means the posting or transfer of an employee of one company to another company with a place of work abroad.
Throughout the posting period the employment relationship remains with the worker’s home company.
The regulations governing transnational posting is contained in Italian Legislative Decree No 136/2016, in line with the provisions of EU law in Directive 2014/67/EU.
Employers who post their employees to companies located abroad, and workers who have several employment relationships in different countries, are required to apply electronically to the social security institution for the issue of an A1 form.
The purpose of the A1 form is to certify that the posted worker is duly registered with the social security system of the country of origin.
In compliance with Article 10, paragraph 3 of Italian Legislative Decree No 136/2016, in fact, the employer is obliged to keep the documentation proving the posting until two years after the end of the relationship. In this regard, the Inspectorate raised the question as to how to verify the posting, if the law of a foreign country does not provide for prior notification to public bodies at the recruitment stage.
The Inspectorate’s interpretation enables employers, who do not have documentation proving the posting in the foreign country, to present equivalent documents. In this regard, INL has ruled that it is sufficient to submit an A1 form application.
The A1 Form application confirms the social security registration in the state of origin; therefore, it is to be considered as a valid document for the purpose of certifying the regularity of the relationship as it contains the identifying data of the same.
The Inspectorate has ruled, therefore, that it is sufficient to submit the application made, as opposed to directly submitting the A1 form itself. This interpretation avoids all sorts of problems arising from possible delays by the foreign country’s authorities in issuing documentation.
In ruling No 223/2023, the Italian Revenue Agency provided some clarification on the applicability of the ‘tax amnesty’ (remissione in bonis) regime – under Article 2, paragraph 1 of Italian Decree-Law No 16/2012 – in the event of failure to pay under Article 5, paragraph 2-bis of Italian Decree-Law No 34/2019, for the extension of the special regime for impatriate workers.
Article 16 of Italian Decree-Law No 147/2015 provides that only a maximum of 30% of employment income and self-employment income produced in Italy by workers who transfer their residence to Italy contributes to the calculation of their total income for five tax periods when the following conditions are met:
Moreover, as a result of Article 5 of Italian Decree-Law No 34/2019, subsequently converted into law, with amendments, by Italian Law No 58/2019, which introduced paragraph 3-bis to Article 16 of Italian Decree-Law No 147/2015, the special tax regime may be applied for a further five tax periods when it is established that the subjective requirements of the rule are met, namely:
In both cases, during the extension period of the preferential tax regime, a maximum of 50% of the income generated contributes to the formation of the overall income.
In the request to the Italian Revenue Agency for a ruling, the applicant pointed out that he had returned to Italy in September 2016, together with his entire household and had benefited, from the 2017 tax period, from the provisions set out in Article 16 of Italian Legislative Decree No 147/2015, in the version of the text in force pro tempore, which provided that employee income would be included in the calculation total income up to a maximum of 50% of its amount.
After the applicant’s repatriation, the legislation was subject to substantial amendments and Article 5, paragraph 1 of Italian Decree-Law no 34/2019 – converted into Italian Law No 58/2019, the so-called “Growth Decree” (Decreto Crescita) – amended certain subjective and objective requirements of the impatriate scheme, increased the percentage reduction of taxable income and provided for the possible extension of the preferential tax treatment for a further five years under certain conditions.
The possible extension originally applied only to persons who had transferred their tax residence to Italy on or after 30 April 2019. Subsequently, however, the Italian Budget Law 2021 – Italian Law No 178/2020 – allowed the application of the extension to those registered with the Registry of Italians residing abroad (Anagrafe degli italiani residenti all’estero) and to citizens of European Union Member States who had transferred their residence before the year 2020 and who, as of 3 December 2019, were beneficiaries of the scheme.
The extension option required the payment of an amount equal to 10%, or 5% under certain conditions, of the taxable employment and self-employment income produced in Italy, relating to the tax period preceding that in which the option is exercised.
Although the applicant met the requirements to exercise the option to extend the impatriate scheme for a further five years, ‘due to a mere oversight (forgetfulness) […] he did not pay the amount by 30 June 2022’.
Faced with this oversight, the applicant requested the Italian Revenue Agency to apply the ‘tax amnesty’ regime (remissione in bonis) – governed by Article 2, paragraph 1 of Italian Decree-Law No 16/2012 – to regularise the non-payment of the above-mentioned amount, which was a prerequisite to the extension of the preferential tax regime.
In response to the request made by the applicant, the Italian Revenue Agency recalled that, following the entry into force of Italian Budget Law 2021, taxpayers participating in the special regime for ‘impatriate’ workers could benefit from the extension for a further five tax periods on payment of 10% or 5% of the taxable employment and self-employment income in Italy relating to the tax period preceding that in which the option is exercised.
By director’s order published by the Italian Revenue Agency protocol No 60353/2021, the Agency identified the procedures for exercising the option, from which it follows that the option must be exercised by paying a lump sum of:
The amount must be paid by means of an F24 form no later than 30 June of the year following the year in which the first period of the use of the preferential treatment ends and there is no possibility of offsetting.
The Italian Revenue Agency, in its ruling on the application in question, referred to a previous ruling published in July 2022 – No 383 – in which it specified that ‘the extension for a further five years of the special regime […] is subject to the exercise of the option on payment of the amounts due within the indicated deadline’. Therefore, the Agency considers that, ‘where the payment of the amounts due is omitted or deficient, non-compliance precludes the application of the benefit in question’.
In light of the foregoing, the Italian Revenue Agency reiterated that recourse to the voluntary correction of tax return (ravvedimento operoso) regime is not permitted, nor as suggested by the applicant, is recourse to the ‘tax amnesty’ regime under Article 2, paragraph 1, of Italian Decree-Law No 16/2012.
That article, in fact, provides that ‘the enjoyment of tax benefits or access to optional tax regimes, which are subject to the obligation of prior notification or to formal compliance promptly performed, is not precluded, provided that the breach has not been established or access, inspections, audits […] of which the taxpayer has had formal knowledge have not commenced, where the taxpayer:
According to the Italian Revenue Agency, the failure to pay the sums due by the deadline of 30 June 2022 is clearly not attributable to ‘formal’ compliance and therefore the taxpayer will not be able to regularise this compliance by means of the tax ‘amnesty’ regime.
With its order no. 37021 of 16 December 2022, the Court of Cassation stated that a worker is entitled to compensation for damages if, under an extraordinary redundancy fund (CIGS) procedure, the employer decides discretionally and without defined criteria to suspend work without adequate rotation.
The case involved an employer’s appeal after the suspension of a female worker under the “zero hours” extraordinary redundancy fund was held unlawful at first instance. The employer was ordered to pay the difference in wages to the worker for the extraordinary redundancy fund periods. These differences consisted in the company integrating the INPS payment up to the full salary that the worker should have received if she had worked for the entire period of the “zero hours” suspension.
Given the Court of Appeal’s confirmation of the first instance ruling, the employer asked for its annulment on several grounds of appeal. These were rejected by the Court of Cassation based on the following.
The employer claimed a short statute of limitations of the sums claimed by the worker based on Art. 2948 of the Italian Civil Code. The Supreme Court held that “under case law, the worker’s claim for damages for the unlawful suspension following the extraordinary redundancy fund allocation is based on a claim for contractual breach (consisting of relationship management which does not conform with the rules), subject to the ordinary ten-year statute of limitations.”
The Court of Cassation stated that the agreements for starting each extraordinary redundancy fund period referred to “technical and organisational needs related to a re-organisation plan but did not specify the criteria used to identify those who were to be suspended.” The employer’s criterion was “completely discretionary, not agreed, not inferable from the generic reference to technical-production requirements and arbitrary.”
The employer “autonomously identified the workers to be suspended without complying with predetermined criteria establishing the priorities within the following parameters – seniority, burdens, production needs. Additionally, it needed criteria application methods, identification of the workers’ group based on their qualifications and duties as part of the company reorganisation and restructuring objectives ”.
The Supreme Court ruling showed that during corporate reorganisation and restructuring that involves access to the extraordinary redundancy fund, specific obligations are imposed on the employer including notifying the trade unions of the criteria for the choice of personnel subject to wage subsidy. This must guarantee adequate rotation. If this is not implemented, the extraordinary redundancy fund measure is unlawful, as the employer is not allowed to arbitrarily choose the workers to be suspended.
The selection criteria to be considered are related to company seniority, family burdens and organisational needs. They must be an integral part of the notifications and joint examination under the law and paragraph 7 of Article 1 of Law 223/1991. If these criteria are not followed or defined by an agreement, the extraordinary redundancy fund measure is unlawful. According to the Court of Cassation, the worker suspended without the employer having implemented the criteria laid down in the union agreement is entitled to claim the employer’s compensation liability for breach of the “rotation” clause. In this case, the employer is liable according to the “debtor’s default” principle under Art. 1218 of the Italian Civil Code, unless it proves that this was not due to force majeure or organisational reasons beyond its control.
The National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’), with Circular No 4 of 16 January 2023, provided a summary of the provisions in force on the subject of social shock absorbers relating to employment relationships for 2023.
In its circular, the Entity reviewed the legislation relating to the main wage guarantee tools for each sector, starting from the provisions of Italian Law No 197/2022 (hereinafter, ‘2023 Budget Law’).
The main financing initiatives established by the 2023 Budget Law
The 2023 Budget Law provided for various initiatives in the field of social shock absorbers envisaged for 2023; with the above-mentioned circular INPS set out the details. In particular, it describes:
The Circular then summarised the wage guarantee tools currently in force, as well as the provisions on income and family support, the main contents of which are set out below.
Financing for employees of companies operating in areas of complex industrial crisis
For workers at companies operating in areas of complex industrial crisis, there is an increase in funding from the Social Fund for employment and training, established by Italian Law No 2/2009, equal to EUR 250 million, starting from 2023.
Furthermore, there is funding of EUR 70 million for the continuation of income support financing (CIGS and special unemployment fund), for employees.
The funds will be distributed among the Regions, through an inter-ministerial decree, jointly between the Ministry of Labour and Social Policy and the Ministry of Economy and Finance.
Income support measures for workers in the call centre sector
Financing from the Social Fund for employment and training will be refinanced and disbursed according to INPS message No 1495 of 4 April 2022. The indemnity paid is equal to the maximum wage guarantee financing, notwithstanding current legislation. The measure is subject to the issuance of specific decrees by the Ministry of Labour and Social Policy, containing the data relating to the beneficiary company, the payment methods and the period of financing provision.
Extension of the extraordinary wage guarantee fund financing for complex reorganisation processes or complex crisis recovery plans
For the two-year period 2023-2024, the extension of the provisions under Article 22 bis of Italian Legislative Decree No 148/2015, relating to income support measures through the extraordinary wage guarantee fund financing.
Furthermore, in derogation from Article 22 bis of Italian Legislative Decree No 148/2015, companies of regional strategic importance may request the use of the financing in question beyond the legal deadlines. The extension may be six months on the basis of ‘Corporate Crisis’, or 12 months in cases of ‘Corporate Reorganisation’ and for ‘Collective Reduced Hours Agreement’.
CIGS intervention for reorganisations and situations of particular economic difficulty
Throughout 2023, the provisions of Article 44, paragraph 11-ter of Italian Legislative Decree No 148/2015 regarding the possibility of resorting to the extraordinary wage guarantee fund financing – CIGS – for situations of particular economic difficulty will continue to apply.
By way of derogation from the legislative provisions, employers who have already benefited from the maximum period of wage guarantee envisaged, equal to 12 months in the rolling five-year period, will be able to access this financing.
Provisions on CIGO and wage guarantee allowance provided for by Article 44, paragraphs 11-quinquies and 11-sexies, of Italian Legislative Decree No 148/2015
It should be noted that the previous provisions relating to CIGO and the Wage Guarantee Allowance of the Wage Guarantee Fund (Fondo di integrazione salariale, ‘FIS’), as described in INPS Circular No 97 of 10 August 2022, no longer apply with effect from 1 January 2023.
Parental leave
In the context of the provisions on support for families, Article 1, paragraph 359, of the 2023 Budget Law introduced an important change in relation to parental leave, namely that for the maximum duration of one month of leave and up to the sixth year of the child’s life, the indemnity was raised from 30% to 80% of salary.
In particular, the new measure – which can be used alternatively between parents – applies to employees who finish the period of maternity leave or, alternatively, paternity leave, after 31 December 2022 and will be explained in detail with the subsequent specific circular that will be issued by INPS.
The Italian Revenue Agency, with ruling No 168 of 26 January 2023, provided some clarification on the determination of employment income in the case of incentive plans that provide for payment in shares.
Application for clarification
The application for clarification was submitted by a company resident in Italy, which belongs to an international group headed by a German company. Shares in the German parent company have been listed on the Stock Exchange since 2021 following an initial public offering (IPO).
Two of the Italian resident company’s employees participate in incentive plans, which are substantially the same, operated at an international level by a group company for subsidiaries, in particular:
On the occurrence of certain conditions set out in the plan, employees are entitled to receive a cash payment by exercising an option (so-called exercise notes) within certain deadlines. Alternatively, the company may decide, at its discretion, that instead of paying cash, employees will be assigned shares (so-called Share Settlement) (to be delivered within six weeks of the option exercise date).
The IPO of the German company’s shares took place on 4 February 2021 and the two employees exercised the option on 22 November 2021, accruing the right to receive the Payout in relation to the assigned Virtual Shares. The German company opted for the payment in shares and these were transferred to the two employees on 15 December 2021.
The Italian resident company – the employer – as a prudential measure determined the employee income relating to the above-mentioned transaction and applied the withholding taxes, identifying the normal value of the shares on the date of exercise of the option.
In this context the applicant company asked whether, in the present case, considering that when the option was exercised (22 November 2021) the employees were entitled to the payment of a sum of money and that only following the German company’s decision did they receive payment in shares, the normal value of the assigned shares had to be determined on the basis of the average price of the listed shares on the date of their transfer (15 December 2021).
The Italian Revenue Agency’s ruling
In providing the answer to the application for clarification, the Italian Revenue Agency first of all referred to the reference regulatory framework, starting from Article 49 (Employment income) of Italian Presidential Decree of 22 December 1986, No 917 (Italian Income Tax Consolidation Act, Testo unico delle imposte sui redditi, ‘TUIR’), according to which employment income is that which ‘derives from relationships which have as their subject matter the performance of work, in whatever capacity, in the employment and under the direction of others’.
Furthermore, for the purposes of determining employment income, the Agency reiterated that the subsequent Article 51 of TUIR, established that ‘employment income consists of compensation of any nature, monetary or otherwise, received for any purpose during the fiscal period, including in the form of donations, in connection with the employment relationship’.
On the basis of the latter provision, the Agency emphasised that compensation in kind also constitutes employment income, including the assignment of shares in listed companies (as in the present case), the normal value of which is determined under Article 9, paragraph 4, letter a), of TUIR.
Therefore, as already clarified in the past by the practice notes provided by the financial administration – Resolutions No 29/E/2001 and No 366/E/2007, Circular No 54/E/2008 – in the context of employee stock optionincentive plans, to determine the moment at which the shares are received as a result of the exercise of the option right, the shares must be considered to be at the disposal of the employee and, consequently, to be treated as taxable employee’s income.
In particular, Circular No 54/2008 clarified that the option right follows the signing of a contract with which one party is given the right to establish a definitive contractual relationship through a new declaration of intent. Therefore, unlike the bound party (the employer) who is not required to issue other declarations of consent, for the exercise of the right attributed to him or her, the option holder (the employee) must expressly express the will to establish a definitive contract.
Therefore, the shares reserved for the employee become at his or her legal disposal, i.e. they are assigned to him or her, when he or she exercises his option right, regardless of whether the actual issue or delivery of the security (or any accounting entries) take place at a later time.
As regards the determination of the taxable base, in the Ministry of Finance Circular of 17 May 2000, no 98, it was specified that the shares must be subject to taxation for an amount equal to the difference between the normal value determined under Article 9 of TUIR, at the time of exercise of the option right, and the amount paid by the employee for the assignment itself.
With reference to the case in question, according to the Italian Revenue Agency as set out in ruling No 168/2023, the determination of the moment at which the shares are received as a result of the exercise of the option right, within the context of the employee incentive plans, is when the shares must be considered to be at the disposal of the employee.
Therefore, the assignment of Virtual Shares to employees does not give rise to the right to the assignment of shares in the German company, not even following the German company’s (unilateral) decision to make the payment through assignment of its own shares, but only grants the employees a right to receive a cash payment (Payout Entitlement) on the occurrence of certain events contemplated by the incentive plans, including the IPO transaction, which took place on 4 February 2021.
Consequently, on the date of exercise of the option by the two employees (22 November 2021), they would not have acquired shareholders’ rights nor the ownership of the shares that the German company would subsequently assign on 15 December 2021, deciding to make the above-mentioned payment in shares.
Therefore, taking into account that, for the purposes of taxation of the employees’ income, the transfer of ownership of the shares is relevant which, in the present case, appears to have occurred at the time of the material delivery of the shares, the Italian Revenue Agency considers that the normal value of the shares assigned, under Article 9 of TUIR, must be determined on 15 December 2021, the date on which the German company decided to make the payment.