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.