How to run payroll in Italy

Italy employers are required to pay employees monthly. The standard pay date is the last working day of each month.

Payment frequency and timing

Italian law requires monthly salary payments for most employees. You must pay by the last working day of each month for work performed in that month.

Some companies pay on the 27th or 28th to ensure processing time, but the legal deadline remains the last working day. Late payments can result in penalties and interest charges to employees.

Hourly workers and some temporary staff may be paid more frequently, but monthly remains the standard across all employment types.

13th and 14th month payments

Italy mandates a 13th month payment (tredicesima) for all employees. This equals one month's gross salary and must be paid by December 24th each year.

The 13th month is prorated based on months worked. An employee working six months receives 50% of their monthly gross salary as their 13th month payment.

Many collective bargaining agreements also require a 14th month payment (quattordicesima), typically paid in June or July. This varies by sector and isn't legally mandated for all employees.

Both payments are subject to full income tax and social security contributions, just like regular monthly salary.

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Holiday and vacation pay

Employees receive full salary during their annual leave. Italy doesn't use a separate vacation pay calculation - employees continue receiving their regular monthly salary while on approved vacation.

You must allow employees to take their annual leave and can't replace it with additional pay, except in specific termination circumstances.

Some collective agreements provide vacation bonuses (typically €150-300) paid before summer holidays, but this isn't legally required.

Payment methods and requirements

Bank transfer is the only practical payment method in Italy. Cash payments are legally restricted for amounts over €5,000 annually per employee.

All salary payments must be in euros. International companies can't pay Italian employees in foreign currencies, even if the employee agrees.

You must provide detailed payslips (busta paga) with every payment. Payslips can be electronic but must include:

• Employee personal and tax details
• Gross salary breakdown
• All deductions (taxes, social contributions)
• Net pay amount
• Year-to-date totals

Payslips must be in Italian and follow the standard format required by Italian labor authorities. Electronic delivery requires employee consent, but most employees accept digital payslips.

Before your first payroll run in Italy, you'll need two key tax registrations: VAT registration with the Agenzia delle Entrate and enrollment in the withholding tax system (sostituto d'imposta).

Income tax in Italy operates on a progressive scale, with rates ranging from 23% to 47% for 2026. Here's what you'll withhold from employee paychecks:

Annual Income (€)	Tax Rate
€0 - €28,000	23%
€28,001 - €50,000	35%
€50,001 - €120,000	43%
€120,001+	47%

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Withholding requirements

You're responsible for withholding income tax from every paycheck and remitting it monthly to the tax authorities. Registration as a sostituto d'imposta (withholding agent) must happen within 30 days of hiring your first employee.

Monthly withholding payments are due by the 16th of the following month. For example, January withholdings must be paid by February 16th. Late payments trigger a 30% penalty on the outstanding amount.

Annual reconciliation occurs through the Certificazione Unica (CU), which must be filed by February 28th of the following year. This document reconciles total withholdings against the employee's actual tax liability.

Regional and local taxes

Beyond national income tax, employees face regional tax (IRAP) at rates between 2.68% and 4.97%, depending on the region and business activity. Most regions apply the standard 3.9% rate for 2026.

Some municipalities also impose a municipal surcharge of up to 0.9% on income tax. Check with your local comune for specific rates in your area.

Common tax mistakes

Misclassifying employees as contractors remains the costliest error. Italian authorities scrutinize working relationships closely, and reclassification triggers back taxes, penalties, and social contributions.

Missing monthly deadlines costs 30% penalties plus interest. Set up automatic reminders for the 16th of each month to avoid this trap.

Ignoring regional variations in IRAP rates catches many employers off guard. Rates vary significantly between regions, so verify your specific location's requirements during setup.

The biggest employer cost in Italy? Social security contributions at 30.34%. That's before you add pension, unemployment, and other mandatory contributions.

Contribution breakdown

Here's what you'll pay on top of every salary:

Contribution Type	Employer Rate	Employee Rate	Annual Cap
Social Security (INPS)	30.34%	9.49%	€119,650
Severance Fund (TFR)	0.50%	-	-
Unemployment Insurance	1.61%	-	-
Work Injury Insurance	0.16-16.00%*	-	-
Total Base Rate	32.61%	9.49%	-

*Work injury rates vary by industry risk level. Office workers typically pay 0.16%.

Total employer cost example

For a €60,000 annual salary:

• Base salary: €60,000
• Social security: €18,204
• Severance fund: €300
• Unemployment: €966
• Work injury: €96
• Total employer cost: €79,566
• Cost multiplier: 1.33 (33% more than base salary)

This assumes standard office work. Manufacturing or construction roles face higher injury insurance rates, pushing total costs above 35%.

Contribution caps and high earners

Social security contributions cap at €119,650 in 2026. Once an employee's salary exceeds this threshold, you stop paying the 30.34% rate on the excess amount.

For a €150,000 salary, you'd save €9,139 annually compared to uncapped contributions. Other contributions like severance fund and unemployment insurance have no caps.

Registration requirements

You must register with multiple agencies before hiring:

• INPS (social security): Register within 30 days of starting business activity
• INAIL (work injury): Registration required before first employee starts
• Local Labor Office: Submit hiring declaration 24 hours before employment begins

Each registration requires your Italian tax code, business registration documents, and detailed job descriptions for INAIL risk assessment.

Payment deadlines

Contributions are due by the 16th of the following month. Miss this deadline and you'll face:

• 0.5% penalty for delays up to 15 days
• 1.5% penalty for delays between 16-30 days
• Additional 1.5% for each subsequent 30-day period

INPS offers direct debit options to avoid late payments. Set this up during registration—manual payments often cause compliance headaches.

Maternity leave in Italy is 20 weeks at 80% pay. Here's how it affects your payroll.

INPS (Italy's social security institute) covers the cost, but you'll handle the calculations and payments. Employees take 2 months before birth and 3 months after, though they can shift one pre-birth month to post-birth if approved by a doctor.

Annual leave

Italian employees get 20 working days minimum annual leave, plus 4 days of permessi individuali (personal leave days). That's effectively 24 paid days off to track and calculate.

Vacation pay equals regular daily wage. Calculate this by dividing monthly salary by 26 (average working days per month). For hourly workers, multiply their standard hourly rate by daily hours.

Employees can carry over unused vacation to the following year, but you must pay out all accrued vacation when they leave. No exceptions - this is mandatory even for terminated employees.

The tredicesima (13th month) calculation includes vacation periods, so don't reduce this bonus for time off taken.

Sick leave

Employees get unlimited sick days, but payment varies by duration. You pay 100% for the first 3 days directly. From day 4, INPS pays 50% of daily wage, and many employers top this up to full salary through collective agreements.

Medical certificates are required from day 1. Employees must submit certificates within 2 days, and you'll receive copies directly from doctors through the INPS system.

For payroll calculations, deduct the INPS portion (50% from day 4) from your gross payment, then claim reimbursement through your monthly INPS filings.

Parental leave

Beyond maternity leave, each parent gets 6 months of optional parental leave (paid at 30% by INPS) until the child turns 12. Fathers must take 10 mandatory days within 5 months of birth at 80% pay.

Parents can also take these 6 months together, up to a combined maximum of 10 months per family. INPS handles payments, but you process the payroll entries and advance the funds.

Public holidays 2026

Date	Holiday	Notes
January 1	New Year's Day	National
January 6	Epiphany	National
April 21	Easter Monday	National
April 25	Liberation Day	National
May 1	Labour Day	National
June 2	Republic Day	National
August 15	Assumption Day	National
November 1	All Saints' Day	National
December 8	Immaculate Conception	National
December 25	Christmas Day	National
December 26	St. Stephen's Day	National

Work on public holidays requires 200% pay (100% regular + 100% premium). Most collective agreements also grant a substitute day off.

Local patron saint days add 1-2 additional holidays per city. Check your municipal calendar for Rome (June 29), Milan (December 7), and other locations.

Mandatory benefits affecting payroll

Tredicesima (13th month salary) is mandatory - pay this by December 15th. Calculate as gross monthly salary × months worked ÷ 12. Include vacation and sick leave periods in the calculation.

TFR (severance fund) requires 6.91% of gross annual salary set aside monthly. This doesn't appear on payslips but affects your cash flow planning.

Meal vouchers (buoni pasto) aren't mandatory but are nearly universal. Provide €4-8 per working day, with €4 tax-free to employees. Costs above €4 count as taxable income.

Many collective agreements require quattordicesima (14th month) paid in June or July. Check your specific industry agreement for requirements.

Italy requires you to keep payroll records for 10 years. Lose them during an inspection and face fines starting at €2,582 per violation.

Monthly filing requirements

You'll submit your F24 tax payment form by the 16th of each month following the payroll period. This covers income tax withholdings, social security contributions, and regional tax (IRAP).

The submission happens through the Agenzia delle Entrate online portal or your bank's electronic system. Most employers use the portal since it provides immediate confirmation of receipt.

Late filing penalties start at €25 for delays up to 15 days. After that, you'll pay 0.4% of the amount due for each additional day, capped at 30% of the total.

Social security reporting

INPS requires monthly contribution declarations through their UNIEMENS system. The deadline is the last day of the month following the payroll period.

This electronic filing includes detailed employee data, working hours, and contribution calculations. The system flags discrepancies immediately, so you can correct errors before they become penalties.

Annual reporting

Year-end reconciliation

Your annual tax reconciliation (Modello 770) is due by September 30, 2026. This compares your monthly withholdings against employees' actual tax liability for the year.

The reconciliation often results in refunds for employees, which you'll process through their final payroll of the year or first payroll of 2027.

Employee tax statements

Issue Certificazione Unica (CU) statements to all employees by March 31, 2026. These show total earnings, tax withholdings, and social contributions for 2025.

Employees need these statements to file their personal tax returns. You'll also submit copies to the tax authority by the same deadline.

Employee documentation

Employment contracts

All employment contracts must be in writing and include specific mandatory elements. Missing any of these makes the contract legally invalid:

• Job classification and level according to the applicable CCNL (collective bargaining agreement)
• Gross monthly salary broken down by basic pay and allowances
• Normal working hours and overtime rates
• Probationary period duration (maximum 6 months for most roles)
• Notice periods for termination

Contracts must be in Italian, even for international employees. You can provide translated versions, but the Italian version governs the employment relationship.

Payslip requirements

Italian payslips must show detailed breakdowns of gross pay, each deduction, and net pay. Key mandatory elements include:

• Employee's tax code (codice fiscale)
• Employer's tax identification number
• Pay period dates
• Normal hours, overtime hours, and rates
• Each social contribution with separate employer and employee portions
• Regional tax (IRAP) calculation
• Year-to-date totals for all items

Record retention

Keep all payroll records for 10 years from the end of the employment relationship. This includes:

• Original employment contracts and amendments
• Timesheets or attendance records
• Payslips and payment confirmations
• Tax withholding documentation
• Social contribution payment receipts

Digital storage is acceptable if records remain accessible and complete. Many employers scan physical documents immediately to ensure nothing gets lost.

Penalties and fines

Violation	Penalty
Late F24 tax filing	€25-30% of amount due
Missing UNIEMENS filing	€150-1,500 per month
Invalid employment contract	€400-2,400 per employee
Incomplete payslip	€150-1,500 per occurrence
Missing overtime documentation	€100-600 per employee
Incorrect social contributions	30% of underpayment + interest

Administrative penalties double for repeat violations within two years. The labor ministry can also suspend your business license for serious or repeated compliance failures.

Regulatory bodies

Agenzia delle Entrate (Tax Authority)

Handles income tax withholdings, regional tax, and annual reconciliations. Their online portal processes most payroll-related filings.

• Website: agenziaentrate.gov.it
• Helpline: 848 800 444
• Portal: Fisconline or Entratel (depending on company size)

INPS (Social Security Institute)

Manages pension contributions, unemployment insurance, and family allowances. All monthly social security reporting goes through their systems.

• Website: inps.it
• Employer portal: Servizi Online per le Aziende
• Contact center: 803 164

Ministry of Labor

Oversees employment law compliance, workplace safety, and labor inspections. They coordinate with other agencies during payroll audits.

Regional labor offices handle most employer interactions, but serious violations escalate to the national ministry level.

Using 2025 tax brackets? You're withholding incorrectly. Here's what changed.

Italy's 2026 payroll updates focus heavily on tax adjustments and digital compliance requirements. The most significant changes affect income tax withholding and mandatory electronic reporting timelines.

Tax bracket adjustments

IRPEF Rate Changes - Effective January 1, 2026

Italy simplified its progressive tax structure from four brackets to three, with adjusted thresholds:

Income Range (EUR)	2025 Rate	2026 Rate
€0 - €28,000	23%	23%
€28,001 - €50,000	35%	35%
€50,001+	43%	41%

The top rate dropped from 43% to 41% for income above €50,000. This affects roughly 15% of Italian employees and reduces withholding for higher earners by approximately €200-400 monthly.

Update your payroll system immediately if you haven't already. The tax authority expects correct withholding from the first January 2026 payroll.

Electronic reporting acceleration

Monthly CU Filings - Effective March 1, 2026

Employers must now submit Certificazione Unica (CU) forms monthly instead of annually. This applies to all companies with 50+ employees.

Previous deadline: Annual filing by March 31 New requirement: Monthly filing by the 16th of the following month

Non-compliance penalties start at €258 per late filing, with additional daily penalties of €25.80 for delays exceeding 15 days.

Contribution rate updates

Apprenticeship Contributions - Effective January 1, 2026

Employer contribution rates for apprentices decreased:

• Previous rate: 11.84%
• New rate: 10.84%
• Applies to: All apprenticeship contracts under age 25

This 1% reduction saves employers approximately €180 annually per apprentice earning €18,000.

Coming in late 2026

Digital Payslip Mandate - Effective October 1, 2026

All employers must provide electronic payslips through the government's new NoiPA Plus platform. Paper payslips will no longer satisfy legal requirements.

Registration opens June 2026. Plan system integration now to avoid the September rush.