Hiring in Italy: A Comprehensive Guide for US Companies

Italy stands out in the global talent market for its highly educated, bilingual workforce and deep-rooted culture of creativity and quality. 

With a strong tradition in engineering, design, technology, and manufacturing, Italy offers a rich pool of skilled professionals. Its strategic location in Europe, robust infrastructure, and integration with the EU make it a prime destination for international business expansion.

For foreign companies, hiring in Italy opens doors to a diverse talent pool, access to the European market, and a business environment shaped by both innovation and tradition. Italy’s workforce is known for adaptability and ingenuity, making it an appealing choice for companies seeking to build competitive, globally distributed teams.

How to Hire Employees in Italy

Assess Your Hiring Needs

Before entering the Italian market, clarify your hiring strategy:

• Full-time vs. project-based support: Decide if you need permanent employees for long-term growth or contractors for temporary, specialized projects.
• Local compliance requirements: Understand Italy’s complex labor laws, including collective bargaining agreements (CBAs), payroll obligations, and statutory benefits.
• Onboarding speed vs. long-term control: Weigh the need for rapid hiring and onboarding against the benefits of maintaining direct oversight and presence.

Hiring Options in Italy

You have two main routes to hire in Italy:

• Set Up a Legal Entity: Establish a local company, allowing direct hiring and full operational control. This is best for large teams or a long-term presence but involves significant setup time, cost, and compliance responsibilities.
• Partner with an Employer of Record (EOR): Engage a third-party provider to legally employ talent on your behalf. This option offers speed, flexibility, and reduced risk, especially for companies testing the market or hiring a small team.

EOR vs. Legal Entity: Side-by-Side Comparison

Feature	Employer of Record (EOR)	Legal Entity Setup
Setup Time	Days to weeks	Months
Upfront Cost	Low	High (registration, capital, fees)
Compliance Responsibility	EOR handles all compliance	Company is fully responsible
Payroll & Benefits	Managed by EOR	Managed internally
Onboarding Speed	Fast	Slower
Long-Term Control	Limited	Full control
Ideal For	Small teams, market testing	Large teams, long-term presence

Understanding Worker Classification

Employees vs. Contractors in Italy

Proper classification is crucial to avoid legal and financial risks. Here’s how Italy distinguishes between employees and contractors:

Aspect	Employee	Contractor
Control	Employer directs work, hours, and methods	Contractor sets own hours and methods
Benefits	Entitled to statutory benefits, leave, etc.	No statutory benefits; paid per contract
Tax Withholding	Employer withholds taxes and contributions	Contractor manages own taxes
Job Security	Protected by labor laws and CBAs	No job security or protection
Termination	Regulated process, notice required	Based on contract terms

Legal Implications and Risks of Misclassification

Misclassifying employees as contractors can lead to:

• Fines, back pay, and benefits arrears
• Legal action and reputational damage
• Retroactive tax and social security liabilities

Italian law is strict—if you control a contractor’s schedule, attire, or payment, you risk being deemed their employer. Regular audits and legal counsel are recommended to ensure compliance. 

For more details on global classification, see W-2 and 1099 Forms: Differences, Usage, and Classification Regulations.

Hiring Costs and Payroll

Hiring Costs Overview

The total cost of hiring in Italy includes:

• Base salary
• Employer social security contributions: 33-40% of salary
• 13th and 14th-month salary: Each typically 8.33% of base salary, often required by CBAs
• Severance pay (TFR): 6.91% of gross monthly earnings

Costs vary by industry, occupation, and location. Use tools like an employee cost calculator for accurate budgeting.

Payroll Setup Steps

To run payroll in Italy:

1. Register with local tax and social security authorities.
2. Collect employee tax and banking information.
3. Apply applicable CBAs for salary and benefits.
4. Calculate and withhold income tax, social security, and TFR.
5. Pay salaries monthly, typically by the 27th.
6. File annual wage and tax reports (Certificazione Unica).

Income Tax Rates

Italy’s national income tax is progressive:

• €0 – €28,000: 23%
• €28,001 – €50,000: 35%
• Over €50,000: 43%

Regional taxes: 1.23%–3.33%; Municipal taxes: 0%–0.9%. Employers must withhold and remit all taxes.

Payment Methods

• Direct deposit to employee bank accounts
• Bank transfers
• EOR payroll: EORs manage all payments, taxes, and reporting

Using Global Payroll Services

Global payroll services, including EORs, handle:

• Local compliance and filings
• Multi-currency payments
• Benefits administration
• Timely, accurate salary disbursement

This approach reduces risk and administrative burden, especially for multi-country teams. 

Check How Tarmack Streamlines Global Payroll and Compliance for Enterprise Growth.

How to Properly Hire and Pay Contractors

• Draft clear, project-based contracts
• Avoid controlling work hours or methods
• Pay against invoices, not on a fixed payroll cycle
• Ensure contractors manage their own taxes and social contributions

Explore the Best Ways to Pay International Independent Contractors: Challenges and Solutions.

Compliance Risks

Incorrect Payroll Contributions

Errors in social security or tax payments can result in:

• Fines and penalties
• Delays in operations
• Employee dissatisfaction

Stay updated with current rates and reporting requirements, or use a global payroll partner for accuracy.

Permanent Establishment Risk

If your company:

• Owns/leases office space in Italy
• Manages day-to-day operations from Italy
• Has Italian residents on the board

…you may trigger permanent establishment (PE) status, leading to local corporate tax obligations. Structure your presence carefully to avoid unexpected tax liabilities. 

Check out Understanding International Tax Implications of Hiring Remote Workers Globally.

Statutory Benefits

Employers must provide:

• Social security and pension contributions
• Severance pay (TFR)
• Annual leave, parental leave, and sick leave
• 13th and 14th-month salary (as per CBA)

Non-compliance can result in legal action and business restrictions.

Misclassification Risks

Misclassifying contractors as employees exposes you to:

• Back pay and benefits claims
• Tax and social security arrears
• Legal sanctions

Regularly review working relationships and seek legal guidance.

Provincial/Regional Law Variances

While most labor laws are national, CBAs and some tax rates vary by region and industry. Always check applicable agreements and local requirements.

Overview of Main Intellectual Property Rights for Employers

Employers in Italy should secure:

• Copyright: For software, designs, and creative works
• Patents: For inventions and technical solutions
• Trademarks: For brand protection
• Trade secrets: Via confidentiality agreements

Ensure employment contracts include IP assignment and confidentiality clauses. 

Learn about Managing Intellectual Property (IP) Through EOR: Key Considerations for Businesses.

Onboarding Process

Before Their First Day

• Collect personal, tax, and banking details
• Register employee with social security and tax authorities
• Issue a compliant offer letter with all terms

On Day 1

• Provide employment contract and CBA details
• Explain statutory benefits and workplace policies
• Introduce team and assign necessary equipment

During Their First 90 Days

• Monitor performance and integration
• Ensure statutory benefits and leave are accessible
• Address any compliance or documentation issues

Offer Letter Essentials

• Job title and description
• Salary and benefits (including 13th/14th-month pay)
• Working hours and location
• Termination and notice terms
• Reference to applicable CBA

NDAs and Confidentiality

• Include NDAs in contracts to protect sensitive information
• Specify IP ownership and post-employment obligations

Running Background Checks

• Obtain written consent
• Follow data privacy laws (GDPR)
• Limit checks to relevant information for the role

Remote Employee Management

Managing remote teams in Italy requires:

• Computer and app access: Provide secure devices and software, use VPNs, and set up multi-factor authentication.
• IP protection: Use strong confidentiality agreements and clear IP assignment clauses in contracts.
• Best practices: Schedule regular check-ins, clarify performance expectations, and ensure compliance with Italian labor laws and CBAs.

Learn How to Manage Employees Remotely and Globally and about Building Organizational Culture in Remote Teams: Employee Well-Being & Productivity.

Labor Law Compliance

Key Working Condition Requirements

• Working hours: Standard is 40 hours/week; CBAs may set lower limits.
• Leave: Minimum 4 weeks’ paid annual leave, 12 public holidays, maternity/paternity leave, and sick leave.
• No at-will employment: Termination must be justified and follow legal procedures.
• Trade unions and CBAs: Most industries are covered by CBAs, which set additional rights and obligations.

Working Conditions by Employment Type

• Full-time employees: Protected by law and CBAs; entitled to all statutory benefits.
• Part-time/temporary workers: Pro-rated benefits; subject to CBA and legal protections.
• Contractors: No statutory benefits; only contractual rights.

Termination Guidelines

Acceptable Termination Reasons

Termination in Italy is allowed only for:

• Just cause (serious misconduct)
• Justified objective reasons (economic, organizational)
• Resignation (employee-initiated)
• Expiry of fixed-term contract

Unjustified absence exceeding CBA or statutory limits may be treated as voluntary resignation, provided proper procedures are followed.

Notice Periods and Legal Protections

• Notice periods depend on CBAs and contract terms, typically ranging from 15 days to several months.
• Severance pay (TFR) is mandatory for all terminations.
• Employees can challenge terminations in court; procedural fairness is critical.
• Employers must notify relevant authorities for certain terminations.

For tips on respectful offboarding, check out the Suggested Script for Terminating an Employee Professionally & Respectfully.

Benefits of Hiring in Italy

• High-quality talent pool: Educated, bilingual, and skilled professionals
• Cost efficiency: Competitive salaries and social contributions compared to other Western European countries
• Time zone advantages: Overlaps with both US and Asian markets
• Strategic location: Access to EU markets and regulatory frameworks
• Robust infrastructure: Advanced transport, digital, and business services
• Cultural diversity: Brings creativity and innovation to global teams

Expand Smarter with Italian Talent

Hiring in Italy gives US-based companies access to a dynamic, skilled workforce and a gateway to the European market. 

While the regulatory environment is complex, the right approach—whether through an EOR or a local entity—enables you to navigate compliance, control costs, and build a strong, engaged team. 

By understanding local laws, payroll obligations, and best practices for onboarding and remote management, you can unlock Italy’s full potential for your global growth strategy.

Ready to build your team in Italy?
Let Tarmack handle payroll, compliance, and HR so you can focus on growth.

Contact us today to get started.