termination of employment in Italy: laws & severance policies

Legal Grounds for Termination of Employment in Italy

As per the National Collective Agreement (NCA), termination requires justification and advance notice, unless the employee fails to meet mutually agreed-upon commitments, such as job responsibilities, engaging in serious misconduct, or termination due to economic reasons. Acceptable grounds for termination include:

 
• Just Cause (Giusta Causa): Severe misconduct by the employee that makes the continuation of the employment relationship impossible, such as theft, violence, or serious insubordination. In such cases, the employer can terminate the contract without notice.
 
• Subjective Justified Reason (Giustificato Motivo Soggettivo): A significant breach of contractual obligations, like consistent poor performance or minor misconduct, which requires notice before termination.
 
• Objective Justified Reason (Giustificato Motivo Oggettivo): Economic, technical, or organizational factors, such as company restructuring or redundancy due to technological advancements.

Employment Laws and Severance Policies in Italy

Notice Period in Italy

In Italy, the notice period for termination depends on whether it's initiated by the employer or the employee. It is determined by factors such as the applicable National Collective Bargaining Agreement, length of employment, and employee classification. Employer-initiated terminations may have a notice period of 30 days to 12 months, while employee resignations could range from 30 days to 4 months, as per major NCBA in Italy.

Severance Pay in Italy

Employees are entitled to severance pay, known as "Trattamento di Fine Rapporto" (TFR). This is a deferred form of compensation accrued annually and paid upon termination. The TFR is calculated by dividing the annual salary by 13.5, it also includes 1.50% for each year of service and compensation for inflation.

Probation Period in Italy

In Italy, probation periods vary based on the collective bargaining agreement. Non-managerial roles have a 3-month probation, while managerial positions entail a 6-month probationary period.

Process for Ending Employment in Italy

 
• Written Notice: Provide written notice specifying the termination reason and effective date.
 
• Notice Period Fulfillment: The employee must serve the notice period or receive payment in lieu.
 
• Settlement of Final Payments: Employers must disburse all owed amounts, including TFR and unused vacation days.
 
• Return of Company Property: Employees must return company-owned items such as equipment and ID badges.
 
• Documentation: Maintain all termination-related documents for compliance.

Employee Rights During Termination in Italy

Unfair Dismissal Protections

Unfair dismissal occurs when termination lacks a valid reason or violates procedural requirements. Employees can challenge dismissals within 60 days and file a court claim within 180 days. Remedies include reinstatement or compensation.

Grievance Procedures

Grievance procedures allow employees to formally dispute termination or other employment conditions. These may involve mediation or arbitration as outlined in company policies or collective bargaining agreements.

Final Pay and Benefits

Upon termination, employers must settle all final payments, including:

 
• Outstanding wages: Payment for all work performed up to termination.
 
• Unused vacation days: Compensation for accrued but unused leave.
 
• Additional payments: Bonuses or other outstanding compensation.

What Termination Documentation Is Required by Law?

Employers must provide specific termination documents, including:

 
• Termination Letter: A written notice stating the reason for termination and effective date.
 
• Final Payslip: A detailed statement of all final payments.
 
• Severance Pay Statement (TFR): A breakdown of severance entitlements.
 
• Certificate of Employment: Upon request, a certificate detailing employment duration and duties.

How to Stay Compliant as An Employer in Italy

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.