Firm Guides · Labor cost

Hiring an employee: labor cost and compliance requirements

Hiring your first (or yet another) collaborator is a strategic choice that must be planned both economically and bureaucratically. The starting point is to understand that the Gross Annual Salary (RAL) agreed with the worker is only part of the bill: the actual cost for the company is significantly higher, while what the employee takes home (net pay) is lower. In between lies the so-called tax and social security wedge (cuneo fiscale e contributivo). This guide explains, with a numerical example, how to go from the RAL to the employer cost, what the compliance requirements are to hire and manage the relationship, the main contractual types, and the management of the TFR (severance pay).

1. From the RAL to the employer cost

The RAL is the gross annual salary provided for by the contract, normally including additional monthly payments. On this basis, the employer’s charges apply:

• Gross Annual Salary (RAL) (including accrued 13th/14th monthly salary instalments)
• + INPS social security contributions borne by the employer (approx. 28%–32%, depending on sector, job grade and company size)
• + INAIL premium (variable depending on the risk level of the work activity)
• + TFR accrual (severance pay provision) (approx. 7.41%, equal to 1/13.5)
• = ANNUAL EMPLOYER COST

The typical ratio between employer cost and RAL is, for a white-collar or blue-collar employee, around 1.35 – 1.45: for every 100 euros of RAL, the employer costs are about 135–145 euros, to which indirect costs are added (meal vouchers, welfare benefits, training, equipment).

2. INPS, INAIL, TFR and accrued instalments

INPS contributions. The portion borne by the employee is ordinarily 9.19% of the taxable salary, which rises to 9.49% on the portion exceeding the first annual bracket of pensionable salary. The portion borne by the employer includes, in addition to IVS, NASpI, CIG where due, sickness, maternity and various funds: indicatively the 28%-32%. The overall rate generally exceeds 38%-40%.

INAIL. Entirely borne by the employer, the premium depends on the risk class of the activity: from very low values (office activities, under 0.5%) to high values (construction, over 7%). It is paid by self-assessment (autoliquidazione).

TFR. Each year, the eligible remuneration divided by 13.5, about 7.41%, net of the 0.50% allocated to INPS. The accrued TFR is revalued every 31 December with a fixed 1.5% plus 75% of the ISTAT increase.

Accruals. The 13th month salary (tredicesima) accrues at the rate of 1/12 per month (8.33%) and is paid in December. The 14th month salary (quattordicesima) is provided only by some CCNL (Italian national collective labour agreements) (commerce, tertiary sector, tourism) and is paid in June or July.

3. The tax wedge and the 2025/2026 measures

The tax wedge is the difference between the labour cost borne by the company and the net pay received by the employee. From 2025 the measure in favour of low and middle incomes is structural and is structured into two instruments:

• Non-taxable supplementary amount for employment income up to 20,000 euro, calculated as a percentage of pay: approximately 7.1% up to 8,500 euro, 5.3% between 8,500 and 15,000 euro, 4.8% between 15,000 and 20,000 euro;
• Additional IRPEF tax credit (detrazione) for income between 20,000 and 40,000 euro: a fixed amount (around 1,000 euro) up to 32,000 euro, then decreasing until it is reduced to zero at 40,000 euro.

IRPEF remains structured into three brackets: for 2025 they were 23% (up to 28,000 euro), 35% (28,000-50,000) and 43% (over 50,000). For 2026, a reduction of the second rate from 35% to 33% is envisaged (to be confirmed in the final text of the Legge di Bilancio as regards both the percentage and the threshold). In addition, the employment tax credits (art. 13 TUIR) apply, decreasing as income increases.

Warning: the amounts, percentages and thresholds of the supplementary amount, the additional tax credit and the IRPEF rates for 2026 must be checked in the final text of the Legge di Bilancio 2026 and in the implementing circulars.

4. Net pay, gross pay and employer cost: example (RAL 25,000 euro)

Employee with gross annual salary (RAL) of €25,000 (including 13th-month salary), indicative employer social security contributions at 30% and indicative INAIL premium (Italian workplace insurance) of 1.5%. Values are indicative: they vary depending on the CCNL (national collective bargaining agreement), risk class and personal tax situation.

The cost/RAL ratio is about 1.39. Let’s see the transition from RAL to net:

In summary: the company spends approx. 34,700 euro, the employee receives approx. 20,500 euro net (about 1,575 euro per month over 13 monthly payments). The overall tax wedge is about 14,200 euro.

5. Requirements to hire

1. Mandatory notification (UNILAV) to the employment services, by 24:00 on the day before the start of the employment relationship.
2. Hiring letter with the essential elements (job duties, level, CCNL, remuneration, workplace, working hours, probationary period).
3. Libro Unico del Lavoro (LUL); entry and recording of attendance and remuneration, by the end of the following month.
4. Payslip to be processed and delivered monthly.
5. Pre-employment medical examination where required, before assignment to work.
6. Safety training (general and specific by risk level), DVR, appointment of the RSPP, any RLS, PPE.
7. INAIL positions and INPS registration number for the first hire.

6. Types of contracts

• Open-ended (permanent) : this is the standard form of employment relationship, with no expiry date. It is the most stable form for the company and for the employee, and the one on which professional growth paths are built.
• Fixed-term : ordinary maximum duration of 24 months, adding extensions and renewals; beyond 12 months a justification (causale) is required. An additional NASpI contribution of 1.40% is due, increasing by 0.50% at each renewal.
• Apprenticeship : a contract with a training component in three types (qualification and diploma; professionalising, the most common; higher education and research). It allows under-classification of up to two levels or percentage-based pay and a reduced social security contribution rate, in exchange for the obligation to provide training.

7. The TFR and its management

The TFR is deferred remuneration paid upon termination. Within six months of hiring, the employee chooses the destination of the accruing portions:

• Retention within the company (companies with fewer than 50 employees), with annual accrual and revaluation;
• Supplementary pension scheme (collective bargaining fund, open fund or PIP).

For companies with at least 50 employees the TFR not allocated to supplementary pension provision is paid into the INPS Treasury Fund. In the event of no indication, the tacit transfer to the fund provided for by the CCNL applies. TFR paid out is subject to separate taxation.

8. Periodic compliance

9. Operational notes and checks for 2026

This guide is for information purposes and does not replace personalised advice: the exact calculation of cost and net pay depends on the applicable CCNL (Italian collective bargaining agreement), the job grade, the INAIL risk class, company size and the individual worker’s tax position. The data to to be confirmed for 2026 are in particular: the rate of the second IRPEF bracket (misura della seconda aliquota IRPEF) and the width of the bracket; the percentages and thresholds of the supplementary amount and the additional tax deduction of the tax wedge; the social security contribution rates in detail by CCNL (national collective bargaining agreement) and sector; the INPS ceiling and contribution brackets updated. Studio Ponchio is available to run a simulation of the labour cost for the specific case and to provide full management of compliance formalities.

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