Advance and Monthly Payment of Severance Pay: Clarifications from the National Labour Inspectorate

The National Labour Inspectorate, so called INL, through note No. 616 dated April 3, 2025, clarified that the systematic payment of severance pay through monthly payroll, outside the cases provided by law, is not compliant with current regulations. Specifically, the INL emphasized two main points:

• the legitimacy of the practice of monthly advance payments of severance pay in payroll made after the end of the experimental scheme introduced by Law No. 190/2014 (March 1, 2015 – June 30, 2018);
• the consequences from an inspection standpoint resulting from the disqualification of such payments as severance pay installments.

The Inspectorate clarified that collective or individual agreements may only concern the advance of accrued severance pay, not the automatic monthly transfer of a portion of severance pay into payroll as a mere wage supplement, which would also have consequences in terms of social security contributions.

Illegitimacy of Monthly severance pay Payments

As is well known, severance pay is a sum set aside by the employer to provide the employee with financial support upon termination of employment. Article 2120 of the Italian Civil Code governs the calculation methods and conditions for advance payment of the severance pay, allowing the employee to request a portion of the amount before the end of the employment relationship under specific conditions—such as extraordinary medical expenses or purchasing a first home.

Moreover, such an advance can only be requested once during the employment relationship and is deducted from the final severance payment. Article 2120 also allows for collective bargaining or individual agreements to set more favorable conditions and priority criteria for approving advance requests.

The INL’s note focused on Law No. 190/2014, which had introduced, on an experimental basis and only for the period between March 1, 2015, and June 30, 2018, the option for private-sector employees to receive their accrued severance pay monthly in their payslip. This experiment has ended and has not been extended.

According to the INL, in conclusion, the monthly disbursement of severance pay contradicts the very rationale of the institute, which is to provide financial support at the end of the employment relationship.

Consequences for Employers

If the INL finds that severance pay has been paid monthly in a manner not compliant with the law, its inspection staff will issue a formal order under Article 14 of Legislative Decree No. 124/2004, requiring the employer to allocate the improperly advanced severance pay amounts. This may lead to:

• the obligation to transfer the sums to the INPS Treasury Fund;
• the application of social security and tax contributions to the sums;
• possible administrative sanctions for violations of labor and social security regulations.

Therefore, monthly payment of severance pay in the payslip is only allowed in cases expressly provided by law, such as during the experimental period that ended in 2018 or upon the worker’s request under the specific conditions outlined in Article 2120 of the Civil Code. Any other form of systematic advance of severance pay is considered unlawful and may result in penalties for the employer.