‘Employment Decree’ provisions on incentives and employment costs reduction

26 May 2023

Italian Legislative Decree No 48/2023, also referred to as the ‘Employment Decree’, amended, among other things, the incentives provided for employers who hire particular categories of workers, namely Inclusion Allowance recipients, so-called ‘NEETs’ and people in receipt of invalidity benefit.

Incentives for the employment of inclusion allowance beneficiaries

In general, the Inclusion Allowance constitutes economic support payable to households consisting of, at least one of the following (i) a disabled person, (ii) a minor, (iii) a person over sixty years of age, or (iv) a person in receipt of invalidity benefit.

For future beneficiaries of the Inclusion Allowance (to come into effect under Article 1 of the Employment from 1 January 2024), the law provides, in cases of hiring by employers of these individuals, a social security contributions exemption usable up to a maximum of 12 months extendable to 24 months in case of transformation of the contract in question [from a fixed-term contract to a permanent one].

In this regard, Article 10 of the Employment Decree with reference to economic incentives granted to private employers hiring individuals benefitting from the above allowance, provided an incentive of exemption from payment of 100% of the employer’s social security contributions, excluding premiums and contributions due to National Institute for Insurance against Accidents at Work (Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro, ‘INAIL’), up to a maximum of EUR 8,000 per year for 12 months as financial incentives for private employers who hire those in receipt of above-mentioned allowance. This exemption will be granted for permanent employment hires, whether these are full-time or part-time, including through an apprenticeship contract.

The relief is also granted to private employers who recruit recipients of the Allowance under a fixed-term or seasonal employment contract, for a maximum period of 12 months, provided that the contract is of shorter duration. In this case, the exemption is 50% of the employers’ total social security contributions, excluding INAIL premiums, up to a maximum of EUR 4,000 per year.

Examination of the rule shows that the incentive may apply for a total of 24 months in the case of stabilisation of the fixed-term employee the conversion of fixed-term contracts into permanent ones, of which the first 12 refer to fixed-term (maximum of EUR 4,000.00 per year) and, in the case of transformation, for an additional 12 months (for EUR 8,000.00 per year).

Incentives for hiring of ‘NEETs’ youngsters.

Additional incentives are provided for private companies who recruit young people ‘under 30’ who are Not in Education, Employment or Training (‘NEETs’) provided they are registered with the Youth Employment Initiative’ national operational program.

Under Article 27 of the Employment Decree, the incentive is granted to private employers who hire NEETs on permanent contracts, including under agency supply contracts, or on vocational or trade apprenticeship contracts.

The incentive in question lasts for a period of 12 months. Under it the employer is awarded a contribution equal to 60% of the gross monthly salary taxable for social security purposes, for new recruitment from 1 June 2023 to 31 December 2023 of young people:

  • under 30 on the date of recruitment;
  • who qualify as ‘NEET,’ i.e., not working and not in education or training at the time of recruitment;
  • that are registered with the ‘Youth Employment Initiative’ national operational program which is the European ‘Youth Guarantee’ to combat youth unemployment.

The ‘NEET’ incentive is cumulative with other incentives and contribution exemptions provided by current legislation, among which of particular interest due to the ‘common’ scope of application is the ‘Under 36’ incentive, extended by Article 1, paragraph 297 of the 2023 Budget Law. In the event of accumulation of several incentives, Paragraph 2 provides for the reduction of the ‘NEET’ incentive from 60% to 20% of the gross monthly wage taxable for social security purposes for each ‘NEET’ employee recruited.

Incentives for the employment of people with disabilities

With the aim of boosting the professional skills and labour market inclusion of young people under 35 with disabilities, Article 28 of the Employment Decree established a fund for third-sector entities, voluntary associations, and non-profit organisations that enter into permanent employment contracts between 1 August 2022 and 31 December 2023 with individuals with disabilities.

Reducing the ‘tax wedge’

With a view to increasing employees’ net pay due to the cut in the social security contribution or ‘tax wedge’ (cuneo fiscale) Article 39 of the Employment Decree raised by 4% the partial exemption on the share of social security contributions for IVS (disability, old age and surviving partners) borne by employees for pay periods from 1 July 2023 to 31 December 2023, excluding the 13th month’s pay.

In the light of this provision, the already provided exemption is increased to 7% if the taxable salary does not exceed EUR 1,923.00 per month and to 6% up to EUR 2,692.00 a month.

Fringe benefits

For employees with dependent children for tax purposes only, and limited to the 2023 tax period, the tax exemption limit for fringe benefits is to be raised from EUR 258.23 to EUR 3,000.00 per year per individual employee. The increase in the limit only affects workers with children who are dependent for tax purposes under Article 23 of Italian Presidential Decree No 917/1986 (‘Italian Income Tax Consolidation Act’ or ‘Testo unico delle imposte sui redditi’, ‘TUIR’).

Derogating from the provisions of Article 51, paragraph 3, of the TUIR, and only for the employees involved, the value of goods sold, and services provided to employees with children for tax purposes, as well as the sums disbursed or reimbursed to those employees by employers for the payment of domestic utilities for integrated water service, electricity and natural gas, do not constitute employee income, within an overall limit of EUR 3,000.00.

Scopri le soluzioni HR
pensate per te