---
title: "Italy Employer Cost Breakdown 2026 | TFR, INPS, Leave"
description: "Italy employer cost 2026: 30% INPS, TFR severance from day one, 4 weeks paid leave, and a mandatory 13th salary. Full line-by-line breakdown."
canonical: https://www.teamed.global/country-hiring-guides/italy/cost-breakdown
---

Italy · Cost breakdown child

Served by Teamed vetted partner-entity network in Italy

# How much does it really cost to *hire in Italy* in 2026?

Every Italian hire carries a TFR severance fund that accrues on your books from day one. Add 30% INPS on top of gross salary, a mandatory 13th monthly payment, and 4 weeks of paid leave. The total employer cost in Italy lands well above the salary figure you agreed.

Last reviewed 13 June 2026 · Italy guide

![A sun-drenched Milan business district with modern glass towers and a historic arcade in the foreground.](/images/country-guides/italy-cost-breakdown.webp)

Illustration · Milan, Italy

Answer.cite this

An Italian hire costs more than the salary you agreed. Three things drive most of it. Employer INPS contributions run at around 30% of gross salary. The TFR severance fund accrues from day one at roughly one month of salary for every 13.5 months worked. And almost all collective agreements require a 13th monthly salary payment paid at Christmas.

Every employee also gets 4 weeks of paid leave plus 12 national public holidays. Sick pay is covered by INPS from day four. The first three days carry no INPS payment, and many collective agreements require the employer to top up during that period.

Italy has no statutory national minimum wage. Pay floors are set by sector-specific collective agreements. The IRPEF income tax rate starts at 23% from the first euro of income and rises to 43% at the top.

![A worn Italian payslip and an abacus on a marble desk in a Roman office.](/images/country-guides/italy-cost-breakdown-polaroid-1.webp)

Every line counted

## The TFR: Italy's built-in severance fund from day one

TFR (Trattamento di Fine Rapporto) is a mandatory severance fund. It accrues on your books from the first day of employment. There is no qualifying period.

Each year of employment adds a share equal to the annual gross salary divided by 13.5. That works out at roughly 0.888 months of gross salary per year. It is not paid monthly. It is paid in full when employment ends, for any reason.

TFR is one of the most misunderstood lines in Italian employment cost. It is not a deduction from the employee's salary. It is an employer obligation that accrues separately. The longer an employee stays, the larger the fund. At termination, resignation, or retirement, the full balance is due.

### Where the TFR fund sits

By default, TFR sits on the employer's balance sheet as a liability. Employers with more than 50 employees must direct new TFR accruals to INPS (the state pension body) or to a supplementary pension fund (fondo pensione). Smaller employers may keep it on their own books. Either way, the cost to the employer is the same: roughly 0.888 months of gross salary per year of service, with no statutory cap on the total accumulated amount.

### A TFR worked example (illustrative)

The table below shows how TFR builds over time for a hypothetical EUR 48,000 gross annual salary. These are illustrative totals computed from the verified TFR accrual formula. They are not statutory figures. Actual TFR is revalued annually by a statutory index (75% of ISTAT inflation plus 1.5%), so the real balance will differ from these projections.

| Years of service | Illustrative TFR accrued on EUR 48,000 gross | Note |
| --- | --- | --- |
| 1 year | EUR 3,556 (illustrative) | EUR 48,000 divided by 13.5 = EUR 3,556, before revaluation |
| 3 years | EUR 10,667 (illustrative) | Three years at the base rate, before revaluation |
| 5 years | EUR 17,778 (illustrative) | Five years at the base rate, before revaluation |

These figures are illustrative. They are computed from the verified accrual formula under [Italian Civil Code art. 2120](https://www.alassistenzalegale.it/en/collective-dismissals-everything-you-need-to-know/) and confirmed by Eurofound and Employsome. They do not account for the annual ISTAT-linked revaluation or any applicable tax on the TFR payout. Use the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to model TFR alongside other cost lines.

Eurofound · Italy: Severance pay and redundancy compensation

Italy's TFR accrues throughout employment at a rate of the annual gross salary divided by 13.5. There is no cap on the total accumulated TFR and no minimum service threshold. TFR is due on all forms of termination: dismissal, resignation, and retirement.

Source: [Eurofound, Italy: Severance pay/redundancy compensation](https://apps.eurofound.europa.eu/legislationdb/severance-payredundancy-compensation/italy)

## Employer INPS contributions: the biggest monthly line

Employer INPS contributions run at around 30% of gross salary for standard private-sector employment.

This is an approximation. The actual rate varies by sector, company size, and the applicable collective agreement. It sits in a range of roughly 28 to 32% for most private-sector hires. The pension ceiling is €122,295 per year. Above that ceiling, contributions are reduced.

INPS bundles pension, health, unemployment, maternity, and family contributions into a single combined rate. Unlike the UK or Germany, there is no separate pension-only line. The employer pays the combined rate and INPS allocates the amounts internally.

### The INPS pensionable earnings ceiling

For employees registered under the contributory system (post-1996 entrants), the annual pensionable earnings ceiling is €122,295. Above this ceiling, the pension component of the INPS contribution is reduced. The health, unemployment, and other branches continue to apply to earnings above the ceiling. For most mid-senior hires, the ceiling is relevant only when gross salary exceeds approximately EUR 10,000 per month.

### Employee INPS contributions

The employee pays 9.19% of gross salary into INPS up to the pension ceiling. This is deducted from gross pay and does not increase the employer cost. It reduces the employee's net salary. Factor this into any conversation about take-home pay.

### A worked example at EUR 48,000 gross (illustrative)

| Line | Illustrative annual cost | Basis |
| --- | --- | --- |
| Gross salary | EUR 48,000 | Contract |
| Employer INPS at approximately 30% | EUR 14,400 (illustrative) | 30% of EUR 48,000; verified approximate rate |
| TFR accrual at EUR 48,000 divided by 13.5 | EUR 3,556 (illustrative) | Verified formula, before revaluation |
| 13th monthly salary (tredicesima, paid at Christmas) | EUR 4,000 (illustrative) | One month of gross; see section below |
| INPS on 13th salary at approximately 30% | EUR 1,200 (illustrative) | INPS applies to all salary payments including tredicesima |
| **Total illustrative employer cost** | **EUR 71,156 (illustrative)** | **Approximately 148% of base gross (illustrative)** |

These totals are illustrative. They are computed from the verified INPS employer rate and TFR formula applied to a EUR 48,000 gross salary. They do not include benefits in kind, sector-specific levies, or any additional entitlements under the applicable collective agreement. The actual employer cost depends on the sector and CCNL in force. Use the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to model your specific hire.

1. Identify the applicable CCNL Before modelling any cost, confirm which sector collective agreement applies to the role. The CCNL sets the pay floor, the 13th or 14th salary obligation, and any leave or benefit extras above the statutory minimum.
2. Add INPS on top of gross Apply the employer INPS rate to the agreed gross salary. Remember the tredicesima is a salary payment too and carries INPS at the same rate.
3. Provision for TFR each month Set aside the TFR accrual monthly. The full balance is due when employment ends, for any reason. Factor TFR into cash-flow planning from the first month.
4. Budget for the tredicesima The 13th salary is paid in December and is equivalent to one month of gross pay. If the applicable CCNL requires a 14th salary, budget for that in June or July as well.
5. Account for sick pay and leave obligations Holiday is built into the salary. The risk cost is the three-day INPS carenza that may fall on the employer under the CCNL. Model it as a small but recurring exposure across the team.

## The 13th salary and what collective agreements add

Italy has no statutory minimum wage. Pay floors are set by sector-specific collective agreements, called CCNL.

Almost all CCNLs require a 13th monthly salary (tredicesima) paid in December. Many sectors also require a 14th salary paid in summer. These are not optional extras. They are contractual obligations under the applicable CCNL.

The CCNL (Contratto Collettivo Nazionale di Lavoro) is the sector-level national collective agreement. It governs minimum pay, seniority increments, additional leave, and extra salary payments. Every Italian employee is covered by a CCNL, even in the absence of a union. Identifying the right CCNL before making an offer is the single most important cost-modelling step for an Italian hire.

### The tredicesima

The standard pay cycle in Italy is 13 salary payments per year. The 13th payment (tredicesima mensilita) is paid at Christmas and is equivalent to one month of gross salary. INPS contributions apply to it. It is not a bonus and it is not optional under most CCNLs. It adds approximately 8% to the annual salary cost before INPS and TFR are applied.

### The 14th salary

Several sectors, including commerce, banking, and food industry, additionally require a 14th monthly salary paid in June or July. If your sector falls under one of these CCNLs, the tredicesima and quattordicesima together add approximately 15 to 16% to the base annual salary cost before social contributions and TFR are applied. Check the applicable CCNL before finalising the cost model.

### Seniority increments (scatti di anzianita)

Many CCNLs provide for automatic pay increases tied to years of service (scatti di anzianita). These are not a single statutory figure. They vary by sector and employee category. For a long-tenure employee, accumulated increments can be material. Model them from the specific CCNL applicable to your hire.

### No statutory minimum wage

Italy remains one of the few EU member states without a statutory national minimum wage. The EU Minimum Wage Directive has not yet forced Italy to introduce one. Pay floors are set entirely by sector CCNLs and vary widely. Before making any offer, confirm both the applicable CCNL and its current pay scale for the employee category involved.

## Leave and sick pay obligations

Every Italian employee is entitled to 4 weeks of paid annual leave plus 12 national public holidays.

Sick pay in Italy is shared between INPS and the employer. INPS does not pay for the first 3 days of illness. Many CCNLs require the employer to top up during that period. INPS pays 50% of average daily salary from days four to twenty, then 66.67% from day twenty-one to the maximum of 180 days per year.

### Annual leave

The 4 weeks entitlement is the EU Working Time Directive floor, implemented by Legislative Decree 66/2003. Most CCNLs provide more than the minimum. Senior employees and longer-tenure staff typically receive five to six weeks under their collective agreement. The holiday cost is built into the gross salary. It is not a separate line item.

### Public holidays

Italy has 12 national public holidays in 2026, set by Law 260/1949. Many municipalities also observe a local patron-saint day as an additional holiday. If your employee is based in Milan, Florence, or another city with a strong local holiday tradition, check the local calendar before confirming working patterns.

### Sick pay: the three-day waiting period

The first 3 days of any illness absence are the giorni di carenza. INPS pays nothing for these days. The obligation falls on the employer. Many CCNLs require the employer to pay full salary during the waiting period. Others require a partial top-up. Check the applicable CCNL. The exposure is small per episode but can add up across a team in a given year.

### Parental and maternity leave

Mandatory maternity leave (astensione obbligatoria) runs for 21.73 weeks (five months) and is paid at 80% of salary by INPS. The employer does not fund the maternity pay directly. INPS reimburses the employer, who then pays the employee. Mandatory paternity leave is 10 days, paid at 100% of salary by INPS. Optional parental leave for both parents is paid by INPS at 30% of salary for children under six under the 2026 Budget Law.

| Entitlement | Duration | Pay rate | Who pays |
| --- | --- | --- | --- |
| Annual leave | 4 weeks minimum | Full salary | Employer |
| Public holidays | 12 national days | Full salary | Employer |
| Sick pay days 1 to 3 (carenza) | 3 days | Varies by CCNL | Employer (INPS pays nothing) |
| Sick pay days 4 to 20 | 17 days | 50% of average daily salary | INPS |
| Sick pay days 21 to 180 | Up to 180 days total per year | 66.67% of average daily salary | INPS |
| Maternity leave (mandatory) | 21.73 weeks | 80% of salary | INPS (via employer) |
| Paternity leave (mandatory) | 10 days | 100% of salary | INPS |

## Italian income tax bands for 2026

Italy uses three IRPEF brackets in 2026. Tax applies from the first euro of income. There is no zero-rate personal allowance band.

The 2026 Budget Law (Law 199/2025) reduced the second bracket from 35% to 33%. The top rate stays at 43% on income above €50,001 a year. Italy uses tax credits (detrazioni) rather than a personal allowance to reduce the effective tax burden at lower income levels.

| IRPEF band (2026) | Rate |
| --- | --- |
| Up to €28,000 a year | 23% |
| €28,001 to €50,000 a year | 33% |
| Above €50,001 a year | 43% |

Italy also applies regional and municipal income tax add-ons (addizionali) on top of the national IRPEF rate. Regional rates range from 1.23% to 3.33% depending on the region. Municipal rates vary by municipality. A senior employee in a high-rate region can face an effective marginal rate significantly above the national top band.

### Tax credits instead of personal allowances

Unlike the UK or Germany, Italy does not give employees a zero-rate band. Instead, IRPEF applies from the first euro at 23%. Italy uses a system of detrazioni (tax credits) to lower the effective burden. Employment income credits, family dependent credits, and a range of other deductions apply on the annual tax return. These credits cannot be reduced to a single clean number without knowing the individual's family and income situation.

### Withholding (sostituto d'imposta)

The employer acts as a withholding agent (sostituto d'imposta) and deducts IRPEF from each payslip. The withholding rate is calculated monthly based on the employee's expected annual income. Any over or under-withholding is reconciled at year-end via the annual tax return. The employer remits withheld IRPEF to the Agenzia delle Entrate via the F24 form by the 16th of the month following each pay period.

Source: [Agenzia delle Entrate, Personal Income Tax Rates and Calculation (IRPEF 2026)](https://www.agenziaentrate.gov.it/portale/web/english/personal-income-tax-rates-and-calculation)

## How Teamed handles Italy employment costs for you

Teamed becomes your legal [employer of record](/lp/employer-of-record) in Italy for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency.

INPS filings, TFR accrual tracking, tredicesima administration, and the full Italian employment compliance stack run on **one platform**.

**Real HR and legal experts** handle your Italian hires from the first offer letter through every F24 remittance, INPS submission, and year-end reconciliation. **An actual person**, not a chatbot or a pooled queue. There is **no setup fee** and **no exit fee**. Every employer cost **passes through at cost, itemised** on every invoice. You see the INPS line, the TFR accrual line, and the tredicesima line. Nothing is hidden inside the management fee.

Italy's cost structure requires close attention to the applicable CCNL, TFR indexation, and the correct INPS classification for each employee category. All of it runs on **one platform**. A contractor who converts to employment keeps their record. That same employee can **graduate** from EOR to your own Italian entity when the team size justifies it. EOR is the right structure for a first Italian hire, **until it isn't**. Start from the Italy hiring overview or run the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to see the full picture.

## Frequently asked questions

What is the total employer cost of a hire in Italy in 2026?

An Italian hire typically costs 145 to 155% of gross base salary once INPS, TFR, and the mandatory tredicesima are included. Employer INPS runs at around 30% of all salary payments. The TFR fund accrues at annual gross divided by 13.5 per year, which is roughly 0.888 months per year. The tredicesima adds one month of gross salary in December. The exact total depends on the sector CCNL and whether a 14th salary applies.

What is the TFR and when does it have to be paid?

TFR (Trattamento di Fine Rapporto) is a mandatory severance fund. It accrues from the first day of employment at the rate of annual gross salary divided by 13.5. There is no statutory cap on the total accumulated amount. The full balance is due when employment ends, whether by dismissal, resignation, or retirement. For employers with more than 50 staff, new TFR accruals must be directed to INPS or a supplementary pension fund rather than held on the employer's books.

What INPS contributions does an Italian employer pay?

Employer INPS contributions run at around 30% of gross salary for standard private-sector employment. The rate bundles pension, health, unemployment, and family contributions. Actual rates vary by sector, company size, and CCNL. The annual pensionable earnings ceiling for post-1996 registrants is €122,295. Above that ceiling, the pension component of INPS is reduced. The employee contributes 9.19% on top of their gross, deducted from their pay.

Is a 13th-month salary mandatory in Italy?

Yes, for virtually all employees. The tredicesima (13th monthly salary) is required under the CCNL that governs most Italian employment relationships. Italy's standard pay cycle is 13 salary payments per year. The 13th payment is equivalent to one month of gross salary and is paid at Christmas. INPS contributions apply to it. Some sectors require a 14th salary in addition. Confirm both obligations from the specific CCNL before modelling annual cost.

What income tax does an Italian employee pay in 2026?

Italian IRPEF applies from the first euro of income at 23%. It rises to 33% on income between €28,001 and €50,000 a year, and to 43% above €50,001 a year. Italy uses a system of tax credits rather than a personal allowance. Regional and municipal add-ons of 1 to 3% apply depending on where the employee is based.

Teamed Legal Operations

The most common budgeting mistake we see with Italian hires is treating INPS as the only add-on to gross salary. Clients forget the TFR. It does not appear on the monthly payslip. It builds silently on the balance sheet. A five-year employee on EUR 60,000 will have accumulated over EUR 22,000 in TFR by the time they leave. That is a real cash obligation. Model it from day one, not from the exit notice.

A note from Tom Price-Daniel

Italy's TFR accrues at roughly 0.888 months of annual salary per year, from the first day, with no ceiling and no exceptions.  
Add 30% INPS, a mandatory 13th salary, and 4 weeks of paid leave.  
Know every line before you send the offer.

Tom Price-Daniel · Co-founder, Teamed

## Related Italy guides

- Hiring in Italy, overviewparent
- [Italy tax and payroll](/country-hiring-guides/italy/tax-and-payroll)sibling
- [Italy termination and severance](/country-hiring-guides/italy/termination-and-severance)sibling
- [France cost breakdown](/country-hiring-guides/france/cost-breakdown)neighbour
- [Germany cost breakdown](/country-hiring-guides/germany/cost-breakdown)neighbour
- [Employer of Record overview](/lp/employer-of-record)core
- [Pricing, Zero FX Fixed](/pricing)core
- [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost)tool
- [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax, or accounting advice. Rules change and vary by jurisdiction. Italian employer INPS contribution rates vary by sector, company size, and collective agreement. The approximate 30% rate is the commonly cited range for standard private-sector employment; actual rates should be verified with INPS or a qualified payroll adviser. TFR calculations are illustrative and do not account for annual ISTAT-linked revaluation. Pay floors and additional salary obligations depend on the applicable CCNL. Italy has no statutory national minimum wage. Verify current requirements with INPS and the Agenzia delle Entrate before relying on any specific figure.