Italy Labour Law Updates 2026
A comprehensive overview of Italy labour law updates 2026, with practical guidance for employers operating in or expanding into Italy.
Italy has entered 2026 with one of its most active employment law agendas in years. The 2026 Budget Law, published in the Official Gazette on 30 December 2025 and effective from 1 January 2026, introduced a wide range of immediate changes across compensation, parental and family leave, social security incentives, and employee benefits. On 1 July 2026, a significant structural change to the TFR (Trattamento di Fine Rapporto) severance system came into force, replacing the previous tacit-assent pension enrolment mechanism with automatic participation.
This article sets out every significant change, those already in force and those developing through implementing legislation, with practical steps for employers to take now.
Income Tax And Compensation Changes: In Force From 1 January 2026
IRPEF rate reduction for the second income bracket
For taxpayers with income exceeding €200,000, a compensatory reduction of €440 applies to their available expense deductions, a measure designed to keep the overall revenue impact of the IRPEF cut approximately neutral at the highest income levels.
Productivity bonuses: tax rate cut to 1%
15% flat tax on overtime, night, holiday, and shift premiums
For 2026, a substitute income tax rate of 15% applies to overtime premiums, night work premiums, and shift work or holiday premiums paid to employees in the private sector (excluding the tourism and hospitality sector, which has a separate treatment, see below). This flat rate applies up to a maximum of €1,500 in premium payments per year and is available to employees whose employment income in the previous tax year (2025) did not exceed €40,000; employees may opt for ordinary taxation instead where more favourable. The standard marginal rate would otherwise apply to these payments, making this a materially beneficial treatment for a significant portion of shift-based workforces.
Tourism and hospitality sector: special supplementary treatment
Workers in the tourism, hospitality, and spa sectors who received employment income not exceeding €40,000 during the 2025 tax year are entitled, for the period from 1 January to 30 September 2026, to a special supplementary benefit equal to 15% of gross salary paid for overtime, night shifts, and holiday work. This benefit is non-taxable and is paid by the employer, who can recover the amounts through tax compensation with INPS or the tax authority. Workers must apply for this benefit and certify they meet the income requirements.
Meal vouchers: digital threshold increases to €10 per day
The daily tax and social security contribution exemption threshold for electronic meal vouchers has increased from €8.00 to €10.00 per day from 1 January 2026. Paper meal vouchers retain the previous €4.00 exemption limit. This means employers providing digital meal vouchers can now offer a more valuable daily benefit at the same contribution cost, or, where voucher programmes are already at or near the old threshold, the increase automatically improves the net value of the existing benefit.
| Key Action For Employers: |
|---|
| Update payroll software immediately to apply the revised IRPEF rate of 33% on the €28,000 to €50,000 bracket. Confirm that the 1% substitute tax is being applied to qualifying productivity bonuses (up to €5,000). Identify employees receiving overtime, night, or shift premiums and confirm the 15% flat rate is being applied up to the €1,500 ceiling for employees earning below €40,000. If you operate in tourism or hospitality, confirm the special supplementary treatment mechanism is in place and that employees have been informed of the application requirement. Review meal voucher programmes, if you are still issuing paper vouchers, assess whether switching to digital vouchers is cost-effective given the higher exemption threshold. |
Social Security Contribution Incentives For Permanent Hiring
The 2026 Budget Law and the subsequent Labour Decree No. 62/2026 (converted into Law No. 112/2026) together restructure and expand social security contribution incentives for permanent hiring.
Youth and women hiring incentives
Under Decree-Law No. 62/2026, social security contribution relief of up to 24 months is available for employers that, within 2026, take any of the following steps:
- Hire women who have been unemployed for at least 24 months on a permanent basis
- Hire workers under 35 years old who have been unemployed for at least 24 months on a permanent basis
- Convert fixed-term contracts (not exceeding 12 months) for workers under 35 into permanent contracts
- For employers with up to 10 employees: permanently hire workers aged 35 or over in Southern Italy
The relief is capped at €500 per month for under-35 hires (€650 in Southern Italy) and €650 per month for women (€800 for hires in the Southern Special Economic Zone), and the 24-month unemployment requirement drops to 12 months for workers in EU-defined disadvantaged categories.
These incentives are in addition to, and partly restructure, the previous youth and women employment incentives under the 2026 Budget Law. The Budget Law had already provided that private employers hiring women with at least three children under 18 who have been unemployed for at least six months receive a full exemption from social security contributions worth up to €8,000 per year, effective until 2035.
Part-time for parents of three or more children
From 2026, employees with at least three dependent children have a statutory right to request part-time work, provided the youngest child is aged ten or under, or regardless of age if any child has a disability. Employers who accommodate these requests without reducing the employee’s total contractual hours (i.e., where the reduction is in daily hours rather than days worked) are eligible for a social security exemption of up to €3,000 per year for 24 months.
This is an unusual provision: it creates both a new employee right and a financial incentive for employers who accommodate it in a specific way. HR teams should be prepared to receive part-time requests from qualifying employees and to assess whether the exemption applies to their specific implementation.
| Key Action For Employers: |
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| Map your planned 2026 permanent hiring against the qualifying categories for contribution relief, women unemployed 24 months, workers under 35 unemployed 24 months, and fixed-term to permanent conversions for under-35s. Document eligibility carefully before claiming relief, as the Incentive Code introduces stricter monitoring. If you have employees with three or more children under 18, ensure your HR team is prepared to process part-time requests and understands the social security exemption available where the accommodation meets the statutory criteria. |
Parental And Family Leave: Multiple Expansions From 1 January 2026
The 2026 Budget Law expands several parental and family leave entitlements. These changes are confirmed and in force from 1 January 2026.
Parental leave age limit extended to 14 years
From 1 January 2026, parental leave can be taken until the child reaches the age of 14, extended from the previous limit of 12. This change increases the window during which both parents can request parental leave and affects working parents of children currently aged 12 or 13 who had previously exhausted their entitlement window.
To recap the current parental leave structure in Italy, it helps to distinguish leave (time off) from pay (the INPS benefit). Each employed parent may take up to six months of parental leave, within a combined cap of 10 months between both parents, which rises to 11 months where the father takes at least three months. INPS pays benefits for up to nine of those months: three reserved for each parent plus a further three shared between them, all at 30% of salary, with one parent’s three months paid at 80% if taken within the child’s first six years of life. Leave taken beyond the nine indemnified months is unpaid, unless the parent’s income is below 2.5 times the minimum pension, in which case the 30% rate continues.
Sick child leave doubled to 10 days
Unpaid leave to care for a sick child has been increased from five to ten working days per year, per child, from 1 January 2026, and the qualifying child age limit has been raised from 8 to 14 (leave for a sick child under three remains unlimited). This is unpaid leave, the cost to the employer is the administrative and staffing impact of absence rather than a direct salary cost, but it is a meaningful expansion of the entitlement that HR teams need to reflect in leave management systems and employee handbooks.
| Key Action For Employers: |
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| Update HR systems, employee handbooks, and leave policy documentation to reflect the new parental leave age limit of 14 and the doubling of sick child leave to 10 days. Communicate these changes to employees, particularly the sick child leave expansion, which is immediately relevant to a large proportion of working parents. Ensure line managers are briefed on the updated entitlements to avoid leave requests being incorrectly refused. |
TFR Severance Pay Reform: Automatic Pension Enrolment From 1 July 2026
What is the TFR?
The TFR is a mandatory entitlement requiring employers to set aside 6.91% of each employee’s total annual salary (including cash and in-kind benefits) as a severance reserve, calculated and accrued monthly. When employment ends, for any reason, the accrued TFR is paid to the employee.
In 2026 to 2027, employers with an average of 60 or more employees in the previous calendar year must transfer TFR accruals for such employees to the INPS Treasury Fund rather than hold in company books. In 2028 to 2031, the prior-year threshold will be 50 employees, decreasing to 40 employees from 2032.
Previously, the company size threshold triggering the obligation was 50 employees, but the reference year for the determination was 2006 or the first year of operations, if later, so companies that first exceeded the threshold in subsequent years were exempt.
The previous system: tacit assent with a six-month window
Under the previous system, when a new employee was hired, their TFR was automatically transferred to the default supplementary pension fund specified by the applicable National Collective Bargaining Agreement (NCBA), unless the employee actively opted out within the first six months of employment. If no NCBA specified a fund, contributions defaulted to the Cometa pension fund. Employees who opted out may have either kept TFR with the employer or chosen their own supplementary pension fund.
The new system from 1 July 2026: automatic enrolment with 60-day opt-out
Since 1 July 2026, the opt-out window has shrunk from six months to 60 days. Employees hired from that date onward are automatically enrolled in the NCBA’s default supplementary pension fund from the start of employment, with only 60 days to opt out if they choose a different arrangement.
The reform also extended automatic enrolment to additional minimum TFR contributions required by applicable CBAs, which were previously excluded from the tacit-assent mechanism. Since 1 July 2026, those mandatory CBA contributions have also been automatically directed to the default pension fund unless the employee opts out.
Employers now have disclosure obligations under this reform: when hiring, they must provide employees with clear, written information about the automatic enrolment mechanism, the default fund, and the 60-day opt-out procedure. Failure to meet the disclosure obligation is a separate compliance exposure.
What this means in practice
Employment onboarding processes should already include the TFR disclosure and opt-out procedure for every new hire, this is no longer a future item. Payroll systems must direct TFR contributions to the correct fund from day one of employment, rather than holding them in company books during a six-month window, for every hire since 1 July 2026. Employers who haven’t updated these processes are already out of compliance, not preparing for a deadline.
| Key Action For Employers: |
|---|
| Update employment onboarding processes to include the mandatory TFR disclosure, the applicable NCBA's default fund, the automatic enrolment mechanism, and the 60-day opt-out procedure. Update payroll and HR systems to direct TFR contributions to the default fund from the first contribution period after hiring, rather than after a six-month window. Inform your payroll provider or outsourced payroll function of the change if they manage TFR calculations and transfers. Consider the cash flow implications if your current practice has TFR accruing in company books during an initial period for a significant proportion of new hires. |
Decree-Law No. 62/2026: The Fair Wage Framework And NCBA Code Requirement
Decree-Law No. 62/2026 (the Labour Decree) introduces three interconnected reforms: a new fair wage concept, restructured hiring incentives, and a digital platform workers’ framework.
The Decree has since been converted into law as Law No. 112 of 25 June 2026, which confirms the fair wage, NCBA code, and IPCA adjustment provisions described below and adds several further measures introduced during conversion, including a new “economic sustainability mentor” role for workers who lose their jobs, retained job-placement-list protections for workers with disabilities on fixed-term or apprenticeship contracts, a total remuneration treatment (TRT) floor tied to NCBA rates, new filing requirements for proximity and company-level agreements, a 36-month maximum duration for indefinite-term agency supply (‘staff leasing’), and a new secondment scheme aimed at safeguarding employment levels and production continuity.
The 'fair wage' concept: NCBA-anchored, not a statutory minimum
Italy has not introduced a statutory national minimum wage. The political debate on the topic has been ongoing for years, but the Labour Decree deliberately avoids legislating a fixed floor. Instead, it introduces a concept of ‘fair wage’ defined by reference to the National Collective Bargaining Agreements (NCBAs) entered into by the most representative employer and trade union organisations at the national level, having regard to the relevant sector, category, and principal business activity.
This is a deliberate response to a well-documented practice known as ‘dumping contrattuale’ where some employers apply minority or low-cost collective agreements to reduce labour costs while technically complying with the requirement to apply a CBA. By anchoring the fair wage benchmark to agreements entered into by the most representative parties, the Decree makes it harder to use fringe CBAs as a cost-reduction tool while staying within formal compliance.
Mandatory NCBA alphanumeric code on contracts and payslips
Employers are now required to include the applicable NCBA’s unique alphanumeric code in both employment contracts and payslips. This code will be used by the Ministry of Labour, INL (National Labour Inspectorate), INPS, CNEL, and other competent bodies to monitor compliance, detect pay deviations, and verify conditions for accessing regulatory and financial benefits.
This is an immediate operational requirement. Employers who issue employment contracts or payslips without the correct NCBA code are exposed to compliance risk from the point of the Decree’s entry into force. Payroll software and HR document templates must be updated to include the code. For multinational employers managing Italian payroll through a global provider, this specific Italian requirement needs to be communicated explicitly to the payroll team.
Automatic wage adjustment for delayed NCBA renewals
Where a National Collective Bargaining Agreement is not renewed within 9 months of its natural expiry date, wages under that agreement will be automatically increased by a flat-rate advance on the pay rise equal to 50% of the IPCA-NEI change (the consumer price index net of imported energy goods) as a provisional supplement, pending full renegotiation. Exceptions apply in highly seasonal sectors, where sector-specific economic indicators agreed through collective bargaining substitute for the IPCA mechanism.
This provision is primarily relevant to employers in sectors where NCBA negotiations are historically slow and represents a legislative intervention to prevent the erosion of real wages during prolonged renegotiation periods. Employers whose applicable NCBA is approaching expiry or is already overdue for renewal should monitor negotiation progress and factor potential automatic adjustments into payroll forecasting.
| Key Action For Employers: |
|---|
| Update all employment contract templates and payslip formats immediately to include the applicable NCBA's unique alphanumeric code, this is an immediate compliance requirement under the Labour Decree (now Law No. 112/2026). If you are uncertain which NCBA applies to your business, obtain advice from Italian employment counsel. If your applicable NCBA is approaching or has passed its expiry date, model the impact of the 50% IPCA-NEI automatic pay-rise advance on your payroll costs. Review whether the CBAs you apply are genuinely those of the most representative organisations in your sector, if not, assess the compliance risk under the new fair wage framework. Also review the additional provisions introduced when the Decree was converted into law, noted above. |
Digital Platform Workers: New Protections And Obligations
Transparency on algorithmic management
Digital platforms must provide workers with clear and accessible information about any automated or algorithmic systems used to assign tasks, determine pay, evaluate performance, or restrict platform access. Workers have the right to request human review of automated decisions affecting their working conditions. These provisions align with the EU Platform Work Directive’s core algorithmic transparency requirements and apply to platforms operating in Italy regardless of where they are incorporated.
Specific protections for delivery riders (since 1 July 2026)
Since 1 July 2026, platforms engaging delivery riders have been required to maintain individual work ledgers for each rider, recording monthly deliveries and total amounts paid. Mandatory identity verification is required, and the transfer of rider accounts between individuals is prohibited, a measure targeting fraud and labour exploitation through account sharing. Riders must complete mandatory basic training within 30 days of their first assignment.
| Key Action For Employers: |
|---|
| If you operate or manage a digital platform in Italy, including platforms that use algorithmic tools to assign work, monitor performance, or set pay for workers, review the algorithmic transparency disclosure requirements. For platforms engaging delivery riders, confirm the work ledger system, identity verification, and account transfer prohibition are already in place, these have been mandatory since 1 July 2026, not upcoming requirements. Ensure your employment classification approach for platform workers is consistent with the increasing regulatory scrutiny Italy is applying to this area. |
Italy's Pay Transparency Directive Transposition
Consistent with Italy’s broader CBA-centric labour law framework, the decree anchors “work of equal value” to National Collective Bargaining Agreements, which serve as the primary reference for job classification and carry a presumption of compliance; employers may supplement but not replace this framework with their own gender-neutral criteria.
Key obligations now in force:
- Job postings must disclose the starting salary or salary range and reference the applicable NCBA
- Employers may not ask candidates about current or past pay
- Employees can request average pay information by gender for equal-value roles once per year; employers have two months to respond
- Companies with fewer than 50 employees are exempt from disclosing pay-progression criteria, though other information duties still apply
- Gender pay gap reporting is phased in by size: first reports due 7 June 2027 (150+ employees) and 7 June 2031 (100–149 employees). This sits alongside, and doesn’t replace, the existing biennial reporting under Law 162/2021 for employers with 50+ employees.
AI In Employment Decisions: Law No. 132/2025 Takes Effect In 2026
These decrees are not yet in force, they still need to go through parliamentary committees and further consultation before final adoption, which is due by the law’s 12-month delegation deadline of 10 October 2026. Employers who use AI tools for recruitment, performance evaluation, scheduling, or disciplinary decisions should already be complying with the core obligations in Law No. 132/2025 itself, and should monitor the two implementing decrees as they move toward final adoption, alongside the EU AI Act’s provisions on high-risk AI systems used in employment and worker management, which are also phasing in during 2026.
| Key Action For Employers: |
|---|
| Identify all AI tools currently used in your Italian employment processes, including recruitment screening, performance monitoring, scheduling algorithms, and any disciplinary or absence management systems with automated components. Confirm these already comply with Law No. 132/2025's core obligations, transparency to workers, human oversight, and non-discrimination, since the law has been in force since October 2025, not from some later 2026 date. Monitor the two implementing decrees as they move toward final adoption, due by October 2026. Cross-reference against the EU AI Act's employment-related provisions, which also apply to Italian operations and which begin phasing in their high-risk system requirements during 2026. |
Right To Disconnect: Legislation Expected In 2026
If passed, which is expected in the second half of 2026, the framework would require employers to establish clear policies on communication outside contracted hours, implement technical measures to prevent work messages outside those hours, and refrain from penalising employees for being unreachable outside designated periods. Proposed penalties for violations range from €500 to €3,000 per employee per violation.
This legislation has not been enacted as of this article’s publication. However, for employers with Italian operations managing employees across multiple time zones, particularly where UK, US, or APAC colleagues routinely message Italian employees outside Italian working hours, the practical compliance question is worth anticipating ahead of formal legislation.
| Key Action For Employers: |
|---|
| Review current communication norms for your Italian teams, particularly where they interact with colleagues in different time zones. If you have smart working agreements in place (as most employers with remote or hybrid workers should), confirm they include the required rest period and right-to-disconnect provisions. Prepare a template company communication policy covering out-of-hours expectations, this will be required if the general right-to-disconnect legislation passes in 2026. |
At-a-Glance: Italy Labour Law Updates 2026
| Effective Date | Change |
|---|---|
| 1 Jan 2026 | IRPEF rate on €28,000–€50,000 reduced from 35% to 33%. Payroll withholding updated from first pay period. |
| 1 Jan 2026 | Productivity bonus substitute tax cut from 5% to 1%. Maximum bonus amount qualifying for preferential rate rises from €3,000 to €5,000. |
| 1 Jan 2026 | 15% flat tax on overtime/night/shift premiums for private sector employees earning under €40,000 (up to €1,500 cap). |
| 1 Jan 2026 | Digital meal voucher daily exemption threshold rises from €8 to €10. |
| 1 Jan 2026 | Parental leave age limit extended from 12 to 14 years. |
| 1 Jan 2026 | Sick child care leave doubled from 5 to 10 working days per year per child; qualifying age limit raised from 8 to 14 (unpaid). |
| 1 Jan 2026 | Incentive Code (Legislative Decree No. 184/2025) restructures employer incentive framework. Stricter anti-relocation rules. |
| 1 May 2026 (DL 62/2026, converted into Law No. 112/2026 on 25 June 2026) | Fair wage framework anchored to NCBA. NCBA alphanumeric code mandatory on contracts and payslips. Automatic wage adjustment for expired NCBAs (50% of IPCA-NEI, triggered 9 months after expiry). Social security incentives restructured. Conversion into law added further provisions, including an economic sustainability mentor role and new proximity-agreement filing requirements. |
| 1 May 2026 (DL 62/2026, converted into Law No. 112/2026) | Digital platform transparency obligations in force. Algorithmic management disclosure required. Human review right for automated employment decisions. |
| 7 Jun 2026 (enacted) | Italy Pay Transparency Directive transposition complete. Legislative Decree No. 96/2026, published 1 June 2026, entered into force 7 June 2026, one of only four EU member states to meet the deadline. |
| 1 Jul 2026 | TFR automatic pension enrolment: opt-out window reduces from 6 months to 60 days. New employer disclosure obligations at onboarding. |
| 1 Jul 2026 | Delivery rider work ledgers, identity verification, and account transfer prohibition take effect. |
| 2026 (expected) | Right-to-disconnect general legislation expected. Would extend protections from smart workers to all employees. |
| 10 Oct 2025 (law in force); implementing decrees expected by 10 Oct 2026 | AI in employment decisions: Law No. 132/2025 already in force since October 2025. Two implementing decrees (covering, among other areas, AI in employment relations) received preliminary approval on 10 June 2026 and are due for final adoption by October 2026. |
What Employers Should Be Doing Now
Immediate payroll actions
- Update IRPEF withholding tables to apply 33% rate to the €28,000–€50,000 bracket from January 2026.
- Confirm 1% substitute tax is being applied to qualifying productivity bonuses (up to €5,000).
- Apply 15% flat rate to overtime, night, and shift premiums for qualifying employees (under €40,000, up to €1,500 cap).
- Apply the €10 per day digital meal voucher exemption threshold.
- If operating in tourism or hospitality, implement the special supplementary treatment mechanism and inform employees of the application requirement.
NCBA code (urgent compliance requirement)
- Identify the unique alphanumeric code for the NCBA applicable to your business.
- Update all employment contract templates to include the NCBA code.
- Update payslip format to include the NCBA code from the next pay period.
- If the applicable NCBA is near or past its expiry date, model the potential automatic wage adjustment under the 50% IPCA-NEI advance mechanism (triggered 9 months after expiry).
TFR & Platform Worker Compliance Check (Effective Since 1 July 2026)
- Update onboarding processes to include the TFR automatic enrolment disclosure, applicable NCBA default fund, automatic enrolment, and the 60-day opt-out window.
- Update payroll and HR systems to direct TFR contributions to the correct pension fund from day one of employment rather than after a six-month window.
- For digital platform operators: implement delivery rider work ledgers, identity verification, and account transfer prohibition.
Leave policy and documentation
- Update leave policy and employee handbooks to reflect parental leave age limit of 14 years.
- Update sick child leave entitlement to 10 working days per year.
- Update family care leave documentation to include grandparents and grandchildren and the individual-day usage option.
- Brief line managers on all updated leave entitlements to prevent incorrect refusals.
Forward planning
- Monitor Pay Transparency Directive transposition. Italy enacted its transposition via Legislative Decree No. 96/2026, in force since 7 June 2026; employers with 50+ employees should prepare gender pay gap data now, with first formal reports due in 2027 for employers with 150+ employees.
- Identify AI tools used in Italian employment decisions and monitor the two implementing decrees under Law No. 132/2025, which are expected to be finalised by October 2026.
- Assess smart working agreements for right-to-disconnect compliance and prepare a general communication policy template ahead of potential wider legislation.
- Review planned 2026 permanent hiring against qualifying categories for contribution relief under Law No. 112/2026 (formerly the Labour Decree).
How Beyond Borders HR Supports Employers Stay Compliant
Italy’s 2026 compliance landscape is unusually dense, the combination of the Budget Law, the Incentive Code, and the Labour Decree means that multiple changes are in force simultaneously, with more to follow in the second half of the year. Employers managing Italian operations as part of a global workforce face the additional complexity of applying these Italian-specific rules alongside their global HR frameworks, a task that requires both local expertise and global coordination.
Reach out to Beyond Borders HR for tailored solutions, expert guidance, and seamless integration of these legislative updates into your HR policies and practices. Our team is dedicated to empowering your business with the knowledge and support needed to thrive in this dynamic regulatory environment.
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Article Authored By:
Raj Inda
