Hiring in Italy comes with many benefits — a skilled workforce, strong labour protections, and a thriving business environment. But one area where foreign employers often run into trouble is termination. Unlike in more flexible labour markets, dismissing an employee in Italy requires careful compliance with legal and contractual obligations.
Handled poorly, a termination can result in court cases, reinstatement orders, and heavy financial penalties. Handled correctly, it’s a structured process that protects both the company and the employee.
Why Termination in Italy Is Complex
Italian labour law prioritises employee protections. Employers cannot simply “let someone go” without valid reasons. Dismissals are regulated by:
- National labour law
- Collective Bargaining Agreements (CCNLs)
- Individual contracts
- Case law (jurisprudence)
This layered framework means every decision must be justified, documented, and compliant.
The Two Main Types of Dismissal
1. Disciplinary (Just Cause or Justified Subjective Reason)
Used in cases of serious misconduct or repeated underperformance.
- Requires documented warnings and evidence.
- Immediate termination is only allowed in extreme “just cause” cases (e.g. theft, fraud).
2. Economic / Organisational (Justified Objective Reason)
Used when a role is eliminated due to restructuring, cost-cutting, or redundancy.
- The company must prove the reason is legitimate and not a pretext.
- Alternatives, like redeployment, must be considered.
Note: “At-will” termination, common in the US, does not exist in Italy.
Notice Periods and Severance
- Notice periods depend on the employee’s seniority, role, and the applicable CCNL.
- Severance pay (TFR – Trattamento di Fine Rapporto) is mandatory and accrues throughout employment. This must be paid out on termination, regardless of reason.
Risks of Getting It Wrong
If a termination is judged unfair by a labour court, the employer may face:
- Reinstatement of the employee.
- Compensation covering missed wages.
- Additional penalties depending on the case.
For international employers, these risks can escalate quickly without proper guidance.
Best Practices for Managing Termination in Italy
- Document everything – performance reviews, warnings, and correspondence are critical.
- Check the CCNL – each collective agreement outlines specific termination rules.
- Respect notice periods – even in disciplinary cases, exceptions must be justified.
- Communicate clearly and respectfully – poor communication often leads to disputes.
- Seek local expertise – navigating Italian labour law without guidance is risky.
How an Employer of Record Helps
When hiring through an Employer of Record (EOR) like Peoitaly:
- Employment contracts are fully compliant from day one.
- Terminations are managed in line with Italian law and CCNLs.
- Documentation and process are handled by experts.
- Your business is shielded from costly mistakes.
Final Thoughts
Termination in Italy isn’t simple — but it is manageable when approached correctly. By understanding the rules, respecting due process, and partnering with local experts, you can protect your business while maintaining professionalism and fairness for employees.
Planning to hire in Italy but worried about compliance? Peoitaly manages the entire employment lifecycle — from onboarding to termination — so you can expand with confidence.
