Employer Costs in Italy (2026): Contributions, TFR and a Worked Example

Last updated: 29 October 2026 · Written by the Peoitaly team, Employer of Record and payroll specialists in Italy.

How much does an employee really cost in Italy? It is usually the first question foreign companies ask before hiring. The short answer: employer costs in Italy add about 35–40% to the gross annual salary. The exact figure depends on the collective agreement (CCNL) that applies, the sector, the size of the company and the employee’s job level.

This guide explains each cost item, shows a worked example and gives the key figures for 2026. For a quick estimate you can also use our free salary calculator for Italy.

What is RAL in Italy?

In Italy salaries are almost always quoted as RAL, short for retribuzione annua lorda: the gross annual salary. For foreign employers, one detail matters: RAL already includes the 13th month’s pay (tredicesima) and, where the collective agreement provides for it, the 14th (quattordicesima). A RAL of €42,000 paid over 14 instalments therefore means €3,000 gross a month, not €3,500.

The employee’s social security contributions and income tax are included in the RAL and withheld from the salary. The employer’s costs come on top of the RAL.

INPS social security contributions: what is the employer rate?

The largest cost item is the contribution to INPS (Istituto Nazionale della Previdenza Sociale), Italy’s national social security institute. It funds pensions, unemployment benefit (NASpI), sickness and maternity pay, family benefits and wage guarantee funds.

Contributions are calculated every month and paid by the 16th of the following month with the F24 payment form.

INAIL: workplace accident insurance

The employer alone also pays premiums to INAIL (Istituto Nazionale per l’Assicurazione contro gli Infortuni sul Lavoro), the statutory insurance against workplace accidents and occupational diseases. The premium does not depend on the region but on the risk of the activity: for office jobs it is usually well below 1% of gross pay, while in construction or manufacturing it can be considerably higher.

TFR: the severance accrual

A feature specific to Italy is the TFR (trattamento di fine rapporto). Every year the employer sets aside the annual salary divided by 13.5, about 7.4% of the RAL. The accrued amount is revalued every year and paid whenever the employment ends, including when the employee resigns.

Since 1 July 2026, new private-sector hires are also automatically enrolled in a supplementary pension fund: unless the employee opts out within 60 days, the TFR goes to the fund instead of staying with the employer. Details in our guide to automatic pension enrolment and TFR and in what is TFR in Italy.

Example: how much does a €40,000 employee cost in Italy?

The calculation below is an indication for an office employee in retail or services. The exact figures depend on the collective agreement and on the company.

The example excludes optional extras such as meal vouchers, a company car, supplementary health insurance or bonuses that the collective agreement or the employment contract may provide. More in our guide to fringe benefits in Italy. To run your own calculation for any salary and job level, use our salary calculator.

13th and 14th month’s pay

The 13th month’s pay is due to practically all employees in Italy and is paid in December. A 14th month’s pay exists only where the collective agreement provides for it, for example in retail (CCNL Commercio) or tourism, and is usually paid in June or July. The metalworking agreement (CCNL Metalmeccanici), by contrast, has no 14th month.

For cash-flow planning this means monthly payments are uneven, with noticeably higher amounts in December and, where applicable, in the summer.

Annual leave and paid hours off

Every employee is entitled by law to at least four weeks of paid annual leave. At least two weeks must be taken during the year they accrue (consecutively, if the employee asks), and the remaining two within 18 months of the end of that year. Statutory minimum leave cannot be paid out during employment; unused days are paid when the employment ends.

Many collective agreements also grant paid hours off, known as ROL (riduzione orario di lavoro) and hours for abolished public holidays (ex festività). The amount and the rules for paying them out depend on the CCNL. These hours are a cost item that is often overlooked.

Other costs foreign companies often miss

• Health and safety: mandatory training, occupational health checks and the risk assessment document (DVR) required by Legislative Decree 81/2008.
• Collective agreement funds: many CCNLs require contributions to supplementary health funds or joint bodies (enti bilaterali).
• Payroll and administration: payslips, monthly INPS filings, annual certificates for employees (CU) and the employer’s withholding tax return (Modello 770).

For an overview of the process, see our payroll services in Italy.

Hiring in Italy without an Italian company

If you do not have an Italian company yet, you can employ staff through an Employer of Record (EOR). In Italy this is legal only through an employment agency authorised by the Ministry of Labour, under the rules on labour supply: see is EOR legal in Italy?. Peoitaly is an authorised agency. We handle the employment contract, payroll, contributions and compliance, and you receive a transparent cost breakdown.

Frequently asked questions

Figures updated in October 2026 and given as an indication. The exact cost depends on the collective agreement, sector, company size and job level.