Employer Alert Legislative Change in Italy Effective March 1, 2015

There is a legislation change in Italy that will impact your employees (some exceptions may apply). Effective on March 1, 2015 employees that meet the following criteria:

• Private Sector
• At least 6 months employment with current employer

Can request a payout or liquidation of their accrued TFR (Trattamento di Fine Rapporto) monthly as an addition to their salary. This will only be available until June 30, 2018 as this is an experimental measure. It will be taxed normally for Income Tax but not subject to Social Security.

Prior to March 1, TFR (accrued at 7% of employee’s earning annually) was paid at the end of a working relationship or was able to be partly or totally anticipated in the case of the employee’s special needs (buying a property for example).

The government is putting the onus on the employee to make his or her choice as to what they want to do with their TFR savings.

How is it determined the amount that is paid out on a monthly basis? The payroll system calculates monthly the amount of the TFR cost that must be accrued by using the parameters established at the end of the previous year and the salary amounts paid out during the current. The overall figures for the month of these calculations are shown on the face of each pay slip issued to each employee. The annual figures are trued up at the end of the December payroll processing, which includes the governments adjustment to the official inflation rate published around the 16th of January every year.

Does the employer legally need to reach out to their employees and advise them of this and does the employee need to provide an answer of whether or not they wish to receive this payout? Although there is no legal obligation we highly recommend that, you reach out to your employees and advise them of this change. They should communicate to you what their preference is. The form called Qu.I.R. will be available soon for population by the employee.

Lastly, Employers who do not intend to immediately pay with their own funds the accruing share of TFR can have access to a loan secured by a specific guarantee issued by the guarantee “Fund for the access to loans” with INPS and State guarantees.

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