Employment status in Italy

The different categories of worker

There are two main categories of employment relations:

• the employment of a dependent employee, regulated by an employment contract, and
• the engagement of an independent contractor for particular services or tasks, which is regulated by a special contract, such as self-employment, consultancy or freelance.

Distinguishing the categories

Dependent employees

A dependent employee puts his/her services at the employer’s disposal within the organisational context arranged by the employer. This is the main difference between a dependent employee and an independent contractor. A dependent employee must work under the operating procedures and to working hours set by the employer.

Independent contractors

Employment relations are deemed to be “independent” when one party undertakes to perform a certain service for another party, without any bond of dependent employment and when any risk entailed in the performance of the service is taken on by the independent contractor. Independent contract work is usually regulated by a consultancy contract and is for the performance of a specific task or service. An independent contractor is not a part of an employer’s organisational structure, but is commissioned by the employer to carry out the task or perform services in exchange for the payment of a fee.

Legal consequences of the distinction

The distinction between an employee and an independent contractor is important for the following reasons: (i) only employees are subject to National Collective Labour Agreements; (ii) only employees are entitled to redundancy payments and benefit from specific protection against unfair dismissal and, inter alia (iii) different rules of taxation apply to employees and independent contractors.

Categories of employee

Indefinite term

Employees employed for an indefinite term are those with contracts which do not have a fixed expiry date. Employment contracts are usually concluded for an indefinite term and run until notice is given or until it ends in some other way such as retirement.

Fixed term

Fixed term contracts are subject to strict regulations: (i) the term has to be in writing; (ii) the maximum duration is 36 months (five years for executive level employees (Dirigenti)); (iii) an employer can extend the contract up to five times within the maximum 36 month term; (iv) an employer is not required to specify the reason for using a fixed term contract; (v) fixed term workers must not exceed 20% of the company’s overall workforce.

Part term

A part time contract is one which provides for fewer hours of work than the 40 hour working week set by law or the working week as agreed by the applicable CCNL. The employee’s salary is pro-rated in proportion to the hours worked. A part time contract can be entered into either for a fixed term or for an indefinite term.

Directors

Directorships are governed by:

• articles of association, and
• resolutions of shareholders' meetings subsequently made into binding agreements to determine:
  • the length of the appointment
  • the amount of remuneration
  • how the appointment can be terminated, and
  • any amounts payable in the event of early termination.

The maximum length of time that a person can serve as a member of the board is three years.

Agency workers

There is an increasing tendency to use agency workers. An agency worker is recruited and employed by the agency and the agency is liable for paying the workers’ salary and social security contributions. The client company will pay the agency a fee for their service.

Depending on the circumstances under which the relevant agency worker effectively carries out his or her duties (ie in particular, if he or she has, in fact, worked exclusively for the client company as if he or she were one of its employees) there can be a high risk of such an individual claiming that they have employee status.

Further information on employment status in Italy is available here.