Imagine you’re planning to grow your business in Italy—a market that offers access to a talented workforce, a central position within Europe, and a strong cultural foundation. But as you start looking into local employment laws, tax obligations, and regulatory requirements, it quickly becomes clear that the process is more complex than anticipated. This is where an Employer of Record (EOR) can provide valuable support, helping you navigate these challenges and ensuring a smoother path forward.

By partnering with an EOR in Italy, you can delegate essential employment tasks such as handling payroll, drafting contracts, and ensuring legal compliance. This allows your company to focus on growth without establishing a legal entity. This guide outlines how an EOR can simplify hiring in Italy, reduce risks, and support your business’s success.

Understanding the Employer of Record (EOR) model

Before diving into the essential steps of expanding into Italy, let’s first understand what an Employer of Record (EOR) is and how it can help. An Employer of Record (EOR) in Italy is a third-party organisation that takes on the legal responsibilities of employing staff on behalf of your company. While you still direct your team’s daily activities and goals, the EOR manages payroll, taxes, employee benefits, and compliance with Italian labour laws.

Let’s say your business wants to hire a sales representative in Milan. Rather than establishing a legal entity in Italy, the EOR can:

• Hire the employee on your behalf and handle all necessary documentation and contracts.
• Manage payroll and withhold the appropriate taxes and social security contributions.
• Handle employee benefits like health insurance and paid leave.
• Ensure compliance with Italy’s employment laws, including regulations on wages, working hours, and anti-discrimination policies.

This solution allows businesses to operate in the Italian market without the complexities of setting up a local entity, making it a strategic choice for companies aiming for rapid growth.

Managing talent selection and administrative tasks with an EOR

Choosing the right team members is essential for a successful expansion into Italy. By working with an EOR, you retain full control over your recruitment process. Whether you’re transferring employees from your home country or hiring locally, you can select the best candidates to fit your business goals. Once you’ve made your choice, the EOR takes over the administrative and legal aspects of the hiring process.

Key advantages of using an EOR in Italy

1. Handling intricate labour laws

Italy’s labour market is governed by detailed regulations that define everything from employment contracts and working conditions to employee rights and obligations. Different types of contracts, collective agreements, and sector-specific regulations make compliance challenging. An EOR has the expertise to manage these requirements, helping you stay compliant and avoid potential legal issues.

For example, a digital services company from Germany faced challenges guiding Italy’s regulations on temporary contracts. With the help of an EOR, they could comply with local laws, ensuring smooth operations and employee satisfaction.

2. Simplifying payroll and taxation

Administering payroll in Italy involves understanding complex tax rules and social security contributions. Employers must navigate Italy’s tiered tax system and meet specific contribution rates for pensions and healthcare. 

Beyond the regular payroll and tax obligations, there are also unique programs, such as the Rientro dei Cervelli, or “Lavoratori Impatriati” initiative, launched in 2019, encourages skilled professionals to return to Italy by offering a reduced tax rate for their first five years. Initially, it provided a 70% tax reduction on income earned in Italy, but starting January 1, 2024, this will change to a 50% reduction. This tax incentive boosts net income, making working in Italy more attractive.

I once cooperated with a French firm expanding into Italy. They struggled with the intricacies of the country’s tax codes and contribution requirements. By working with an EOR, they avoided costly mistakes and maintained compliance effortlessly.

3. Reducing legal risks

Employing staff in Italy may come with different risks, including legal disputes, misunderstandings of local laws, and managing terminations. An EOR mitigates these risks by serving as the legal employer and offering local expertise.

For instance, you may need help with misinterpreting the Italian notice period layoff regulations. The EOR can guide the termination process, helping your company handle the situation legally and efficiently.

4. Faster market entry

Establishing a legal entity in Italy can be time-consuming and require several registrations and administrative approvals. However, by partnering with an EOR you can speed up this process. With their infrastructure already in place, an EOR enables you to hire and start operations quickly.

One American retailer I worked with wanted to enter the Italian market in time for a busy shopping season. Thanks to their collaboration with an EOR, they were able to set up their workforce in just a few weeks, avoiding delays and capturing new market opportunities.

5. Adaptable workforce management

An EOR offers flexibility in managing your workforce, whether you need full-time employees, contractors, or temporary staff. Employment regulations differ in Italy based on contract types, and an EOR ensures compliance regardless of the arrangement. This adaptability is crucial in industries with fluctuating demand or project-based work.

Once, a Italian consulting firm needed to quickly assemble a project team in Milan. With the EOR’s help, they hired local contractors and scaled down smoothly once the project concluded without worrying about complex contract terminations.

The EOR hiring process in Italy

The EOR hiring process in Italy typically involves several stages designed to ensure compliance and provide a smooth onboarding experience for employees.

1. Needs assessment and consultation: The process begins with a consultation to determine your hiring needs, such as the number of employees, job roles, and desired timelines.

2. Employment contract preparation: The EOR drafts employment contracts that are compliant with Italian laws, detailing salary, benefits, working hours, and termination clauses.

3. Payroll and benefits setup: The EOR establishes a payroll system to manage salary payments, tax withholdings, and social security contributions. Employee benefits like health insurance and pension plans are set up per Italian regulations.

4. Employee onboarding: The EOR handles onboarding, collecting necessary documents, getting work permits (if applicable), and informing employees of their rights and responsibilities under Italian law.

5. Ongoing support and management: The EOR provides ongoing assistance, including payroll processing, compliance monitoring, and HR support. They handle any issues that arise, such as contract amendments or disputes.

6. Regular reporting and updates: The EOR keeps in touch with your business, providing reports on payroll, compliance, and other key metrics.

Make hiring easier and reduce risks in Italy

Expanding into Italy offers exciting business opportunities but also involves navigating the country’s complex labour laws and compliance requirements. An Employer of Record in Italy can be a valuable partner, providing expertise, minimising risks, and simplifying the hiring process.

If you’re considering expanding into Italy and want to make hiring easier while reducing risks, contact us today to learn how we can support your business expansion and help you succeed in the Italian market.