Working in Italy: How to understand your payslip and about the taxes you pay

Aug 30, 2023
How to understand your payslip if you work in Italy

How to understand your payslip if you work in Italy? If you work in Italy as an employee, you will receive a monthly “busta paga”, which is the Italian version of payslip. Italian payslips can be a little bit difficult to understand as there are different sections and items with many technical words.

How payslips are structured in Italy

Generally speaking, an Italian payslip is divided in three sections.

Payslips may vary a little bit depending on each company. Below, there is an example of a standard Payslip.

Section 1

The first section contains information about the employer, the employee and it also includes the base salary of the employee based of the classification level and the collective agreement applied to the case.
More specifically, this section contains INAIL number, INPS number, personal information of the worker (personal data, qualification, length of service, etc.), the paid period (month), etc. This section also indicates those items that make up the worker’s de facto wages: base salary which is determined by the collective agreement on the basis of the category, the worker’s qualification and the seniority steps, which are periodic increases in wages established by the collective agreements; contingency, E.D.R.

What is INAIL?
INAIL stands for Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro and it means National Institute for Insurance against Accidents at Work. It is a public non-profit entity that safeguards workers against physical injuries and occupational diseases.

What is INPS?
INPS stands forIstituto Nazionale della Previdenza Sociale and it means National Institute for Social Security.

Section 2

The second section, which is also known as the body of the payslip and it is the main part of it. In this section, you will find the variable items of the month that directly impacts your actual salary. For example: how many hours you worked, any hours of holidays that were taken (including any specific leaves), public holidays, social security contributions and tax withholdings.

In some specific periods of the year, other items may also be reported, such as the thirteenth (tredicesima) or fourteenth (quatordicesima) month salary, advances on severance pay (offically known as TFR), productivity bonuses, etc.

After summing up all the variable items for the month (gross pay), the social security contributions are calculated. They are those that the employer is required to pay to INPS to guarantee the employee the retirement and invalidity pension, sickness and maternity leave and family allowances.

The percentage of withholding due for social security and welfare reasons varies according to the type of contract.

Once the social security contributions due by the worker have been deducted, we can now see the “taxable income”. The taxes you pay in your payslip in Italy are: IRPEF, regional taxes, and town taxes.  A part of these contributions is paid by the worker and are withheld in the pay slip, while the remaining amount is paid by the employer.

What is the meaning of IRPEF in Italy?

IRPEF stands for Imposta sul Reddito delle Persone Fisiche and it refers to Personal Income Tax. It is a progressive tax divided as follows:

  • up to €15,000:23%
  • between €15,000 and €28,000: 25%
  • between €28,000 and €50,000: 35%
  • Over €50,000: 43%

Moreover, “regional” and “communal” taxes will be also applied.

Section 3

The third section contains the amount of social security and tax deduction summed up and the net salary. Also, this section includes a summary of the annual leaves (for example: used and remaining days and hours).

Additional Information: Payment of Social Security and Bilateral Agreements

Some countries have signed bilateral agreements with Italy regarding the payment of social security. In those cases, specific rules will apply to the seconded workers (for example: those with ICT work permit and Service Agreement work permit) coming from those countries.

For further information please see, INPS: Bilateral agreements with Third countries

This article was written by Barbara Burroni and Yuu Shibata

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