There are some unusual payroll rules in other countries that may be unfamiliar to global mobility professionals, and there can be statutory bonuses or salary payments that must be included in the annual compensation package. One of our clients assigning employees to Italy was asking why there were additional months of salary included in the payroll invoice we prepared for them.
If they did not know about this additional salary payment before assigning the employee, it could come as a surprise and here is how we explained it to them:
What is the 14th Month Salary?
In Italy, the payroll for some employees (resident or expat) is made in 14 equal payments, rather than just the regular 12-month calendar payments. The two additional months are paid in December (just before Christmas Eve) and on the 1st of July. These statutory payments are a required part of the regular payroll process, and are the result of a collective bargaining agreement with the Italian government.
What this means for HR departments with staff in Italy is that the annual compensation amount will have to be adjusted to avoid overpayment or unexpected withholding. If an employee’s salary was offered without knowing about these additional months of payment, that would be an unforeseen assignment expense and a windfall for the employee.
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When is it paid?
The 13th month is paid in December and the 14th month is paid in July. The additional months do not include family allowances, which are based on the 12-month calendar.
Here is the law that sets out the 14th month payment:
“Art. 208 Fourteenth Monthly
The personnel included in the scope of this contract will be paid on July 1 of each year, an amount equal to the monthly salary of the fact referred to in art. 195 Acting at 30 June immediately preceding (14th month), excluding family allowances”
Who is it for?
Not every employee is paid the 13th and 14th month bonuses. In general, it is for employees in the commerce industry, and managers or executives, which would include most expats on assignment to Italy.
How Shield GEO can help
The Shield GEO employer of record solution helps our clients manage all aspects of payroll in Italy, and that involves calculating the payment of the 13th and 14th month bonuses to be included in the annual payroll. We prepare the monthly payroll invoice for our clients, along with required contributions or withholding, and then the employee is paid through our local employer of record in Italy.
What this means is that our clients are assured of running a compliant and accurate payroll in Italy, and that the 13th and 14th month bonuses are paid on time and as part of the original compensation package. This is one example of how complex it can be to run a DIY payroll in a foreign country, with the many unique employment and compensation rules.
Need help employing in Italy? Get in touch!