Employment Contract Changes in Italy

Until 2018, Italy preferred using fixed-term employment agreements when hiring employees within organizations. While certain situations are preferable for the use of a fixed-term contract (such as when an employee will be hired to cover another employee’s leave of absence), having a majority of all employment agreements in Italy as fixed-term made employment, in general, more complicated than necessary.

New legislation has been passed in order to discourage the use of fixed-term employment contracts, and instead encourage companies offering open-ended employment contracts. Based on this new legislation, the maximum length of fixed-term contracts has been shortened (to a maximum of 24 months) and there are now only two primary situations where a fixed-term contract will be viewed as a legitimate/applicable employment offering:

  • In order to support temporary or objective needs (such as replacing another worker on a leave of absence, or to see through the completion of a specific project)
  • In order to support temporary, significant, and unpredictable peaks in overall business needs.

Furthermore, Italy has committed to avoid fixed term contracts for more than 20% of the overall employees of a company (or a maximum of 30% for organizations with collective bargaining agreements in place). It is important to note that these regulations are also applicable for companies hiring temporary workers through an agency, and that the rate of fixed term contracts permissible within a business also includes the number of agency-hired temporary workers as well.

Employers should also be aware of other aspects of the new legislation:

  • Fixed term contracts must not exceed 24 months (previous to this legislation stated a maximum of 36 months)
  • A specific cause may not be absolutely necessary for fixed-term agreements for the first 12 months in issue
  • All renewal applications must be submitted with an absolute and specific cause (applicable for all fixed-contract lengths under 24 months)
  • Employers are responsible for paying all costs related to renewals (including unemployment social security provisions)
  • There is a maximum of 4 contract extensions per fixed-term contract (totaling under 24 months in culmination)
  • Employees have the option to challenge the validity of a fixed-term employment agreement within 180 days of issuance (previously only had 120 days to challenge)

The overall goal of this legislation is to provide workers in Italy with more job security. This means that the majority of employees in Italy will have to worry less about their future employment potential and be able to focus more on the roles that they are currently filling. It is stressful for an employee to constantly be looking for a new job or a new workplace every 2 to 3 years. With the reduction in fixed-term employment contracts, the government hopes that more employees will be able to stay within one company for a greater period of time, and that this security will lead to an increased sense of well-being and encourage more work-life balance for the entire nation.

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