Introduction to Remote Hiring in Italy
Remote work has rapidly gained traction in Italy, mirroring global employment trends. Italy’s skilled labor force, strong educational institutions, and strategic geographic location make it an appealing destination for international companies seeking to expand their workforce.
However, remote hiring in Italy comes with a set of challenges, particularly for foreign companies unfamiliar with the intricacies of Italian labor and tax laws. Some of the major hurdles include:
- Navigating complex local employment regulations
- Drafting legally compliant employment contracts in Italian
- Registering for social security contributions (INPS)
- Managing payroll taxes and benefits correctly
To overcome these barriers, companies typically consider two main options: establishing a legal entity in Italy or partnering with an Employer of Record (EOR). Each has its pros and cons, and the decision ultimately depends on your business goals, urgency, and resource capacity.
EOR vs. Setting Up an Entity in Italy
Factors to Consider When Choosing EOR or Entity Establishment
When evaluating whether to establish a legal entity or use an EOR in Italy, several critical factors come into play:
Speed of Hiring: Setting up a legal entity in Italy can take several months, involving bureaucratic processes such as company registration, acquiring a VAT number, and setting up payroll systems. An EOR, on the other hand, allows companies to onboard employees within a matter of days.
Business Goals: For companies testing the Italian market or planning to hire a few employees, EOR offers a flexible and scalable solution. In contrast, a legal entity is more suited for businesses with long-term strategic goals and a significant number of employees.
Administrative and Operational Burden: Establishing an entity comes with ongoing responsibilities like tax filing, social security administration, and labor law compliance. EORs manage these functions on your behalf, significantly reducing your operational workload.
Why Time to Market Matters for Global Companies
Global companies often need to enter markets quickly to capitalize on new opportunities. Time to market is crucial for several reasons:
- Competitive Advantage: Hiring fast can help secure top local talent before competitors do.
- Business Continuity: Delays in hiring due to legal or administrative issues can lead to stalled projects or missed deadlines.
- Cost Efficiency: Each month spent waiting to set up an entity incurs opportunity costs and potential financial losses. EOR services eliminate this downtime by enabling fast onboarding.
Cost Implications of Entity vs. EOR in Italy
Setup and Maintenance Costs
Setting up a legal entity involves expenses like incorporation fees, notary costs, local representative salaries, and ongoing operational costs for HR, legal, and accounting teams. These can quickly add up, especially for small or mid-sized businesses.
Using an EOR, on the other hand, usually involves a service fee (typically 10–15% of the employee’s gross salary). There are no initial setup costs, and all compliance, payroll, and benefits administration are included in the monthly fee.
Compliance Costs
Legal entities must ensure adherence to local laws, file regular tax returns, manage contracts, and stay updated on regulatory changes. These compliance tasks often require hiring local legal consultants or in-house experts.
EOR providers simplify this by taking full responsibility for compliance. They handle labor law adherence, benefits administration, and government filings, reducing both legal risk and consulting expenses.
Time Savings
Entity establishment involves weeks or months of preparation. By contrast, EOR providers already have the infrastructure and legal presence to onboard employees within days, accelerating your hiring timeline and eliminating administrative friction.
Compliance and Legal Exposure: Entity vs. EOR
Italian labor laws are among the most protective in Europe. Employers must provide written contracts, observe collective bargaining agreements (CBAs), contribute to social security, and follow strict termination protocols.
Legal Entities: As the official employer, you are liable for all legal compliance, employee disputes, and financial penalties in case of non-compliance.
EOR Providers: An EOR becomes the legal employer and assumes full responsibility for employment law compliance. This significantly reduces your exposure to risks such as wrongful termination claims, benefit disputes, or delayed contributions.
Foreign Compliance: Setting Up a Legal Entity vs. Using EOR in Italy
Setting Up a Legal Entity
Foreign companies need to register with the Italian Chamber of Commerce, appoint a local legal representative, acquire a tax ID (Partita IVA), and establish payroll systems.
This also includes registering for INPS (social security), INAIL (workers’ compensation), and potentially adhering to sector-specific CBAs.
While this provides complete control over operations and employee management, it is time-consuming and resource-intensive.
Using an Employer of Record (EOR)
An EOR allows you to:
- Hire employees without establishing a local entity
- Stay fully compliant with employment regulations
- Manage staff while the EOR handles HR, payroll, and tax
This approach is ideal for companies looking to enter Italy quickly and compliantly with minimal legal hassle.
Switching from EOR to Entity Establishment in Italy
When is it beneficial to transition?
Transitioning from EOR to your own entity is recommended when:
- You plan to hire a large team
- You require direct management of internal policies and benefits
- Your business strategy includes a long-term presence in Italy
Key steps for a smooth transition
- Inform your EOR provider of the planned transition.
- Begin registering your legal entity while maintaining current employees under the EOR.
- Set up your payroll and compliance systems.
- Once your entity is operational, coordinate with the EOR to transfer employment contracts and benefits seamlessly.
Choose Asanify for EOR in Italy
Asanify helps businesses hire employees in Italy without the cost and delay of setting up a local legal entity. Our platform offers:
- Rapid Onboarding: Start hiring in as little as 5 business days.
- Total Compliance: We manage employment contracts, INPS contributions, payroll taxes, and benefits.
- Local Expertise: Navigate regional differences, CBAs, and statutory leave rules with ease.
We support companies of all sizes across industries to expand in Italy confidently and compliantly.
FAQs
1. What is an Employer of Record (EOR) in Italy?
An EOR is a third-party service that legally employs workers on behalf of a company while allowing the company to direct the employee’s day-to-day work.
2. How does an EOR help with labor law compliance in Italy?
The EOR ensures all contracts, payroll, and social contributions adhere to Italian labor laws.
3. What are the costs involved in using an EOR in Italy?
Typically 10–15% of the employee’s gross salary as a service fee, inclusive of compliance and payroll services.
4. What benefits do employees get under an EOR arrangement in Italy?
Standard employment benefits such as healthcare, social security (INPS), paid holidays, and maternity/paternity leave.
5. How does payroll management work with an EOR in Italy?
The EOR handles salary payments, tax deductions, and monthly reporting to Italian authorities.
6. Can EOR handle independent contractors in Italy?
Yes, but it’s essential to avoid misclassification. The EOR ensures proper contractual engagement.
7. What are the key differences between EOR and setting up an entity in Italy?
EOR is faster, lower-cost, and lower-risk. Entity setup gives full control but is slower and more expensive.
8. Is it mandatory to have written employment contracts in Italy?
Yes. Contracts must be written in Italian and follow legal and CBA requirements.
9. What are the tax obligations for foreign companies hiring in Italy?
With an entity, you must manage corporate tax, VAT, and employee tax withholdings. With an EOR, these are handled for you.
10. What are the maternity and paternity leave rules in Italy under EOR?
Maternity: 5 months fully paid. Paternity: 10 days paid. The EOR ensures these are granted per law.
11. How does health insurance work under EOR in Italy?
Employees are covered through public healthcare via INPS. EORs can offer private insurance add-ons.
12. What is INPS, and who contributes to it?
INPS is the Italian social security system. Both employer and employee make monthly contributions.
13. What is the difference between employees and contractors in Italy?
Employees have protection and benefits. Contractors are self-employed and must manage their own tax and insurance.
14. How does an EOR ensure timely salary payments in Italy?
EORs have established payroll systems to ensure all payments are timely and legally compliant.
15. What are regional tax considerations across different parts of Italy?
Certain regions levy additional income tax surcharges. EORs factor these into payroll calculations.
16. Can EOR handle multi-region compliance in Italy?
Yes. EORs like Asanify offer coverage across all Italian regions with full compliance.
17. Why is an independent contractor agreement important in Italy?
To define the working relationship clearly and avoid misclassification that could result in penalties.
18. What is a Professional Employer Organization (PEO) in Italy?
A PEO shares employer responsibilities but does not become the legal employer, unlike an EOR.
19. What are the key labor laws foreign employers need to know in Italy?
Minimum wage under CBAs, holiday entitlements, probation periods, termination protocols, and severance pay.
20. How does an EOR simplify payroll and compliance for foreign companies?
By taking full responsibility for hiring, contracting, paying, and managing employees in line with Italian law.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.