Taking on your first (or your latest) employee is a strategic choice that has to be planned both financially and administratively. The starting point is to understand that the Retribuzione Annua Lorda (RAL, gross annual salary) agreed with the employee is only part of the picture: the actual cost to the company is appreciably higher, while what the employee takes home (the net pay) is lower. In between sits what is known as the tax and social security wedge. This guide shows, with a worked example, how you get from the RAL to the full company cost, which obligations apply when hiring and managing the relationship, the main types of contract and how the TFR works.
1. From the RAL to the company cost
The RAL is the gross annual salary set out in the contract, normally including the additional monthly instalments. On top of that base come the charges borne by the employer:
RAL (including the accruals for the 13th/14th monthly salary)
+ INPS contributions payable by the company (about 28%-32%, depending on sector, job grade and size)
+ INAIL premium (varies with the risk class of the work)
+ TFR accrual (about 7,41%, i.e. 1/13,5)
= TOTAL ANNUAL COMPANY COST
For a clerical or manual worker the typical ratio of company cost to RAL is around 1,35 – 1,45: every 100 euro of RAL costs the business about 135-145 euro, plus indirect costs (meal vouchers, welfare benefits, training, equipment).
2. INPS and INAIL contributions, TFR and accruals
INPS contributions. The share borne by the employee is ordinarily 9,19% of the contributory pay, rising to 9,49% on the portion above the first annual band of pensionable pay. The share borne by the company covers, besides the IVS pension component, NASpI unemployment insurance, CIG wage guarantee where due, sickness, maternity and various funds: broadly 28%-32%. The overall rate normally exceeds 38%-40%.
INAIL. Borne entirely by the employer, the workplace injury premium depends on the risk class of the work: from very low figures (office work, under 0,5%) to high ones (construction, over 7%). It is paid by self-assessment.
TFR (trattamento di fine rapporto, the Italian end-of-service allowance). Each year the company sets aside the eligible pay divided by 13,5, about 7,41%, net of the 0,50% payable to INPS. The accrued TFR is revalued every 31 December by a fixed 1,5% plus 75% of the ISTAT price increase.
Accruals. The 13th monthly salary accrues at 1/12 per month (8,33%) and is paid in December. The 14th monthly salary is provided for only by some CCNL (national collective agreements: retail, services, tourism) and is paid in June or July.
3. The tax wedge and the 2025/2026 measures
The tax wedge is the difference between the labour cost borne by the company and the net pay received by the employee. From 2025 the relief for low and middle incomes is structural and works through two instruments:
Somma integrativa (untaxed supplementary sum) for employment income up to 20.000 euro, calculated as a percentage of pay: broadly 7,1% up to 8.500 euro, 5,3% between 8.500 and 15.000 euro, 4,8% between 15.000 and 20.000 euro;
Additional IRPEF tax credit for incomes between 20.000 and 40.000 euro: a fixed amount (of the order of 1.000 euro) up to 32.000 euro, then tapering to zero at 40.000 euro.
IRPEF (Italian personal income tax) still has three brackets: for 2025 they were 23% (up to 28.000 euro), 35% (28.000-50.000) and 43% (over 50.000). For 2026 the second rate is expected to fall from 35% to 33%(the rate and the threshold are to be confirmed in the final text of the Budget Law). The employment tax credits (art. 13 TUIR) also apply, decreasing as income rises.
Please note: the amounts, percentages and thresholds of the somma integrativa, of the additional tax credit and of the IRPEF rates for 2026 must be checked against the final text of the 2026 Budget Law and the implementing circulars.
4. Net pay, gross pay and company cost: an example (RAL 25.000 euro)
A clerical employee with a RAL of 25.000 euro (including the 13th monthly salary), indicative employer contributions of 30% and an indicative INAIL premium of 1,5%. The figures are indicative: they vary with the CCNL, the risk class and the individual tax position.
Item (cost to the company)
Calculation
Annual amount
Gross annual salary (RAL)
base
25.000 euro
INPS contributions payable by the company
about 30%
7.500 euro
INAIL premium (indicative)
about 1,5%
375 euro
TFR accrual
25.000 / 13,5
1.852 euro
Total annual company cost
sum
34.727 euro
The cost/RAL ratio is about 1,39. Now the step from the RAL to the net pay:
Item (pay slip)
Calculation
Annual amount
Gross pay
base
25.000 euro
INPS contributions payable by the employee
9,19%
– 2.298 euro
Taxable base
25.000 – 2.298
22.702 euro
Gross IRPEF (23%)
23% of 22.702
5.222 euro
Employment tax credits
indicative
– 2.395 euro
Additional tax credit (20.000-32.000)
indicative
– 1.000 euro
Net IRPEF
5.222 – 2.395 – 1.000
1.827 euro
Regional and municipal surtaxes
about 1,7%
– 400 euro
Net annual pay
22.702 – 1.827 – 400
20.475 euro
In short: the company spends about 34.700 euro, the employee receives about 20.500 euro net (about 1.575 euro a month over 13 monthly payments). The overall wedge is about 14.200 euro.
5. Obligations when hiring
Mandatory notification (UNILAV) to the employment services, by midnight on the day before the employment starts.
Letter of engagement setting out the essential terms (duties, grade, CCNL, pay, place of work, hours, probationary period).
Libro Unico del Lavoro (LUL, the single employment register): registration and recording of attendance and pay, by the end of the following month.
Monthly pay slip to be prepared and delivered.
Pre-employment medical examination where required, before the employee starts work.
Health and safety training (general and specific to the risk level), the DVR risk assessment document, appointment of the RSPP prevention officer, the RLS safety representative where applicable, and personal protective equipment.
INAIL registration and INPS employer number for the first hire.
6. Types of contract
Open-ended contract: the standard form of employment relationship, with no end date. It is the most stable arrangement for both company and employee, and the one on which career development is built.
Fixed-term contract: an ordinary maximum duration of 24 months counting extensions and renewals; beyond 12 months a specific justifying reason is required. An additional NASpI contribution of 1,40% applies, increased by 0,50% on each renewal.
Apprenticeship: a training contract in three forms (for a vocational qualification or diploma; professionalising, the most common; higher education and research). It allows the apprentice to be graded up to two levels below, or paid a percentage of the standard rate, and carries a reduced contribution rate, in exchange for the obligation to actually provide the training.
7. The TFR and how it is managed
The TFR is deferred pay settled when the employment ends. Within six months of being hired the employee chooses where the accruing amounts go:
Kept within the company (businesses with fewer than 50 employees), with an annual accrual and revaluation;
Supplementary pension scheme (a negotiated fund, an open fund or a PIP individual plan).
For companies with 50 or more employees, TFR not allocated to a supplementary pension scheme goes to the Fondo di Tesoreria INPS (the INPS treasury fund). If the employee makes no choice, the amounts are tacitly allocated to the fund designated by the CCNL. TFR paid out is subject to separate taxation.
8. Recurring obligations
Obligation
Frequency
Usual deadline
Pay slip and LUL
monthly
end of the following month
F24 (INPS contributions and IRPEF withholdings)
monthly
16th of the following month
UniEmens filing
monthly
end of the following month
INAIL self-assessment
annual
16 February
Certificazione Unica
annual
16 March
Modello 770
annual
31 October
Annual tax and contribution adjustment
annual
December / January
9. Practical notes and points to check for 2026
This guide is for information only and does not replace tailored advice: the exact calculation of cost and net pay depends on the CCNL applied, the job grade, the INAIL risk class, the size of the company and the individual employee’s tax position. The figures to be confirmed for 2026 are in particular: the level of the second IRPEF rate and the width of the bracket; the percentages and thresholds of the somma integrativa and of the additional tax credit in the tax wedge relief; the detailed contribution rates by CCNL and sector; the revalued INPS ceiling and contribution bands. Studio Antolini is available to simulate the labour cost for your specific case and to handle the obligations in full.
Hiring an employee: labour cost and obligations
Taking on your first (or your latest) employee is a strategic choice that has to be planned both financially and administratively. The starting point is to understand that the Retribuzione Annua Lorda (RAL, gross annual salary) agreed with the employee is only part of the picture: the actual cost to the company is appreciably higher, while what the employee takes home (the net pay) is lower. In between sits what is known as the tax and social security wedge. This guide shows, with a worked example, how you get from the RAL to the full company cost, which obligations apply when hiring and managing the relationship, the main types of contract and how the TFR works.
1. From the RAL to the company cost
The RAL is the gross annual salary set out in the contract, normally including the additional monthly instalments. On top of that base come the charges borne by the employer:
RAL (including the accruals for the 13th/14th monthly salary)
+ INPS contributions payable by the company (about 28%-32%, depending on sector, job grade and size)
+ INAIL premium (varies with the risk class of the work)
+ TFR accrual (about 7,41%, i.e. 1/13,5)
= TOTAL ANNUAL COMPANY COST
For a clerical or manual worker the typical ratio of company cost to RAL is around 1,35 – 1,45: every 100 euro of RAL costs the business about 135-145 euro, plus indirect costs (meal vouchers, welfare benefits, training, equipment).
2. INPS and INAIL contributions, TFR and accruals
INPS contributions. The share borne by the employee is ordinarily 9,19% of the contributory pay, rising to 9,49% on the portion above the first annual band of pensionable pay. The share borne by the company covers, besides the IVS pension component, NASpI unemployment insurance, CIG wage guarantee where due, sickness, maternity and various funds: broadly 28%-32%. The overall rate normally exceeds 38%-40%.
INAIL. Borne entirely by the employer, the workplace injury premium depends on the risk class of the work: from very low figures (office work, under 0,5%) to high ones (construction, over 7%). It is paid by self-assessment.
TFR (trattamento di fine rapporto, the Italian end-of-service allowance). Each year the company sets aside the eligible pay divided by 13,5, about 7,41%, net of the 0,50% payable to INPS. The accrued TFR is revalued every 31 December by a fixed 1,5% plus 75% of the ISTAT price increase.
Accruals. The 13th monthly salary accrues at 1/12 per month (8,33%) and is paid in December. The 14th monthly salary is provided for only by some CCNL (national collective agreements: retail, services, tourism) and is paid in June or July.
3. The tax wedge and the 2025/2026 measures
The tax wedge is the difference between the labour cost borne by the company and the net pay received by the employee. From 2025 the relief for low and middle incomes is structural and works through two instruments:
Somma integrativa (untaxed supplementary sum) for employment income up to 20.000 euro, calculated as a percentage of pay: broadly 7,1% up to 8.500 euro, 5,3% between 8.500 and 15.000 euro, 4,8% between 15.000 and 20.000 euro;
Additional IRPEF tax credit for incomes between 20.000 and 40.000 euro: a fixed amount (of the order of 1.000 euro) up to 32.000 euro, then tapering to zero at 40.000 euro.
IRPEF (Italian personal income tax) still has three brackets: for 2025 they were 23% (up to 28.000 euro), 35% (28.000-50.000) and 43% (over 50.000). For 2026 the second rate is expected to fall from 35% to 33%(the rate and the threshold are to be confirmed in the final text of the Budget Law). The employment tax credits (art. 13 TUIR) also apply, decreasing as income rises.
Please note: the amounts, percentages and thresholds of the somma integrativa, of the additional tax credit and of the IRPEF rates for 2026 must be checked against the final text of the 2026 Budget Law and the implementing circulars.
4. Net pay, gross pay and company cost: an example (RAL 25.000 euro)
A clerical employee with a RAL of 25.000 euro (including the 13th monthly salary), indicative employer contributions of 30% and an indicative INAIL premium of 1,5%. The figures are indicative: they vary with the CCNL, the risk class and the individual tax position.
Item (cost to the company)
Calculation
Annual amount
Gross annual salary (RAL)
base
25.000 euro
INPS contributions payable by the company
about 30%
7.500 euro
INAIL premium (indicative)
about 1,5%
375 euro
TFR accrual
25.000 / 13,5
1.852 euro
Total annual company cost
sum
34.727 euro
The cost/RAL ratio is about 1,39. Now the step from the RAL to the net pay:
Item (pay slip)
Calculation
Annual amount
Gross pay
base
25.000 euro
INPS contributions payable by the employee
9,19%
– 2.298 euro
Taxable base
25.000 – 2.298
22.702 euro
Gross IRPEF (23%)
23% of 22.702
5.222 euro
Employment tax credits
indicative
– 2.395 euro
Additional tax credit (20.000-32.000)
indicative
– 1.000 euro
Net IRPEF
5.222 – 2.395 – 1.000
1.827 euro
Regional and municipal surtaxes
about 1,7%
– 400 euro
Net annual pay
22.702 – 1.827 – 400
20.475 euro
In short: the company spends about 34.700 euro, the employee receives about 20.500 euro net (about 1.575 euro a month over 13 monthly payments). The overall wedge is about 14.200 euro.
5. Obligations when hiring
Mandatory notification (UNILAV) to the employment services, by midnight on the day before the employment starts.
Letter of engagement setting out the essential terms (duties, grade, CCNL, pay, place of work, hours, probationary period).
Libro Unico del Lavoro (LUL, the single employment register): registration and recording of attendance and pay, by the end of the following month.
Monthly pay slip to be prepared and delivered.
Pre-employment medical examination where required, before the employee starts work.
Health and safety training (general and specific to the risk level), the DVR risk assessment document, appointment of the RSPP prevention officer, the RLS safety representative where applicable, and personal protective equipment.
INAIL registration and INPS employer number for the first hire.
6. Types of contract
Open-ended contract: the standard form of employment relationship, with no end date. It is the most stable arrangement for both company and employee, and the one on which career development is built.
Fixed-term contract: an ordinary maximum duration of 24 months counting extensions and renewals; beyond 12 months a specific justifying reason is required. An additional NASpI contribution of 1,40% applies, increased by 0,50% on each renewal.
Apprenticeship: a training contract in three forms (for a vocational qualification or diploma; professionalising, the most common; higher education and research). It allows the apprentice to be graded up to two levels below, or paid a percentage of the standard rate, and carries a reduced contribution rate, in exchange for the obligation to actually provide the training.
7. The TFR and how it is managed
The TFR is deferred pay settled when the employment ends. Within six months of being hired the employee chooses where the accruing amounts go:
Kept within the company (businesses with fewer than 50 employees), with an annual accrual and revaluation;
Supplementary pension scheme (a negotiated fund, an open fund or a PIP individual plan).
For companies with 50 or more employees, TFR not allocated to a supplementary pension scheme goes to the Fondo di Tesoreria INPS (the INPS treasury fund). If the employee makes no choice, the amounts are tacitly allocated to the fund designated by the CCNL. TFR paid out is subject to separate taxation.
8. Recurring obligations
Obligation
Frequency
Usual deadline
Pay slip and LUL
monthly
end of the following month
F24 (INPS contributions and IRPEF withholdings)
monthly
16th of the following month
UniEmens filing
monthly
end of the following month
INAIL self-assessment
annual
16 February
Certificazione Unica
annual
16 March
Modello 770
annual
31 October
Annual tax and contribution adjustment
annual
December / January
9. Practical notes and points to check for 2026
This guide is for information only and does not replace tailored advice: the exact calculation of cost and net pay depends on the CCNL applied, the job grade, the INAIL risk class, the size of the company and the individual employee’s tax position. The figures to be confirmed for 2026 are in particular: the level of the second IRPEF rate and the width of the bracket; the percentages and thresholds of the somma integrativa and of the additional tax credit in the tax wedge relief; the detailed contribution rates by CCNL and sector; the revalued INPS ceiling and contribution bands. Studio Antolini is available to simulate the labour cost for your specific case and to handle the obligations in full.
Download the guide in Word
Leave your name and email address: you receive the guide, and updates whenever the rules change. The download starts immediately after you submit.