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Italy: Payout of TFR (Trattamento di Fine Rapporto)

By Kira Rubiano

1450862163_55126This is a reminder that back in March 2015, a legislation change occurred in Italy that has payroll impact. Employees in the private sector with at least six months’ employment with their current employers can request a payout or liquidation of their accrued TFR (Trattamento di Fine Rapporto) every pay cycle as an addition to their salaries. This will only be available until June 30, 2018, as this is an experimental measure. It will be taxed normally for income tax but not subject to social security.

Prior to March 1, TFR (accrued at 7% of an employee’s earning annually) was paid at the end of a working relationship or was able to be partly or totally anticipated in the case of the employee’s special needs (buying a property, for example).  

The government is putting the onus on the employee to make his or her choice as to what to do with his or her TFR savings.

How is the amount that is paid out on a monthly basis determined? Your payroll provider’s payroll system calculates monthly the amount of the TFR cost that must be accrued by using the parameters established at the end of the previous year and the salary amounts paid out during the current year. The overall figures for the month of these calculations are shown on the face of each pay slip issued to each employee. The annual figures are trued up at the end of the December payroll processing, which includes the government’s adjustment to the official inflation rate published around January 16 every year.

Does the employer legally need to reach out to its employees and advise them of this, and do the employees need to provide an answer as to whether they wish to receive this payout? Although there is no legal obligation, Celergo does recommend that you reach out to your employees if they are not aware of this change. They should communicate their preference to you. The form called Qu.I.R., should be populated and returned should they choose to liquidate their TFR. This should then be communicated to your payroll provider.

Lastly, employers who do not intend to immediately pay with their own funds the accruing share of TFR can have access to a loan secured by a specific guarantee issued by the guarantee “Fund for the access to loans” with INPS and state guarantees.