Employer of Record in Italy must be seen as a form of labour leasing, also known as staffing work, staff leasing or employee leasing.
Employer of Record services involves companies hiring employees through specialized and licensed agencies, providing flexibility and agility in managing their workforce. In this article, we will explore the intricacies of labour leasing in Italy, examining its legal framework, benefits, challenges, and impact on the Italian economy.
The structure of EOR involves several key elements and participants.
Here's a breakdown of how Employer of Record typically works in Italy:
Client Company
The client company is the business that requires staff to be employed in Italy for temporary or open-ended projects without having an entity established in Italy.
EOR (Labour Leasing Provider or staffing agency)
The Employer of Record, also known as the labor leasing agency, acts as the intermediary between the client company and the employees. The EOR employs the workers on behalf of the Client Company in Italy.
Leased Workers (EOR Employees)
Leased workers are individuals employed by the Employer of Record provider. They are assigned to work at the client company's (often virtually) to fulfil specific roles, projects, or tasks. These workers are legally employed by the staff leasing provider.
Employment Contract
EOR workers have employment contracts with the staffing agency (EOR provider), outlining their roles, responsibilities, compensation, and the duration of their employment. The contract also specifies that their employment relationship is with the Employer of Record, not the client company.
Client's Requirements
The client company communicates its specific requirements to the Employer of Record provider in Italy, including the number of workers needed, duration of the assignment, and any other relevant details.
EOR's Responsibilities in Italy
The staffing agency might be responsible for recruiting suitable candidates (optional), conducting background checks (optional), providing necessary training, handling payroll and benefits, and ensuring legal compliance with Italian labor laws and regulations.
Onboarding and Placement
Once selected, EOR workers are onboarded by the staffing agency. They are then placed at the client company's management to perform their assigned tasks under the supervision of the client.
Supervision and Work Allocation
While the day-to-day tasks and supervision of leased workers occur at the client's workplace (whether it is physical or virtual), the Employer of Record remains responsible for overall HR management, including performance reviews, conflict resolution, and addressing any employment-related issues.
Payment and Invoicing
The client company pays the EOR provider in Italy for the services of the leased employees. The Employer of Record, in turn, pays the leased employees their salaries and handles deductions, taxes, and other payroll-related tasks.
Duration and Transition
Assignments can vary in duration, from short-term projects to long-term open-ended contracts. At the end of the assignment, the client and the Italian EOR agency may choose to extend the contract, transition the worker to the Client, or end the employment relationship.
Legal Framework
In Italy, labour leasing is regulated by Legislative Decree no. 276/2003, which ensures the protection of clients and leased workers' rights. The legislation outlines the rights and obligations of both the leased employees and the hiring company. These regulations emphasize fair treatment, non-discrimination, and equal pay for leased employees, providing a robust legal foundation for employer of record practices.
Benefits of Labour Leasing in Italy
Flexibility
One of the primary advantages of labour leasing is its flexibility. Companies can quickly adapt to changing market demands by adjusting their workforce without the complexities associated with permanent employment.
Cost-Efficiency
Hiring staff through EOR agencies can be cost-effective for businesses, as they avoid long-term commitments such as establishing an entity in Italy.
Reduced Administrative Burden
Employer of Record providers handle administrative tasks, such as payroll processing, taxes, and compliance, allowing businesses to focus on core activities.
Challenges and Concerns
While labour leasing offers several benefits, it is not without challenges. One concern is the unlicensed activity of a conspicuous number of Employer of Record providers operating in Italy.
What make things even worst, is that the unaware clients unaware clients engaging with unlicensed Employer of Record (EOR) providers in Italy may face substantial fines and severe business consequences.
The international client will potentially:
- be fined up to EUR 70 per day worked by the employee retroactively;
- be forced to establish an entity in Italy;
- retroactively repay (once again) social security contributions starting from the first day of employment.
A client wanting to engage with an EOR service provider in Italy should make sure their name come up in the Italian official Register for licensed staff leasing companies here: https://myanpal.anpal.gov.it/albi-informatici/
Also, the Employer of Record agency in Italy must state the ministerial labour leasing license number in the service contract with the client and in the employment contract with the employee.
Labour Leasing and the Italian Economy
Labour leasing plays a significant role in Italy's economy, contributing to its overall flexibility and competitiveness. By enabling businesses both Italian and international to adjust their workforce according to market demands, labour leasing supports economic growth and innovation. It fosters entrepreneurship by allowing businesses to focus on their core activities while accessing the necessary talent when required.
Furthermore, the presence of a well-regulated labour leasing sector enhances Italy's attractiveness to foreign investors.
Companies can tap into the Italian market via an Employer of Record provider, knowing they can easily scale their workforce based on market needs, thereby promoting economic stability and foreign direct investment.
Conclusion
Employer of Record in Italy is a legal and compliant activity only if it is carried out by a licensed serviced provider.
To avoid significant negative consequences, it is advisable to do a thorough check on the legal structure and framework used by the selected provider before signing up with them.