Europe

Italian Labour Reform: What Will the New Year Bring?

Posted on January 3, 2012 by Ius Laboris

By Valeria Morosini of Toffoletto De Luca Tamajo e Soci (the Italy member of Ius Laboris)

On the 27th December 2011, a new law that will greatly reform certain aspects of Italian labour law was published in the Italian official gazette. The law will enter into force at the beginning of the new year and will bring major changes to company tax deductions and pensions.

Starting in January 2012, companies will receive tax deductions as a reward for employing workers under the age of 35 and female employees; these two groups make up the largest percentage of unemployed persons in Italy. However, the biggest change will come in the area of pension reform.

Italy has long struggled with the cost of its pension payments. In 2007, the pension system accounted for 14% of Italy's GDP, the highest in the EU. These high costs, coupled with an ageing population and low birth rate, have prompted the government to completely reform the Italian pension system:

  • Starting from January 2012, all pensions will be calculated on contributions, and not the current earnings-based system;
  • Retirement age in 2012 will rise to 62 or 63.5 years, dependent on employment status, and will progressively rise to 66 in 2018.

The new Government led by president Mario Monti, presented this law with the purpose of safeguarding the Italian market. Considering the state of financial affairs across the European Union, it could be likely that other Member States will follow the trend.
Tags: European Union, Italy, Tax Relief
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