Contributory exemption under 36 from July 2022 to December

Circular Inps no. 57/2023 provides instructions, including those for UniEmens flows, for the management of social security obligations related to the contributory exemption measure provided by the 2023 Budget Law. This measure applies to indefinite-term hires and the transformation of fixed-term contracts into indefinite-term contracts made from January 1st to December 31st, 2023. The circular also provides further clarifications regarding the exemption provided by the 2021 Budget Law for the second half of 2022.

Please note that the 2021 Budget Law introduced a 100% contributory exemption on employer contributions for indefinite-term hires and transformations made between 2021 and 2022 for individuals who, at the time of the incentivized event, have not reached the age of 36 and have never been employed under an indefinite-term employment contract with the same or another employer. The maximum annual amount of the exemption is 6,000 euros for a duration of 36 months (48 months for the Southern Regions), while the pension contribution rate and the authorization of the European Commission, which issued two separate decisions, the first until December 31st, 2021, and the second until June 30th, 2022, remained unchanged. The Budget Law 2023 extended the exemption to indefinite-term hires and transformations made from January 1st to December 31st, 2023, and also increased the maximum eligible amount to 8,000 euros annually, subject to authorization from the European Commission. To ensure the full effectiveness of the incentive measure beyond June 30th, 2022, Italian authorities have notified the Commission of the extended measure provided by the 2023 Budget Law, making it subject to compliance with the Temporary Crisis and Transition Framework (TCTF) related to the Ukrainian crisis. The European Commission, through a decision dated June 19th, 2023, has authorized the granting of the aforementioned exemptions for hires/transformations made from July 1st, 2022, to December 31st, 2023.

Employers concerned

The exemptions are granted from July 1st, 2022, to December 31st, 2023, in favor of all private employers, including non-entrepreneurs, agricultural sector employers excluded, and given that the measures are granted in compliance with the Temporary Crisis and Transition Framework, the following enterprises are also excluded:

• Those operating in the financial and domestic sectors.
• Those subject to sanctions imposed by the European Union, including individuals, entities, or organizations specifically mentioned in the legal acts imposing such sanctions. It also applies to companies owned or controlled by individuals, entities, or organizations subject to sanctions imposed by the European Union, or companies operating in the industrial sector subject to sanctions imposed by the European Union, as the aid could undermine the objectives of those sanctions.

Incentivized employment relationships

The incentives apply to new indefinite-term hires (including part-time and those established in accordance with a close associational bond with a labor cooperative) and to the transformation of fixed-term contracts into indefinite-term contracts made from July 1st, 2022, to December 31st, 2023, for individuals who, at the time of the incentivized event, have not reached the age of 36 (35 years and 364 days) and have never been employed under an indefinite-term contract with the same or another employer. The following cases are excluded:

• Apprenticeship contracts.
• Domestic work contracts.
• Hires with intermittent or on-call contracts, even if indefinite-term.
• Continued employment of a worker after the apprenticeship period and indefinite-term hires/transformationsfor young individuals who, in the previous 6 months, have engaged in school-work alternation activities or apprenticeships for qualification and professional diplomas, upper secondary education diplomas, higher technical specialization certificates, or advanced training apprenticeships.

For cases of continued employment of a worker after the apprenticeship period and indefinite-term hires/transformations involving young individuals who, in the previous 6 months, have engaged in school-work alternation activities or apprenticeships for qualification and professional diplomas, upper secondary education diplomas, higher technical specialization certificates, or advanced training apprenticeships, only the provisions of Article 1, paragraphs 106 and 108, of the 2018 Budget Law apply (Inps Circular no. 40/2018).

The exemptions mentioned above draw part of their general provisions from those provided for the youth structural exemption of the 2018 Budget Law (50% of employer contributions within a maximum limit of 3,000 euros annually), which:

• Can be freely used as an alternative to the temporary exemptions introduced by the 2021 and 2023 Budget Laws.
• Is not subject to the conditions established for the application of the Temporary State Aid Framework.
• Applies to the hiring of workers under indefinite-term employment contracts with increasing safeguards (workers, employees, or supervisors, excluding executives).

Please feel free to contact us for any further clarification.

Setup and measurement of incentives

In the case of part-time employment relationships, it is important to note that the maximum amount of the incentive should be proportionally reduced. The exemption values are as follows, as shown in the following table:

The following contributions are not subject to exemption:

• Premiums and contributions due to INAIL (National Institute for Insurance against Accidents at Work).
• The contribution, if applicable, to the “Fund for the payment of end-of-employment benefits to private sector employees under Article 2120 of the Civil Code.”
• The contribution, if applicable, to the Funds referred to in Articles 26, 27, and 29 of Legislative Decree no. 148/2015, the Intersectoral Territorial Solidarity Fund of the Autonomous Province of Trento, and the Bilateral Solidarity Fund of the Autonomous Province of Bolzano-South Tyrol, as well as the Solidarity Fund for the air transport sector and the airport system.
• The 0.30% contribution for financing Interprofessional Funds for continuing education.
• Contributions that are not of a social security nature and those designed to provide solidarity elements to the relevant social security systems (solidarity contribution on payments destined for complementary pension and/or healthcare assistance funds; solidarity contribution for entertainment workers and professional athletes).

The additional IVS contribution aimed at financing the increase in FPLD contribution rates by 0.50% is subject to the application of contributory exemptions. However, the annual treatment of severance pay will not be reduced or will only be reduced by the amount of the excluded contribution due to the application of the annual threshold, as a result of enjoying the contributory exemptions.

In cases where compensatory measures are applied under Article 10, paragraphs 2 and 3, of Legislative Decree no. 252/2005 (allocation of severance pay to pension funds and to the Fund for the payment of end-of-employment benefits to private sector employees under Article 2120 of the Civil Code), the exemptions are calculated on the social security contributions due, net of reductions resulting from the application of said compensatory measures.

In the case of the transformation of fixed-term contracts or their conversion to indefinite-term contracts within 6 months from the contract expiration date, the employer is entitled to a refund of the additional contribution of 1.40% applicable to fixed-term contracts.

Regarding the duration of the benefit period, the exemptions apply for a maximum period of 36 months from the date of the incentivized event (48 months for employers making hires or transformations in a location or production unit located in the following regions: Abruzzo, Molise, Campania, Basilicata, Sicily, Puglia, Calabria, and Sardinia).

Finally, the period of enjoying the incentives can be suspended only in cases of mandatory absence from work due to maternity, resulting in a temporary deferral of the benefit enjoyment period.

Conditions for eligibility for incentives

The entitlement to benefit from the exemptions is subject to compliance with the following conditions:

a. General principles regarding employment incentives (Article 31, Legislative Decree no. 150/2015). b. Regulations protecting working conditions and mandatory workers’ insurance. c. Specific requirements provided for in the exemption under the Budget Law 2021.

Regarding point c:

• The worker must not have reached the age of 36.
• Throughout the worker’s employment history, they must not have been employed, by the same or any other employer, under an indefinite-term employment contract, even if the previous indefinite-term employment relationship ended due to failure to pass the probationary period or the worker’s resignation (previous apprenticeships completed and one or more intermittent indefinite-term employment relationships or indefinite-term domestic employment do not hinder eligibility for the benefit; however, indefinite-term employment relationships for the purpose of labor leasing do prevent eligibility for the benefit).
• Employers must not have carried out individual dismissals for justifiable objective reasons (excluding those due to absolute unsuitability for the job and expiration of the statutory waiting period) or collective dismissals under Law no. 223/1991, against workers in the same job category within the same production unit, in the 6 months prior to the hiring.
• Employers must not carry out individual dismissals for justifiable objective reasons (except for any dismissals due to absolute unsuitability for the job and expiration of the statutory waiting period) or collective dismissals under Law no. 223/1991, against workers in the same job category within the same production unit, in the 9 months following the hiring.

INPS (National Social Security Institute) has provided clarifications for the following specific cases:

• Regarding part-time indefinite-term employment relationships, exemptions also apply when the worker is employed by two different employers, in relation to both employment relationships, provided that the starting dates of these employment relationships are the same (in the case of staggered hirings, the subsequent employer loses the qualifying requirement for admission to the benefit).
• In cases of transfer of an indefinite-term contract under Article 1406 of the Civil Code, with the employee being transferred to the assignee, the benefit already recognized to the transferring employer can be transferred to the assignee for the remaining unused period.
• Similarly, the enjoyment of exemptions can be transferred to the assignee for the remaining unused period by virtue of Article 2112 of the Civil Code in the case of a company transfer.
• In the event that, following an inspection, a self-employment relationship, with or without VAT registration, as well as a quasi-subordinate relationship, are reclassified as indefinite-term employment relationships, the exemption cannot be granted.

The previous performance of work in legal and contractual forms other than indefinite-term employment, such as fixed-term employment or the performance of professional activities in an autonomous form, does not prevent access to the incentives.

The requirement of the absence of indefinite-term employment relationships for the worker must be met only at the time of the first incentivized hiring. If the worker, for whom the exemption in question has already been enjoyed, is rehired, the benefit can be enjoyed for the remaining months regardless of whether the same worker had a previous indefinite-term employment relationship and regardless of the worker’s age at the date of the new hiring (for the calculation of the remaining period eligible for the exemption in relation to the new employer, the potential revocation of the benefit due to dismissals within 9 months from the start of the previous incentivized employment relationship does not affect other private employers hiring the worker, but the previous period of enjoyment must still be taken into account for the calculation of the remaining eligible period).

Furthermore, with specific reference to the subsequent rehiring of the same worker, the exemptions can only be.

State Aid

The authorization of the European Commission was granted in compliance with the conditions set out in Section 2.1 of the Temporary Crisis and Transition Framework, which considers State aid compatible with the internal market if it meets, among others, the following conditions:

• It does not exceed EUR 2 million (per enterprise and gross of any tax or other charges), or it does not exceed EUR 300,000 for enterprises active in the fisheries and aquaculture sectors, and EUR 250,000 in the primary production of agricultural products sector (if an employer operates in multiple sectors with different caps, the relevant cap must be respected for each activity, and the overall maximum amount of EUR 2 million per employer must never be exceeded).
• It is granted by and no later than December 31, 2023.
• It concerns companies affected by the Ukraine crisis (not necessarily related to energy price increases) or companies in difficulty (differently from the provisions of the Temporary Framework).

Furthermore, the so-called Deggendorf clause applies, according to which beneficiaries of aid that must be recovered based on a decision of the European Commission and for which it would not be possible to grant new aid in the absence of the repayment of the previous aid, access the aid net of the amount due and not reimbursed, including interest accrued up to the date of disbursement.

INPS (National Social Security Institute) will register the measures in the National Register of State Aid or in the SIAN and SIPA registers for aid in the agricultural and fisheries and aquaculture sectors, respectively. For hirings for the purpose of labor leasing, the incentive will be registered in the National Register of State Aid, and the obligation not to exceed the prescribed cap will be borne by the labor leasing agency.

Coordination with other incentives

The exemptions cannot be cumulated with other exemptions or reductions in financing rates related to employer contributions, limited to the period of their application (July 1, 2022, to December 31, 2023), such as:

• Incentives for the hiring of women who have been unemployed for at least 24 months or unemployed for at least 6 months and belonging to specific areas, economic sectors, or professions (Article 4, paragraphs 8 to 11, Law no. 92/2012; Article 1, paragraph 16, Budget Law 2021; Article 1, paragraph 298, Budget Law 2023). However, it is possible to benefit from the aforementioned incentive for a fixed-term employment relationship and then from the youth exemption for the conversion to indefinite-term employment.
• Incentives for the hiring of disabled workers (Article 13, Law no. 68/1999).
• Incentives for the hiring of recipients of the NASpI benefit (Article 2, paragraph 10-bis, Law no. 92/2012).

If the hired workers are employed in non-EU countries without agreements applying conventional wages, the exemptions under discussion cannot be applied.

Moreover, the incentives cannot be cumulated with the contribution reduction provided for agricultural employers employing personnel in mountain areas or in individual disadvantaged areas, nor with the contribution reductions provided for the construction sector. Furthermore, during the period of application of the measures under discussion, the so-called Southern Italy Contribution Reduction cannot be enjoyed for the same workers.

The exemption provided by the Budget Law 2023 can be cumulated with incentives that provide for a reduction in the employee’s social security contributions, such as the exemption on the worker’s Ivs share for pay periods from January 1 to December 31, 2023.

Contribution exemption for disadvantaged women 

The Budget Law 2023 extended the exemption provided for in the Budget Law 2021 to hirings of women made until December 31, 2023, raising the maximum limit to 8,000 euros per year. With Circular No. 58/2023, INPS provided guidelines for the management of social security obligations, including UniEmens flows, related to this exemption for the period January 1 – December 31, 2023, as well as additional clarifications regarding the second half of 2022. We would like to remind you that:

• The Budget Law 2021 provided for the recognition of a contribution exemption under Article 4, paragraphs 9 to 11, Law no. 92/2012, for hirings of women made in the period 2021-2022, to the extent of 100% and up to a maximum amount of 6,000 euros per year.
• The Budget Law 2023 extended these provisions to hirings, both fixed-term and indefinite-term, as well as to conversions to indefinite-term employment, made from January 1 to December 31, 2023, but with a maximum amount of 8,000 euros.

The European Commission had already authorized the measure until December 31, 2021, and then extended it until June 30, 2022, under the so-called Temporary Framework, which expired on that date. To enable its operation beyond that date, the Italian authorities notified the Commission of the measure provided for in the Budget Law 2021, extended by the Budget Law 2023, subject to compliance with the conditions of the Temporary Crisis and Transition Framework, and the Commission authorized it from July 1, 2022, to December 31, 2023.

For the purpose of the prior online communication aimed at accessing the incentive, the “92-2012” form, available in the “Cassetto previdenziale” (Social Security Drawer), continues to be used, bearing in mind that:

• For each eligible event (hiring, extension, or conversion), a single online communication must be completed.
• If this online form has already been used for the incentive provided for by Law no. 92/2012 (50%), the communication already submitted to INPS is also valid for the purposes of accessing the 100% exemption.

Employers concerned

All private employers, including non-entrepreneurs and employers in the agricultural sector, can access the benefits. Public administrations, the Bank of Italy, CONSOB, and, in general, independent authorities qualified as public administrations are excluded. Also excluded are non-state recognized universities qualified as non-economic public entities by administrative and ordinary case law, as well as companies:

• Operating in the financial sector and domestic sector.
• Subject to sanctions adopted by the European Union, including but not limited to individuals, entities, or bodies specifically mentioned in the legal acts imposing such sanctions; companies owned or controlled by individuals, entities, or bodies subject to sanctions adopted by the European Union; or companies operating in the industrial sector subject to sanctions adopted by the European Union, as the aid could undermine the objectives of those sanctions.

Workers eligible for incentives

The exemptions in question adopt part of their regulations from the exemption provided for in Law no. 92/2012. Therefore, the exemptions apply to hirings of:

• Women aged at least 50 who have been unemployed for over 12 months.
• Women of any age residing in regions eligible for financing under the European Union’s structural funds (identified by the “Carta degli aiuti a finalità regionale per l’Italia 1° gennaio 2022 – 31 dicembre 2027,” approved by the Commission’s decision on December 2, 2021, and subsequently modified by the decision on March 18, 2022), who have not had regular paid employment for at least 6 months (no time constraints regarding residency in disadvantaged areas are required, and the employment can take place outside the indicated areas).
• Women of any age working in professions or occupations in economic sectors characterized by significant gender employment disparities, annually identified by ministerial decree, who have not had regular paid employment for at least 6 months.
• Women of any age, regardless of residence, who have not had regular paid employment for at least 24 months.

Therefore, to qualify for the benefits, either long-term unemployment status (over 12 months) for women aged at least 50 or compliance, in combination with additional provisions, with the requirement of “no regular paid employment” is necessary. This means not having performed, in the last 6 months, work attributable to an employment relationship lasting at least 6 months, or having carried out self-employed or quasi-subordinate work during that period resulting in income lower than the minimum annual personal income exempt from taxation (€5,500 for self-employment proper, €8,174 for co.co.co. contracts and other work performances under Article 50, paragraph 1, letter c-bis of the Tax Code). The notion of “regularly paid employment” refers not so much to the regularity of the contribution-related aspect of the employment relationship but to the significance of the work in terms of duration (for employment relationships) or remuneration (for self-employment or quasi-subordinate work). The requirement must be met on the date of the event for which the benefit is requested. Therefore:

• In the case of a fixed-term employment, the requirement must be met on the date of hiring and not on the date of any extension or conversion to indefinite-term employment.
• In the case of a conversion to indefinite-term employment, without an exemption for the previous fixed-term employment, the requirement must be met on the date of the conversion.

Eligible employment relationships The incentives under review apply to both fixed-term and indefinite-term hirings and conversions to indefinite-term employment, whether or not the previous employment was eligible. This includes part-time employment and employment relationships established in strict association with a workers’ cooperative. The incentives do not apply to intermittent employment relationships and occasional work performances under Article 54-bis of Decree Law no. 50/2017, and they do not cover apprenticeship contracts and domestic work contracts.

Regarding the duration of the incentive period, the incentives apply as follows:

• Up to 12 months for fixed-term hirings.
• For 18 months for indefinite-term hirings.
• For a total of 18 months from the date of hiring in the case of a conversion to indefinite-term employment from a previously eligible fixed-term employment.
• For a total of 18 months from the date of conversion in the case of a conversion to indefinite-term employment from a previously non-eligible fixed-term employment.

The incentives also apply in the case of an extension of a fixed-term employment, up to a total limit of 12 months. Finally, the enjoyment of the incentives

Setup and measurement of incentives

Please note that, in the case of part-time employment relationships, the maximum amount of the incentive must be proportionally reduced. The values of the exemption are shown in the table below.

The following contributions are not subject to exemption:

• The contribution, if due, to the “Fund for the payment of end-of-employment benefits to private sector employees under Article 2120 of the Civil Code”;
• The contribution, if due, to the Funds referred to in Articles 26, 27, and 29 of Legislative Decree 148/2015, to the intersectoral territorial solidarity fund of the Autonomous Province of Trento, and to the bilateral solidarity fund of the Autonomous Province of Bolzano-Alto Adige, as well as to the solidarity fund for the air transport sector and airport system;
• The contribution of 0.30% for the financing of interprofessional funds for continuous training;

Contributions that do not have a social security nature and those conceived with the purpose of providing elements of solidarity to the reference social security schemes (Inps Circular No. 40/2018). The additional Ivs contribution intended to finance the increase in contribution rates for the end-of-employment benefits fund by 0.50% is subject to the application of contribution exemptions, but there is no need to reduce the annual severance pay or it must be reduced by the amount of the aforementioned excluded contribution, due to the application of the annual maximum, from the use of contribution exemptions. In case of application of compensatory measures under Article 10, paragraphs 2 and 3, Legislative Decree 252/2005 (allocation of severance pay to pension funds and the fund for the payment of end-of-employment benefits to private sector employees under Article 2120 of the Civil Code), exemptions are calculated on the contribution due, net of reductions for the aforementioned compensatory measures. The employer is entitled to a refund of the additional 1.40% contribution on fixed-term contracts in cases of their conversion or stabilization within 6 months from their expiry.

State Aid

The authorization from the European Commission has been granted in compliance with the conditions set out in section 2.1 of the Temporary Crisis and Transition Framework, which considers State aid compatible with the internal market if they meet, among others, the following conditions:

• They do not exceed an amount of 2 million euros (per enterprise and gross of any taxes or charges), or 300,000 euros for enterprises active in the fisheries and aquaculture sectors, and 250,000 euros for the primary production of agricultural products (if operating in multiple sectors with different ceilings, the relevant ceiling must be respected for each activity, and the overall maximum amount of 2 million euros cannot be exceeded).
• They are granted by or before December 31, 2023
• They concern businesses affected by the Ukrainian crisis (not only due to energy price increases) or otherwise in difficulty (differently from what is provided for in the Temporary Framework).

Furthermore, the so-called Deggendorf clause applies, according to which beneficiaries of aid subject to recovery in accordance with a decision of the European Commission, and for which it would not be possible to request new aid in the absence of the repayment of the first aid, will access the aid net of the amount due and not refunded, including interest accrued up to the disbursement date. INPS (National Social Security Institute) will record the measures in the National Register of State Aid or in the SIAN and SIPA registers for aid in the agricultural and fisheries and aquaculture sectors, respectively. For hires through agency work, the incentive will be recorded in the National Register of State Aid, and the obligation not to exceed the prescribed ceiling will be borne by the employment agency.

Coordination with other incentives

The discussed exemptions should be considered structurally non-cumulative with other exemptions or reductions of financing rates provided for by current legislation. In the various cases where their use does not exhaust the entire eligible employer contribution, they can be combined with other incentives within the overall contribution limit. For the effective application of the second incentive measure:

• Reference must be made to any contribution still “due,” i.e., the remaining contribution due, based on the first applied exemption.
• The cumulation between exemptions, where allowed, must occur according to the approved rules, in chronological order, on the assumption that the most recent exemption introduced in the legislation cumulates (if provided for) with the previous ones on the remaining contribution due.

The exemption provided by the 2023 Budget Law is also cumulative with incentives consisting of a reduction in the worker’s social security contributions (e.g., exemption from the Ivs contribution payable by the worker for pay periods from January 1 to December 31, 2023).