Budget Law 2024: Updates on Labor-related Matters

We inform you that Law No. 213/2023, the Forecast Budget of the State for the financial year 2024 and the multi-year budget for the triennium 2024-2026, has been published in the Official Gazette No. 303 of December 30, 2023. Several legislative acts in the field of labor and taxation outlined in the 2024 Budget introduce significant changes with a substantial impact on businesses and employees. Below are the key updates that will characterize the new year.

For Employees:

Changes to Personal Income Tax (IRPEF)
With the Budget Law 2024, the 25% tax bracket, previously included in the application of the minimum rate, is eliminated, effectively consolidating the first two brackets from the previous year.

For the year 2024, in determining personal income tax, the gross tax is calculated applying the following rates for income brackets:

INCOME BRACKETS	TAX RATES
Up to €28,000	23%
€28,001 to €50,000	35%
Over €50,000	43%

The deduction for dependent work increases to €1,955 from €1,880, and the income threshold for exemption from taxes on dependent work rises from €8,145 to €8,500. Consequently, there is a slight adjustment in the income threshold for eligibility for the Trattamento Integrativo (TIR), which is available to workers whose tax exceeds the deductions for dependent work; the reference income decreases by €75. The new income brackets and the increase in the deduction for dependent work to €1,955 provide a refreshed fiscal framework.

Smart Working and Super Fragile Workers
The deadline for smart working for working parents with children under 14 and “fragile workers” is extended to March 31, 2024.

Contribution Incentive for Salaried Workers
For public and private salaried workers, the Budget Law 2024 confirms the exemption measure on the portion of social security contributions already provided in 2023. The benefit is 6% if the taxable salary does not exceed €2,692 monthly and 7% if it does not exceed €1,923 monthly. Unlike previous years, this exemption has no effect on the thirteenth installment, which will incur the full IVS rate and will not contribute to the determination of the socially favored contribution brackets. Domestic employment relationships remain excluded from the incentive.

Contributory Exemption for Mother Workers
For pay periods from January 1, 2024, to December 31, 2026, mothers with two or more children employed under an indefinite-term employment relationship (excluding domestic employment relationships) are granted a 100% exemption from the portion of their own social security contributions, up to a maximum annual limit of €3,000, recalculated on a monthly basis.

The exemption applies until:

• For mothers of 2 children, until the month the youngest child turns 10.
• For mothers with 3 or more children, until the month the youngest child turns 18.

Facilitated Taxation for Productivity Bonuses
The Budget Law 2024 confirms the reduction of the substitute tax rate on personal income tax (IRPEF) to 5% for bonuses and sums paid by employers to their employees as performance bonuses. This tax incentive encourages productivity and the achievement of objectives agreed upon with trade unions. The tax exemption applies to performance bonuses paid under company or territorial agreements related to increases in productivity, profitability, quality, efficiency, innovation, and sums paid for profit-sharing, within an overall limit of €3,000 per year.

It is important to note that, to benefit from this tax incentive, the company agreement must be electronically filed on the portal of the Ministry of Labor and Social Policies within 30 days of signing.

Fringe Benefits
Significant changes are introduced to the fringe benefits framework for the 2024 tax period. The Budget Law establishes:

• An ordinary exemption limit of €258.23, increased to €1,000 for all salaried workers.
• An ordinary exemption limit of €258.23, increased to €2,000 for salaried workers with dependent children, including children born out of wedlock or recognized adopted children.

In addition to tangible goods, the same overall limit also covers sums paid or reimbursed by the employer to cover utility bills for integrated water services, electricity, and natural gas, as well as expenses related to the lease of the primary residence or interest on the mortgage for the primary residence.

Qualification for the favorable tax regime is contingent upon the salaried worker providing a declaration, including the tax code of the only child or dependent children. It is important to note that the exemptions also apply to the taxable base of social security contributions. In case the specified fringe amount is exceeded, the substitute taxpayer must apply income and social security withholding in the pay period in which the threshold of €1,000 (elevated to €2,000 for individuals with dependent children) is surpassed. However, if the exceeding of the threshold is clear and certain, withholding must be applied from the first pay period.

Tax Exemption for Night and Holiday Work in the Tourism Sector
To support employment in the tourism sector, the Budget Law 2024 introduces a special supplementary treatment for employees with a gross income not exceeding €40,000 in the previous tax year. For the period from January 1, 2024, to June 30, 2024, employees in food and beverage establishments, as per Article 5 of Law No. 287 of August 25, 1991, and those in the tourism sector, including thermal establishments, are granted a special supplementary treatment, not included in income, equal to 15% of gross salaries related to night work and overtime performed on holidays.

The supplementary treatment is paid by the employer upon the employee’s request, who must provide written confirmation of the income earned in the year 2023, including multiple employers, and is recovered through a tax credit to be offset on the F24 model for the month of payment.

Extended Parental Leave
Amending the first period of Article 34, paragraph 1, Legislative Decree 151/2002, for periods of parental leave up to the twelfth year of the child’s life, each working parent is entitled to an allowance of 30% of their salary for three months, non-transferable. This allowance is increased, alternatively between parents, for a maximum total duration of two months up to the sixth year of the child’s life, to 80% of the salary within the maximum limit of one month and to 60% of the salary within the maximum limit of an additional month, increased to 80% for the year 2024 only. Therefore, in 2024, parents can take advantage of two months of parental leave at 80%. From 2025 onwards, they can avail themselves of 1 month at 80% and another month at 60%.

Limitations for High Incomes
The benefit of tax deduction is limited for incomes exceeding €50,000, introducing a reduction for specific charges.

For Businesses

Tax Incentive for New Hires
Another significant aspect in labor matters concerns the so-called “incremental hiring.” For income business owners and professionals who have been in business for at least 365 days in 2023, the cost of personnel for new permanent hires can be increased by 20% in the case of a detected increase in employment, provided that the number of permanent employees at the end of 2024 exceeds the average number of permanent employees in 2023.

It is essential to note that, despite the provision requiring a decree from the Minister of Economy and Finance, in agreement with the Minister of Labor and Social Policies, to be issued within thirty days, the implementation of this provision can have positive impacts on hiring decisions. Although it is indirectly linked to the labor sphere, its effect on the deductibility of costs from business income makes it a significant incentive for companies, promoting the creation of new jobs and supporting overall economic growth.

Women Victims of Violence
Private employers who, in the period from 2024 to 2026, hire unemployed women who are victims of violence are granted a 100% exemption from the payment of social security contributions, excluding premiums and contributions to INAIL, up to a maximum annual amount of €8,000, recalibrated and applied on a monthly basis.

The exemption also applies to women victims of violence who have benefited from the aforementioned measure in the year 2023. The exemption covers the hiring of women victims of gender-based violence involved in protection programs, duly certified by social services of the municipality of residence or by anti-violence centers or shelters, to facilitate their exit from violence through integration into the labor market.

The duration of the exemption is granted differently depending on the type of employment contract:

• 12 months from the date of hiring with a fixed-term employment contract, including temporary employment.
• Up to 18 months in case of conversion to a permanent contract.
• 24 months in the case of direct hiring on a permanent basis.

Expired Roles for Amounts Exceeding €100,000 – Prohibition of Compensation in the F24 Model
The Budget Law establishes a prohibition on compensation in the F24 model, under Article 17 of Legislative Decree 241/97, for expired roles related to state taxes or executive assessments, for amounts exceeding €100,000 in total. The prohibition applies to all taxpayers (individuals, companies, and entities).

The ban operates if there are no suspension measures and lasts until the violation is completely removed. Therefore, the ban seems to persist if the taxpayer has an installment plan for the amounts listed in the roles. In the absence of suspension measures, the only way to compensate is to extinguish the roles by paying them.

These novelties apply from July 1, 2024. In the case of undue compensation, a penalty of 30% is imposed.

Submission of F24 Models Containing Offsetting – Extension of the Obligation to Use the Inland Revenue’s Telematic Services
It is established, in a generalized manner, that payments are made exclusively through the telematic services made available by the Inland Revenue for the submission of F24 models, in cases where offsetting is carried out, even for credits accrued in terms of contributions and premiums towards, respectively, INPS and INAIL.

However, concerning INPS and INAIL credits, it is envisaged that the effectiveness, including any progressive effectiveness, of the new provisions and their implementation methods will be defined by joint measures adopted by the Inland Revenue, INPS, and INAIL.