Facilitated hiring of young individuals: legitimate exemption even in the case of requalification of a previous indefinite-term employment relationship

In order to promote stable youth employment, INPS, through Circular 4178/2023, clarifies that the benefit for young workers entering their first indefinite-term employment remains legitimate even if previous relationships with other employers are subsequently transformed into permanent contracts following an inspection assessment.

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What the benefit entails

The referred benefit is outlined in Articles 1, paragraphs 100 to 108, 113, and 114 of Law No. 205 dated December 27, 2017 (hereinafter referred to as Budget Law 2018). This measure provides an exemption from paying social security contributions for employers concerning new hires on permanent contracts starting from January 1, 2018, for workers under the age of 30.

This exemption is applicable for both new hires and the transformation of fixed-term contracts into permanent contracts for individuals who, at the time of their initial incentivized hiring, ‘have not yet reached the age of thirty and have not been employed on an permanent basis with the same or another employer.’

Despite several modifications over the years regarding the exemption percentage or the widening of the age threshold, the Institute reaffirms that the requirement of the absence of previous permanent employment relationships throughout the worker’s entire working life, for whom the benefit is being claimed, remains an essential condition for the recognition of exemptions for youth employment under Article 1, paragraph 10, of Law No. 178 dated December 30, 2020 (hereinafter referred to as Budget Law 2021), and under Article 1, paragraph 297, of Law No. 197 dated December 29, 2022 (hereinafter referred to as Budget Law 2023).

Requalification of a previous employment relationship following an inspection assessment

In its Circular No. 40 dated March 2, 2018, explicating the regulations concerning the aforementioned exemption, INPS specified that: ‘similar to what was previously established for the three-year exemption regulated by Law No. 190/2014 and confirmed by the Ministry of Labor and Social Policies’ inquiry No. 2 of 2016, the exemption under Law No. 205/2017 cannot be granted if, following an inspection assessment, the self-employed or semi-subordinate employment relationship, with or without a VAT number, is reclassified as an indefinite-term subordinate employment relationship (message No. 459/2016).’

In line with the Ministry of Labor and Social Policies’ inquiry No. 2/2016, the relief cannot be availed ‘where the indefinite-term subordinate employment relationship was not established by the employer’s free choice but as a result of an inspection assessment.’

This exclusion, therefore, applies only if the employer seeking the incentive is the same employer who holds the employment relationship reclassified following an inspection assessment. Hence, if the employer who benefited from incentives for hiring young workers is a different entity from the employer who holds the reclassified employment relationship, the former is legitimately entitled to the benefit since, at the time of the incentivized hiring, they genuinely believed the worker to be a legitimate recipient of the incentive (INPS message No. 4178 dated 24/11/2023).

Conclusions

The message clarifies that an employer who hired in good faith is legitimately entitled to benefit from contribution exemptions. Furthermore, they are not obligated, upon subsequent verification of the existence of a reclassified employment relationship with previous employers, to reimburse the benefit or pay any penalties stipulated for the prior use of the incentive measure.”

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