Non-payment of social security contributions: new sanction regime

Among the novelties introduced by Decree Law May 4, 2023, No. 48 (known as the “employment decree”), one of the most significant concerns the sanctions applied to employers in case of non-payment of social security contributions withheld from employees. The new “Employment” decree partially amends the provisions of Article 2 of Decree Law No. 463/83 regarding administrative sanctions for non-payment of social security and welfare contributions, employing the criterion of proportionality to recalibrate them and allowing more time for contestation.

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Sanction regime before Decree Law May 4, 2023

Article 23 of Decree Law 48/2023 amends Article 2, paragraph 1-bis of Decree Law No. 463 of September 12, 1983, converted by Law No. 638 of November 11, 1983. Previously, in case of non-payment of amounts withheld from employees below 10,000 euros, an administrative pecuniary sanction was applied ranging from a minimum of 10,000 euros to a maximum of 50,000 euros, regardless of the amount of unpaid contributions.This meant that even for insignificant amounts not paid, such as 50 euros, the minimum applicable sanction remained at 10,000 euros. Recognizing the disproportional treatment, the INPS (National Institute for Social Security) attempted to remedy it administratively with message no. 3516 of September 27, 2022, by establishing new criteria for calculating a reduced sanction. However, these criteria were not entirely effective. They stated that the provisions of Article 16 of Law No. 689/1981 (one-third of the maximum sanction of 50,000 euros) did not apply, and instead, a reduced sanction was set at half the amount of the minimum sanction.

The INPS had already proceeded to readjust the amounts of the sanctions, applying a minimum amount of 10,000 euros. However, for prompt payments made within 60 days of the adjustment, a sanction equal to half the minimum could be applied if the conditions were met. The Verbania Tribunal also affirmed, in its October 2022 order, that setting the minimum amount at 10,000 euros resulted in a clear disparity of treatment for violations below the threshold, especially for significantly small amounts. It stated that “the offender, for a minimal amount subject to the violation, such as 100 euros, is actually sanctioned for an amount that represents one hundred times the violation itself.”

Decree Law “Employment” May 4, 2023

Article 23 of the Employment Decree provides that, starting from May 5, if the omitted amount does not exceed 10,000 euros per year, the administrative sanction ranging from 10,000 to 50,000 euros is replaced with a sanction “one and a half to four times the amount omitted.” For example, under the previous regulation, for an omitted payment of 100 euros per year, the applied sanction would have been 10,000 euros, reduced by half according to the INPS message. With the new regulatory formulation, the amount to be paid will range from a minimum of 150 euros to a maximum of 400 euros.

In summary, the new regulations provide that the failure to pay withheld contributions is punished with:

  • Criminal penalties if the non-payment exceeds 10,000 euros per year, with imprisonment of up to three years and a fine of up to 1,032 euros.
  • Administrative sanctions if the non-payment does not exceed 10,000 euros per year, with a pecuniary penalty ranging from one and a half to four times the amount omitted.

It should be noted that if the employer makes the payments within three months of the contestation or notification of the violation, the conduct is not punishable and not subject to administrative sanctions.

Extension of contestation period

Furthermore, Article 23, paragraph 2 of Decree Law 48/2023 provides for an exception to Article 14 of Law No. 689/81, effectively extending the time for contesting sanctions. For violations related to periods of non-payment starting from January 1, 2023, the violation must be notified by December 31 of the second year following the year of the violation, taking into account the monthly due dates for contribution payments (from January 16 to December 16).

Conclusions

The “Employment” Decree introduces significant changes in the field of sanctions for non-payment of social security contributions. The new framework appears aligned and coherent with the principle of proportionality of sanctions, striking a balance between the severity of the violation and the sanction applied. Furthermore, the new provisions aim to promote the regularization of debt positions and protect the rights of workers.

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