Urgent measures for social inclusion and access to the labor market

Exemption from the portion of social security contributions for disability, old age, and survivors borne by the worker.

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Article 39, paragraph 1, of Decree-Law May 4, 2023, No. 48, entitled “Urgent measures for social inclusion and access to the labor market” (hereinafter referred to as the “Labor Decree”), has provided that: “For pay periods from July 1, 2023, to December 31, 2023, the exemption from the portion of social security contributions for disability, old age, and survivors borne by the worker, as determined by Article 1, paragraph 281, of Law December 29, 2022, No. 197, is increased by 4 percentage points, without further effects on the thirteenth installment. The computation rate for pension benefits remains unchanged.”

As known, Article 1, paragraph 281, of Law December 29, 2022, No. 197 (2023 Budget Law) has confirmed, for the period January 1, 2023, to December 31, 2023, the contribution exemption provided for workers introduced by the 2022 Budget Law:

  • A contribution exemption of 2 percentage points, provided that the taxable salary, calculated on a monthly basis for thirteen monthly installments, does not exceed a monthly amount of 2,692 euros, increased by the prorated thirteenth installment for the month of December.
  • A contribution exemption of 3 percentage points, provided that the taxable salary, calculated on a monthly basis for thirteen monthly installments, does not exceed a monthly amount of 1,923 euros, increased by the prorated thirteenth installment for the month of December.
  • Exclusion from the benefit for domestic employment relationships, as reduced contribution rates already apply to them.

With Article 39, paragraph 1 of Decree-Law No. 48/2023, it was established that for pay periods from July 1, 2023, to December 31, 2023, the contribution exemption is increased by 4 percentage points, without further effects on the thirteenth installment, namely:

  • A contribution exemption of 6 (4+2) percentage points, provided that the taxable salary, calculated on a monthly basis for thirteen monthly installments, does not exceed a monthly amount of 2,692 euros.
  • A contribution exemption of 7 (4+3) percentage points, provided that the taxable salary, calculated on a monthly basis for thirteen monthly installments, does not exceed a monthly amount of 1,923 euros.

Regarding the thirteenth installment:

  • If paid in a lump sum in December 2023, the contribution exemption will be:

2 percentage points, provided that the thirteenth installment does not exceed an amount of 2,692 euros.
3 percentage points, provided that the thirteenth installment does not exceed an amount of 1,923 euros.

  • If paid monthly, the contribution reduction will apply to each individual thirteenth installment, namely:

2 percentage points, provided that the installment does not exceed 224 euros (2,692.00/12).
3 percentage points, provided that the installment does not exceed 160 euros (1,923.00/12).

It is important to note that, for the purpose of applying the contribution reduction, the verification of the aforementioned economic thresholds must be done separately for monthly salary and thirteenth installment installments. Considering that the increase in the exemption rate does not affect the thirteenth installments for the pay period from July 2023 to December 2023, the reduction of the worker’s contribution share can be applied to both the salary paid in the month (6% if the salary is less than 2,692 euros or 7% if it is less than 1,923 euros) and the amount of the thirteenth installment paid in the month of December 2023 (2% if the salary is less than 2,692 euros or 3% if it is less than 1,923 euros).

In the case of the thirteenth installment being paid in individual months during the period from July 2023 to December 2023, the contribution reduction can be applied as follows:

On the gross salary (pre-tax amount, net of additional monthly installment):

  • 6 percentage points if it is less than 2,692 euros.
  • 7 percentage points if it is less than 1,923 euros.

On the thirteenth installment, if the amount does not exceed:

  • 224 euros (2% reduction).
  • 160 euros (3% reduction).

Please note that, in cases of termination/start/suspension of employment during the year, the maximum amount of thirteenth installments must be adjusted based on the number of accrued months, multiplying the amount of 224 euros (for the application of the 2 percentage points reduction) or 160 euros (for the application of the 3 percentage points reduction) by the number of accrued months.

Conclusion

The legislator, in line with the experimental measures introduced in 2022, considering the need and urgency to address the exceptional instability of prices for consumer goods and the equally urgent need to adopt measures to contain the effects resulting from the increase in the cost of living, has further strengthened the reduction of the employees’ contribution share by 4 percentage points for IVS (disability, old age, survivors) contributions.

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