Employer contributions: an overview
It has become a commonplace to say that labour costs in Italy are very high. It is also well known that there is a substantial gap between the amount of net salary that the employee pockets and the amount released by the employer for his or her maintenance. We speak, in this case, of a tax wedge.
One of the most important elements weighing on labour costs is contributions. We hear about these contributions all the time ... but what are they and who has to pay them?
The field of supplementary pensions can be difficult to approach. Through this article we offer a guide to understanding contributions, in order to clarify what employer contributions are.
Contributions: what are they and what are they for?
When we speak of contributions, we are referring to the sums of money that must be paid to the Inps (National Social Security Institute) and Inail (National Institute for Accidents at Work).
Contributions must be paid to make up for what the Constitution calls the right of citizens to public support, in the event that they find themselves incapacitated for work due to:
- Sickness,
- Accident,
- involuntary unemployment,
- old age.
Thus, in all situations where a citizen is unable to support himself by acquiring an income of his own, he is entitled to receive state support. The latter is provided by the INPS and results from the sum of the contributions paid by working citizens or, rather, those withheld from their salaries.
In fact, the mechanism of the contributions provides that the employer pays a certain salary to the employee, a percentage of which is given to the INPS, partly by the employer, partly by the employee.
Contributions are, therefore, sums of money that employers and employees must pay to the Inps, in order to guarantee the social security fund for people in difficulty and/or retirement.
In addition to the Inps contributions, there are the Inail contributions intended to pay specific benefits for occupational diseases or accidents at work. They too must be paid by both the employer and the employee.
The contributions fall into two categories. They can be:
- Social security contributions, aimed at supporting the pension fund and paid by the employer to the relevant social security body, i.e.:
- Inps for the private sector,
- Inpdap for the public sector;
- Welfare contributions, made to Inps or Inail in order to cover occupational injury or illness, disability or sickness.
Who pays the contributions?
We have said that contributions are paid partly by the employer and partly by the employee. However, it is necessary to specify this concept.
In fact, in the presence of a subordinate employment relationship, be it fixed-term or open-ended, it is always the employer who must pay INPS contributions. In this case, he must undertake to pay his own share and that of the employee, recovered through the so-called payroll deduction.
Only when the employee is not bound to the employer by a subordinate employment relationship is the employee himself required to pay contributions. This is the case for freelancers or VAT-registered workers. In this case, contributions will be paid to the relevant social security fund (e.g. in the case of lawyers, accountants or engineers). Where this does not exist, contributions are paid to the INPS.
Employer contributions: are they compulsory?
Yes, the payment of contributions by the employer is, as a rule, mandatory, unless there are specific legal provisions to the contrary (legal reference: Article 2115 of the Civil Code).
In fact, the employer is the only party held liable for making the payment of contributions, both civilly and criminally, if there is an employment relationship with employees. On the other hand, as mentioned, for self-employed persons, the contributions are entirely the responsibility of the employee himself.
☝ Periodically, in order to facilitate and incentivise hiring, legal provisions are enacted that reduce contribution charges or even cancel them (e.g. the decontribution for new hires in 2015). Therefore, it is good to keep abreast of new amendments introduced on the subject.
What happens in the event of non-payment or partial payment?
There is a system of sanctions, regulated by Law No 388 of 2000, which describes the measures provided for in the event of non-payment or partial payment of contributions.
The sanctions, divided into civil and criminal sanctions, are provided for in cases of:
→ Contribution omission, whenever there is a delay in the payment of contributions resulting from the documentation provided by the employer;
→ Evasion of contributions, whenever mandatory records and documentation relating to the payment of contributions have been concealed or omitted by the employer.
Illegal working', for example, constitutes an offence and therefore has criminal consequences. In this case, however, there are penalties of up to EUR 3,000 per employee, regardless of the duration of the employee's work.
How high are the contributions?
There are minimum and maximum contribution thresholds, known as minimum and maximum contribution thresholds:
- Minimum contribution: this is the minimum amount that the employer must pay to the INPS for each employee. Its purpose is to protect the employee, as it guarantees him/her a minimum salary.
👀 The minimum contribution amount is revalued every year and is currently EUR 27.21 for the year 2021.
-
Contributionceiling or salary ceiling: this is the amount above which there is no obligation to pay social security contributions.
👀 For 2021, it has been set at EUR 103,055. 49 (103,055.00 rounded to the nearest euro unit).
How are contributions calculated?
First of all, there is a premise to be made: on the basis of the so-called harmonisation of the tax and contribution base, all sums issued to employees that are subject to the payment of taxes and, therefore, on which the employee pays Irpef, are also subject to the payment of contributions. This means that every sum paid by the employer to the employee is subject to the payment of contributions.
There are, however, exceptions, which correspond to those for the payment of Irpef. In fact, there is no obligation to pay contributions on the following sums granted to employees:
- Reimbursement of out-of-pocket expenses incurred for work purposes;
- Travel allowances for sums exceeding €1,500;
- Sums paid on termination of employment (severance pay, redundancy incentives, etc.);
- Fringe benefits.
☝ For the calculation of contributions, the Inps provides a setting to carry out a simulation of the calculation of the contributions to be paid monthly by the employer. The procedure can be carried out via the special space/section called "Simulation of Contribution Calculation" on the Inps website.
Contribution rate
Contributions are calculated by applying the contribution rate to the employee's taxable salary. The rate is not always the same, but its value changes depending on the sector and the employee's employment category.
In general, the contribution rate is 9/10% when paid by the employee and 25/30% when paid by the employer.
How are contributions paid?
Contributions are paid by means of the F24 form, which is made out to the social security institution. The employer is obliged to notify the INPS on a monthly basis of the amount of contributions that he must pay, through the so-called Uniemens flow.
This consists of a means by which the employer communicates the total of the sums paid by way of remuneration to employees in that specific month, so that he can be notified of the amount of contributions to be paid.
☝ The employer advances payments to the employee from Inps, including:
- Inps sick pay,
- Allowances for parental leave,
- Allowances for paid leave 104,
- Wage Compensation Fund.
These advances must be taken into account in the Uniemens flow, in which there will be a set-off between the total contributions to be paid by the employer and the amount of the sums to be returned to him by Inps for the benefits advanced, according to the following equation:
Total contributions - total advance benefits = amount to be paid by the employer to the Inps.
When are contributions paid?
The employer is obliged to pay contributions by the 16th day of the month following the last pay period.
And now that you have all the information you need about the contributions that employers are required to pay, do not hesitate to share your opinion with us in the comments section! Share your doubts or questions, our team will be happy to consider your considerations!
Article translated from Italian