2021 Budget Act
- Jan. 15, 2021
- Reading time: 13 min
This document outlines some of the most significant changes in the field of labor law introduced by the 2021 Budget Law, Law No. 178 of December 30, 2020. Specifically, it summarizes the provisions relating to:
Tax Deduction for Employees (Article 1, paragraphs 8–9)
Social Security Contribution Exemption for the Hiring of Young People Under 36 (Article 1, paragraphs 10–15)
Social Security Contribution Exemption for the Hiring of Women (Article 1, paragraphs 16–19)
Fund for the Exemption from Social Security Contributions Owed by Self-Employed Individuals and Professionals (Article 1, paragraphs 20–22)
Support for Working Mothers Returning to Work (Article 1, paragraphs 23–24)
Paternity Leave (Article 1, paragraphs 25, 363–364)
Exemption from social security contributions for agricultural entrepreneurs and young farmers (Article 1, paragraph 33)
Social Security Contribution Relief for Southern Italy (Article 1, paragraphs 161–169)
Extension and Renewal of Fixed-Term Contracts (Article 1, paragraph 279)
Extension of COVID-19 Layoff Benefits (Article 1, paragraphs 299–314)
Moratorium on layoffs through March 31 (Article 1, paragraphs 309–311)
Interprofessional Expansion Agreement (Article 1, paragraph 349)
ISCRO (Article 1, paragraphs 386–401)
Vulnerable workers (Article 1, paragraphs 481–484)
Provisions Regarding Pensions (Article 1, paragraphs 336–339)
Baby Bonus (Article 1, paragraph 362)
Allowance for Mothers with Disabled Children (Article 1, Paragraph 365)
These provisions are effective as of January 1, 2021.
Tax Deduction for Employees (Article 1, paragraphs 8–9)
As part of a structural overhaul of the tax deduction system, the deduction introduced in 2020 is being made permanent. This deduction provides, for income from employment and for certain types of income treated as equivalent to employment income, a tax deduction for 2021 of 1,200 euros for a total income of 28,000 euros, with the deduction scaled proportionally for incomes between 28,000 and 40,000 euros.
Social Security Contribution Exemption for the Hiring of Young People Under 36 (Article 1, paragraphs 10–15)
In order to promote stable youth employment, the measure providing for an exemption from social security contributions for new permanent hires and for the conversion of fixed-term contracts into permanent contracts for young people, introduced by the 2018 Budget Law, for the two-year period 2021–2022, is granted at 100%, for a maximum period of 36 months and, in any case, up to a maximum of €6,000.00 per year, for individuals who, as of the date of their first incentivized hire, have not yet reached the age of 36.
The period during which the exemption may be claimed is extended to 48 months if the hiring involves an employee whose place of work is located in one of the following regions: Abruzzo, Molise, Campania, Basilicata, Sicily, Puglia, Calabria, and Sardinia.
Employers are eligible for the social security contribution exemption if they have not carried out, during the six months prior to hiring, nor do they carry out, during the nine months following hiring, individual terminations for justifiable objective reasons or collective terminations of employees holding the same position within the same production unit.
The effectiveness of these provisions is subject to authorization by the European Commission.
Finally, the exemption mentioned above does not apply in the event that the apprenticeship contract is extended at the end of the training period, nor does it apply to permanent hires made within 6 months of obtaining a degree, for students who have completed a work-study program¹ or an apprenticeship leading to a professional qualification or diploma with the same employer, a high school diploma, a certificate of advanced technical specialization, or periods of apprenticeship in higher education, for which the 50 percent exemption from social security contributions remains valid, up to a maximum annual amount of 3,000 euros, for a maximum period of 12 months, provided that the worker has not reached the age of 30 as of the date of continuation (the provision set forth in Article 106 of Law 205/2017 remains in effect; in this case, the exemption applies starting from the first month following the month in which the contribution benefit linked to the apprenticeship contract expires).
Social Security Contribution Exemption for the Hiring of Women (Article 1, paragraphs 16–19)
For the hiring of female workers during the 2021–2022 period, on a pilot basis, the exemption introduced by Law No. 92/2012 is granted at a rate of 100%, up to a maximum amount of €6,000.00 per year.
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