2021 Budget Law

This document outlines some of the most significant new provisions in labor law introduced by the 2021 Budget Law, Law no. 178 of December 30, 2020, specifically summarizing the provisions concerning:

• Employee tax deduction (Article 1, paragraphs 8-9)

• Contribution exemption for hiring young people under 36 (Article 1, paragraphs 10-15)

• Contribution exemption for hiring women (Article 1, paragraphs 16-19)

• Fund for the exemption from social security contributions due by self-employed workers and professionals (Article 1, paragraphs 20-22)

• Support for the return to work of working mothers (Article 1, paragraphs 23-24)

• Paternity leave (Article 1, paragraphs 25, 363-364)

• Contribution exemption for agricultural entrepreneurs and young direct farmers (Article 1, paragraph 33)

• Southern Italy Contribution Relief (Article 1, paragraphs 161-169)

• Extension and renewal of fixed-term contracts (Article 1, paragraph 279)

• Extension of Covid Wage Supplementation Fund treatments (Article 1, paragraphs 299-314)

• Layoff freeze until March 31 (Article 1, paragraphs 309-311)

• Interprofessional expansion contract (Article 1, paragraph 349)

• ISCRO (Article 1, paragraphs 386-401)

• Vulnerable workers (Article 1, paragraphs 481-484)

• Pension provisions (Article 1, paragraphs 336-339)

• Baby bonus (Article 1, paragraph 362)

• Contribution for mothers with disabled children (Article 1, paragraph 365)

These provisions apply from January 1, 2021.

Employee tax deduction (Article 1, paragraphs 8-9)

To facilitate a structural overhaul of the deduction system, the deduction introduced in 2020 has been stabilized. For 2021, this deduction provides a tax relief of Euro 1200 for employment income and certain assimilated income types, applicable to a total income of Euro 28,000, and re-proportioned for incomes ranging between Euro 28,000 and Euro 40,000.

Contribution exemption for hiring young people under 36 (Article 1, paragraphs 10-15)

To foster stable youth employment, the contributory exemption for new permanent hirings and the conversion of fixed-term contracts into permanent ones for young individuals, originally introduced by the 2018 Budget Law, is extended for the 2021-2022 biennium. This exemption is granted at 100% for a maximum period of 36 months, capped at Euro 6,000.00 annually, and applies to individuals who have not yet reached their thirty-sixth birthday at the time of the initial incentivized hiring.

The period during which the exemption can be utilized is extended to 48 months if the hiring involves a worker whose place of employment is located in one of the following regions: Abruzzo, Molise, Campania, Basilicata, Sicily, Puglia, Calabria, and Sardinia.

The contributory exemption is granted to employers who have not carried out, in the six months preceding the hiring, nor intend to carry out, in the nine months following it, individual dismissals for objective justified reasons or collective dismissals of workers holding the same qualification within the same production unit.

The effectiveness of these provisions is subject to authorization by the European Commission.

Finally, the aforementioned exemption is not applicable in cases of confirmation of an apprenticeship contract at the end of the training period. Similarly, it does not apply to permanent hirings, occurring within 6 months of obtaining a qualification, for students who have completed school-work alternation programs or an apprenticeship period for professional qualification and diploma, a higher secondary education diploma, a higher technical specialization certificate, or high-level apprenticeship training with the same employer. For these specific cases, the exemption from contribution payments remains valid at 50%, up to a maximum of Euro 3,000 annually, for a maximum period of 12 months, provided the worker has not reached their thirtieth birthday at the date of continuation. (Indeed, the regulatory provision under Article 106 of Law 205/2017 remains in effect; in this instance, the exemption is applied starting from the first month following the expiration of the contributory benefit associated with the apprenticeship contract).

Contribution exemption for hiring women (Article 1, paragraphs 16-19)

For the hiring of female workers conducted during the 2021-2022 biennium, on an experimental basis, the exemption introduced by Law no. 92/2012 is granted at 100%, with an annual maximum limit of Euro 6,000.00.

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