Employer of Record in Italy

In Italy there are some companies that offer hiring of employees via an Employer of Record (EoR). These services are mainly offered to foreign companies that want to “test” the business in Italy. However, it is important to keep in mind that the concept of EoR is not regulated by Italian law. The Italian law regulates manpower agencies. Therefore, if the Employer of Record is not officially authorized as a manpower agency in Italy, the employment through it is considered as unlawful manpower supply, which leads to serious adminis­trative sanctions and criminal liability. Furthermore, the companies that benefit from unlawful manpower run the risk that the involved employees could claim a direct employment with them.

In order for such employments to be lawful, they shall be made through temporary employment contracts/ labour leasing. And these temporary employment or labour leasing services are deemed legal in Italy if the company that offers them is subscribed at the official register at the Ministry of Labour held for manpower companies.

Therefore, if a company wants to hire “external” manpower, they shall do it through a temporary employment contract with an authorized manpower agency. Such contracts could be stipulated both on a fixed-term and on an open-term basis.

Employees hired through a manpower agency are entitled the same rights as the “regular” employees, or direct employees of the “economic”​ employer. In fact, by virtue of the principle of protecting workers from discriminatory conduct, workers on manpower contracts are entitled to economic and regulatory conditions that are not overall inferior to those of the direct employees that carry out the same work tasks and are classified at the same level. Similarly, the union rights provided by Law No. 300/1970 apply also to workers hired by staffing agencies.

A final important aspect to consider is the risk that the activities of the foreign company carried out in Italy by an employee hired through an EoR may constitute a permanent establishment for the economic employer. Indeed, the existence of a permanent establishment is always assessed on the basis of the facts and circumstances in which the activity is actually carried out by the foreign company, even if the formal employer is an EoR. It is therefore essential for the foreign employer to make a proper assessment of this risk before commencing operations in Italy. Moreover, there are no specific rules for temporary employment in Italy by German or other foreign companies that would mitigate this risk.

In conclusion, employment of record is not only illicit in Italy, if not made through an authorized manpower agency and with a labour leasing contract, but it also gives less safety to the employees, as there is reduced transparency of who is the substantial employer. All these facts bring important risks to the economic employer, as well as to the Employer of Record, but they also normally lead skilled employees to reject offers with such labour contracts, preferring regular employment contracts that give them more stability and protection.