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How to understand your payslip
How payslips are structured in Italy
- Earnings (the money the employee is due), divided into fixed and variable amounts
- Withholdings (taxes and contributions), divided into taxes and social security payments
- How many hours of work you performed
- The amount of social contributions you’ve paid
- Whether you have taken advantage of any of the temporary leave you’re entitled to
- How many days of vacation you’ve used or accrued
- Any bonuses you’ve obtained
- Both your gross and net salary
- The header, which contains information on you and your company
- The body, which gives you an overview of your gross salary
- The summary, which contains the progressive annual and monthly amounts of social security and tax deductions, severance pay, and net salary
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Understanding the header of your payslip
- The month or payment period
- Company information. Here, you’ll see the company code, tax code/VAT number, company name, address of the registered office, the INAIL (National Institute for Insurance against Accidents at Work) position number, and INPS (National Institute for Social Security) registration number.
- Employee information. Here, in addition to your personal details, you’ll find your hiring date and possible termination of the relationship (for fixed-term contracts).
- Base pay`–the minimum remuneration to be paid to the employee based on the collective agreement for the job category and level, or their qualifications
- Contingency allowance—the amount required to adjust the base pay to inflation (note that this has remained unchanged since 2001)
- EDR (Distinct Component of Pay)—the ERD is equal to €10.33 gross per month for 13 months. This is paid to all employees, except for managers
- Tax deduction days
- Any indicators envisaged by the relevant national collective bargaining agreements
- Any seniority increments—these are salary increases based on the employee's length of service at the company. They are established by the CCNL and are calculated on the basic pay plus contingency allowance as either a fixed amount, or as a percentage
- Superminimo, or extra allowance over minimum pay (if applicable)—this is an additional amount that can be established both at the time of individual hiring (individual superminimo) or by collective agreements (collective superminimo).
Understanding the body of your payslip
- Overtime worked
- Work performed on bank holidays or at night
- Indemnity or indirect remuneration, namely work permits, sick days, maternity leave, accidents, used up vacation days, etc.
- Productivity bonuses
- A TFR advance, or severance pay
- Vacation pay
Understanding the withholdings on your payslip
- Social security contributions are shared between you and your employer, and are used to finance the National Institute of Social Security (INPS) and the National Institute of Insurance for Accidents at Work (INAIL). Your payslip will only show you the contributions that you’ve paid—both the taxable amount and the total contributions.
- By subtracting the social security contributions from the gross salary, you’ll get to the taxable income. Tax contributions are then calculated by applying your personal income tax rate to this taxable amount. To calculate your tax contributions (IRPEF), a given percentage must be applied to your taxable income, and calculated according to your income level. On your payslip, you’ll find the taxable amount, the gross IRPEF tax, the net IRPEF tax, tax withholdings, the total withholding taxes, and additional IRPEF.
- Severance pay—when applicable, this includes your gross annual severance pay, which is equal to the sum of all gross monthly salary payments you’ve accrued divided by 13.5—as well as the taxable severance pay, equal to the sum of all the accrued portions year by year.
- Net salary—this is the last item on your payslip and represents your take-home salary after all tax and social security deductions.
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