(Updated January 2016) This is a very complex topic, but below is a brief summary. Please remember that this is not legal or financial advice – you should always consult an accountant or lawyer with anything you are unsure of.
1. A permanent employee contract (‘contratto a tempo indeterminato‘ or ‘lavoro subordinato‘) is essentially an old-fashioned lifetime employment contract, and is not the most popular option due to its cost and inflexibility – it is said to be more difficult in Italy to fire an employee than to get a divorce.
There is also a fixed-term version of this contract (contratto a tempo determinato), which can last up to a maximum of 3 years, with conditions attached.
Since 2015 there has been a revived interest in permanent contracts due to tax subsidies and changes to other types of contract. Some protections and rules have been relaxed for fixed-term and especially for permanent contracts – the latter gaining the same status as the old version of the permanent contract only after 3 years.
“Some rules and protections have been relaxed for fixed-term and permanent contracts”
2. The ‘contratto a progetto‘ was the most common option until the labour market reforms in 2015, and many employers misused it – underplaying the benefits it gives the teacher and overplaying the amount of control the school can exert.
This type of contract has been phased out and is now illegal.
3. The third type of contract (collaborazione occasionale) is a short-term temporary contract which can be used only up to a maximum each year of 5,000 Euro in total, from all employers, or 2,000 Euro from any one employer.
Once this limit is reached, the school usually employs the teacher with one of other types of contracts. However, it is also technically possible to continue working beyond this limit, but the tax and social security payments increase and the payment mechanism becomes more complicated.
This type of ‘relationship’ need not actually be drawn up as a contract, but can also be in the form of a purchase order, a brief letter, or an invoice.
“You will have 20% of your earnings withheld as an advance tax payment. However, this is only part of your full tax bill.”
It is especially important to double-check the conditions such as agreed holidays, advance notice, sickness leave, how the salary is paid (each month or at some other frequency), and what happens during the Christmas period and the long August holiday (when most of Italy, and probably also the school, shuts down for 2-4 weeks).
The salary of a teacher with this type of contract has 20% withheld as an advance tax payment – make sure you receive from the school at around February/March of the following year the official declaration that this 20% has actually been paid over to the tax authorities. You will then need to submit a tax return and almost certainly pay more tax, based on your total earnings the previous year.
4. The final type of contract is actually just a consultancy contract for independent freelance teachers who have become what Brits would know as a ‘sole trader’. This involves applying for a VAT number (‘partita Iva‘ in Italian – not to be confused with ‘codice fiscale‘ above), keeping your accounts, issuing invoices, preparing and submitting an annual tax return, and making regular VAT payments and income tax advance payments.
This type of contract is not to be taken lightly and will probably require you to hire, and pay, an accountant.
If a school asks, or sometimes even requires, you to apply for a VAT number, be very cautious. The only good reason to ask a teacher to obtain a VAT number is if the teacher is truly an independent freelancer, with more than one significant client, is aware of the substantial cost and time involved, and has good business acumen.
“Be wary if a school asks or requires you to open a VAT number.”
Unfortunately many teachers who have been in Italy for a while have been caught out by surprise VAT or tax payments, client late payment problems, or has been persuaded to register for the sole reason that the school can continue to pay the same rate while shifting the tax burden onto the teacher instead (see the FAQ on how to calculate your net salary).
Recent changes to employment law have imposed stricter conditions on schools, with freelancers being converted into permanent employees if any 2 of the following 3 conditions aren’t met: the teacher must qualify as a specialised and skilled contractor earning over 18,000 Euro a year; any one employer or school is not allowed to make up more than 80% of a teacher’s earnings over the previous 2 years; they can’t work together for more than 8 months a year, or provide a fixed workstation.
The ‘other’ category in the chart above probably refers mostly to collaborazione occasionale, but some schools have been known to employ teachers under an British or Irish contract, especially if they already have a British National Insurance number.
This has the advantage of lower tax payments, and so normally also a higher net salary, but its total duration in any 1 year is limited to a maximum of 183 days, after which the teacher automatically becomes resident for tax purposes in Italy and so must pay Italian tax out of their salary (and reclaim any tax paid in the UK, which has a double taxation treaty with Italy).
However, some employers are ‘forgetful’ about bringing their British employment contracts to the attention of the Italian tax authorities. It’s not uncommon for some unscrupulous schools to claim that it’s possible to work tax-free for 2 years, only for the teacher to have an unpleasant surprise when they file their tax return a year later.
- How to Find a Good School
- Qualifications and TEFL Certificates
- How and Where to Find a Teaching Job
- Independent or Freelance Teacher?
- Understanding Visas and Permits
- How to Calculate your Net Salary
- Payslips and Common Italian Terms
- Return to main FAQs page
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