Termination in India vs Italy: Retrenchment, Notice and Justified Dismissal

Indian employers often think about exits in terms of notice: the appointment letter says 30, 60 or 90 days, either side gives notice or pays in lieu, and the employee leaves with full and final settlement. For “workers” there are extra rules on retrenchment. In Italy the question is different: after probation, the employer needs a legally valid reason to dismiss, and notice alone is never enough. This guide compares the two. Full side-by-side on Italy vs India .

India: notice, retrenchment and standing orders  

Under the Industrial Relations Code, 2020 (in force since 21 November 2025):

• Retrenchment of a worker with at least one year of continuous service requires one month’s written notice (or wages in lieu) and retrenchment compensation of 15 days’ average pay for every completed year of service (or part above six months), under section 70.
• On top, the employer must pay into the Worker Re-skilling Fund an amount equal to 15 days’ last drawn wages per retrenched worker (section 83).
• Establishments with 300 or more workers need prior government permission for lay-off, retrenchment and closure (Chapter X). The threshold was 100 under the old Industrial Disputes Act.
• Standing orders on classification, conduct and discipline are mandatory for industrial establishments with 300 or more workers.

For employees outside the “worker” definition, such as many managers in IT, termination is mostly governed by the contract. A notice clause, honoured or paid in lieu, usually ends the relationship, subject to wrongful termination claims in civil courts.

Italy: dismissal needs a reason  

Italian law (Law 604/1966) allows the employer to dismiss an employee on a permanent contract only for:

• Just cause (giusta causa, art. 2119 civil code): misconduct so serious it does not allow the relationship to continue even for the notice period. No notice is due.
• Justified subjective reason (giustificato motivo soggettivo): a significant breach of duties, less serious than just cause. Notice is due.
• Justified objective reason (giustificato motivo oggettivo): economic, organisational or production reasons, such as closing a role. Notice is due, and the employer must normally show it could not reassign the employee to another available position.

The dismissal must be in writing and state the reasons. For any disciplinary dismissal, the procedure in art. 7 of the Workers’ Statute applies: written charge, at least five days for the employee to reply, possibly a hearing, then the decision.

During a written probation period, either party can end the contract without notice or reason, which is the closest Italy gets to Indian-style flexibility.

Remedies: what happens if a dismissal is unjustified  

For employees hired from 7 March 2015, Legislative Decree 23/2015 (the “Jobs Act”) applies. In most cases of unjustified dismissal the remedy is an indemnity in months of salary, scaled by seniority, rather than reinstatement. Reinstatement remains for discriminatory, null or oral dismissals, and in some cases where the alleged misconduct did not exist. For employers with more than 15 employees in a unit or municipality (or more than 60 in total), the indemnity is a minimum of 6 and a maximum of 36 months of reference pay (art. 3 D.Lgs. 23/2015); after Constitutional Court rulings 194/2018 and 150/2020 the judge sets the amount within that range weighing seniority, company size, the parties’ conduct and other factors.

Employers with up to 15 employees in a unit (and up to 60 overall) face a lower indemnity range: amounts are halved (art. 9), so 3 to 18 months, after Constitutional Court ruling 118/2025 removed the former six-month cap. This matters when you hire through an EOR, because the EOR’s headcount, not yours, counts.

Collective redundancies  

In Italy, making five or more employees redundant within 120 days in an employer with more than 15 staff triggers the collective redundancy procedure under Law 223/1991, with union consultation. This is the closest parallel to Chapter X in India, though it is a consultation process, not a government permission.

Notice periods  

In Italy, an employee resigns through an online procedure on the Ministry of Labour portal, otherwise the resignation is not effective. Notice for resignation is usually shorter than for dismissal under the CCNL.

Mutual separation  

Indian companies often agree a “mutual separation” with a settlement. Italy has a comparable route: an agreed termination signed in a protected venue (for example before a union representative or a labour conciliation committee), so that the employee’s waiver of claims is binding. A plain private settlement is open to challenge for six months.

TFR is not severance  

Italian employees receive TFR whenever employment ends, for any reason. It is deferred pay that accrues every year, so it is not a cost of firing. See gratuity vs TFR .

Three scenarios Indian managers ask about  

“The project ended, so the role ends.” In India, a project-based exit for a non-worker employee is usually handled through notice. In Italy, the end of a client project can support a justified objective reason only if the role genuinely disappears and the employee cannot reasonably be placed elsewhere in the employer’s organisation. Expect notice and possibly a negotiated exit.

“Performance is not good enough.” Poor performance alone is hard to use as a reason in Italy. It needs to be serious, documented and attributable to the employee, usually after written warnings under the disciplinary procedure. Many performance exits end in a mutual agreement instead.

“They are moving to a competitor.” The employee can resign with CCNL notice. You cannot stop them unless a valid, paid non-compete is in the contract. During notice, the duty of loyalty in art. 2105 of the civil code still applies.

What this means if you hire through an EOR  

The EOR is the legal employer, so it issues any disciplinary letter or dismissal, follows the procedure and handles the final payroll and TFR. You decide on performance and business needs. The practical rules:

• Use probation deliberately and review before it ends.
• Document performance issues as they happen; you will need them if a subjective reason is ever relied on.
• If a role is closed for business reasons, plan the timeline with the EOR; notice and a possible indemnity should be in your budget.
• Do not send termination emails from India. In Italy, the form and the sender matter.

See the Italian employment contract basics, run the calculator , or contact us before any exit.

Related guides for Indian companies  

• Appointment letters vs Italian CCNL levels
• Gratuity vs TFR
• Notice buyouts, bonds and non-compete

General information, not legal advice.