National Insurance, PAYE and Auto-Enrolment vs INPS, IRPEF and TFR: What an Italian Salary Really Costs

A UK finance team budgets a salary by adding employer National Insurance above the threshold and a few percent of pension. Applying that logic to Italy underestimates cost. This guide compares the two payroll systems and explains how to budget an Italian salary.

UK: NI, PAYE and auto-enrolment  

Employer National Insurance. For 2026/27, employer Class 1 NI is 15% on earnings above £96 a week (£417 a month) for most employees, with no upper limit ( gov.uk ). Employee NI is 8% between £242 and £967 a week and 2% above. Employment Allowance can reduce the employer’s bill.

PAYE. The employer withholds income tax and NI under PAYE and reports in real time to HMRC ( gov.uk ).

Auto-enrolment. Eligible staff must be enrolled in a workplace pension, with a minimum total contribution of 8% of qualifying earnings, of which the employer pays at least 3% ( gov.uk ).

Italy: INPS, INAIL, IRPEF, 13th month and TFR  

INPS contributions. Italian social security contributions are paid on all pay from the first euro. The employer share is roughly 30% of gross pay for a typical private-sector employee and the employee share 9.19% (plus 1% on pay above €56,224 a year in 2026). Rates are set by law and INPS circulars . There is a contribution ceiling (€122,295 in 2026) only for employees who first entered the system after 1995.

INAIL. Accident and occupational disease insurance with INAIL is paid by the employer at a rate depending on the risk class of the job; for office work it is low.

IRPEF withholding. The employer acts as tax withholding agent (sostituto d’imposta), deducting income tax each month and reporting through the annual CU certificate and 770 return to the Agenzia delle Entrate . From 2026 the national IRPEF rates are 23% up to €28,000, 33% from €28,000 to €50,000 and 43% above, after the 2026 Budget Law (Law 199/2025) cut the middle rate from 35%. Regional and municipal surcharges are added, and tax credits for employees reduce the effective rate, especially at lower incomes.

13th month. Every CCNL includes a 13th monthly payment, paid in December, and some add a 14th in summer. Italian salaries are quoted as annual gross (RAL) including these. If you agree “€4,000 a month”, clarify whether that is 12, 13 or 14 payments.

TFR. Under article 2120 of the civil code, about one 13.5th of annual pay (about 6.91% after a small offset) accrues every year as deferred pay, paid at the end of employment. Within six months of starting, the employee chooses whether to send it to a supplementary pension fund (Legislative Decree 252/2005). Either way, it is an employer cost.

Side by side  

How to budget a salary  

As a rule of thumb, an Italian employee costs the employer about 1.36–1.40 times the agreed annual gross (RAL), before benefits and before the EOR fee (assuming employer INPS of about 29–32% for an office employee in industry or commerce, INAIL below 0.5% and TFR at 6.91%). That multiple comes from INPS, INAIL and TFR applied to an annual figure that already includes the 13th (and 14th) month. In the UK, the equivalent multiple for a mid-level salary is usually lower, because NI starts above a threshold and the pension minimum is small.

Steps:

1. Agree the RAL in euros and the number of monthly payments.
2. Check the CCNL minimum for the job level; you cannot go below it.
3. Add employer INPS, INAIL and TFR.
4. Add benefits (meal vouchers, welfare, equipment) and the EOR fee.
5. Convert to pounds at a prudent rate, as salary is paid in euros.

Our calculator does steps 3 to 4 for you, and our guide on fully loaded cost explains each line.

Net pay looks different too  

Employees compare offers on net pay. In Italy, social contributions are higher and income tax reaches 33% at a lower income than the UK higher rate, so net-to-gross ratios differ. Do not convert a UK net salary into an Italian gross by exchange rate alone. Use a gross-to-net calculation for the Italian side.

Data protection in payroll  

UK GDPR and the EU GDPR treat payroll data similarly, but Italian payroll processes more sensitive data (for example certificates, family details for tax credits and union membership for dues). The EOR, as employer, is the controller for Italian payroll data; your company receives only what it needs to manage the work.

Payment calendar and cash flow  

The rhythm of payments differs as well. A UK employer pays PAYE and NI to HMRC monthly (or quarterly for small employers) by the 22nd of the following month when paying electronically. In Italy, withheld IRPEF and INPS contributions for a month are normally paid by the 16th of the following month using the F24 form, and INPS receives a monthly UniEmens return with each employee’s data. The 13th month creates a December peak, and a 14th (where the CCNL provides one) a summer peak. Finance teams used to flat monthly UK payroll should plan for these spikes.

Common mistakes UK finance teams make  

• Budgeting on base salary times twelve. The RAL already includes the 13th month; dividing it by twelve overstates monthly pay, while forgetting it understates the annual budget.
• Applying UK thresholds. There is no Italian equivalent of the NI secondary threshold or Employment Allowance for a typical hire, so contributions apply to every euro.
• Ignoring TFR because it is “paid later”. It is a liability that grows every month and must be funded on exit.
• Assuming salary sacrifice works the same way. Italian tax-efficient benefits follow their own rules (meal vouchers, welfare plans, pension contributions), with set limits.
• Converting net to gross by exchange rate. Tax and contribution structures differ, so equal net pay needs a proper calculation.

What this means if you hire through an EOR  

With HiringItaly, the EOR runs Italian payroll, pays INPS and INAIL, withholds IRPEF, accrues TFR and issues payslips, for €250 per employee per month all-inclusive. You get one monthly invoice covering salary and all employer costs. You do not need an Italian entity, tax registration or local payroll provider.

Related guides for UK companies  

• Redundancy pay vs TFR
• Written statement vs Italian contract and CCNL
• Holiday and working time
• Italy vs UK overview , contracts

General information, not legal advice. Contact us for a costed offer.