home  › Government policies

Renzi’s labor reform makes it a bit easier to fire newly-hired workers

by Claudio Tucci

On Christmas eve, Italian Prime Minister Matteo Renzi approved the first two enacting decrees of the labor market reform, also known as the Jobs Act.
The first measure concerns the new rules of the contract with gradual social protection (the longer a worker is employed with a company the heavier is the indemnity in case of firing) for newly-hired workers, with changes to Article 18 of the workers’ Statute.

In case of dismissal for economic reasons (when the company is in a crisis and must reduce its workforce) the employer would not be forced to rehire the worker, but only to pay a compensation ranging from a minimum of four to a maximum of 24 months of salary.
The employer can also opt for a rapid settlement, offering an economic package (from a minimum of one monthly payment to a maximum of 18 months, depending on the employee’s seniority) which, if accepted by the worker, can prevent a court litigation.

The new rules also modify the protection measures in case of disciplinary dismissal. In this case, the general rule is based on economic compensation. But rehiring remains in case the facts alleged against the worker will prove groundless. For example, an employee is accused of stealing, and is fired.

The new legislation will concern not only individual, but also collective layoffs (more than five employees), which will be resolved with economic compensation.

There is also the introduction of a minimum compensation of 4 monthly payments, starting immediately after the trial period, aimed at discouraging easy firing. The contracts with gradual protection will enjoy tax and pension benefits included in the Stability Law.

The rapid settlement is confirmed. In this case, the employer can offer to pay a monthly salary for every year of seniority, starting from a minimum of two months, up to 18 months. These payments are tax-exempt to make more convenient the out of court’s settlement.

The legislation which changes Article 18 will be sent to the Labor commissions of both Chambers of Parliament to receive their binding valuation. The government hopes the new rules will enter into force at the end of January.