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Trend 18 January Jan 2021 0917 18 January 2021

Italy's budget law: what's in store for the employment sector

The budget contains emergency measures, but also important innovations, such as the new income indemnity fund for the self-employed and the extension of expansion contracts

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Support for employment, baby bonus, expansion contracts and the new income indemnity fund for the self-employed. These are just some of the measures targeted at revitalising the Italian labour market, featuring in the budget law adopted by the Italian Government in its efforts to tackle the crisis due to the Covid-19 pandemic.

"The resources earmarked by the budget amount to EUR 39 billion, with 15 billion being used to fund the Recovery Plan. The centre-piece is the work and welfare package, which I eagerly wanted, and is supported by the whole government," explained Nunzia Catalfo, Italy's Minister for Labour.

Since the beginning of the pandemic, the measures adopted by the government amount to almost EUR 100 billion, but they don't go far enough. According to data on the activity of the labour market in the third quarter published by Istat in December 2020, the number of unemployed has grown to 2,546,000, which is up 202,000 more on a year ago. This therefore marks a 10% rise in the unemployment rate, with the unemployed concentrated mainly among women and young people aged 15 to 34.

The 2021 budget law has provided important innovations specifically for these social groups. One relevant measure includes a 100% exemption from social security contributions for those recruiting young people under the age of 36 for 36 months, with this period extending to 48 months if it is applied in the regions of southern Italy or on the islands. The initial fund provided by the government amounts to EUR 200 million for 2021, rising to EUR 774 million in 2023. A similar proposal is made for female workers. The government has provided for a 100% reduction in social security contributions for the recruitment of women during the two-year period 2021-2022, with an initial fund of EUR 37 million.

There are incentives being provided, especially for recruitment in Italy's southern regions: an exemption from social security and welfare contributions of up to 30% in 2025, 20% in 2026 and 2027, and 10% in 2028 and 2029, with an initial fund of EUR 5 billion from 2021.

The major innovation in the budget law is the package targeted at the self-employed, which includes the new ISCRO scheme and the fund supporting exemption from social security contributions

The major innovation in the budget law is the package targeted at the self-employed. The new income indemnity fund for the self-employed registered in the separate INPS management scheme is called "ISCRO", which stands for "extra income and business continuity allowance". This measure, introduced on an experimental basis,for the three-year period 2021-2023, will provide financial support for six months, ranging from a minimum of EUR 250 to a maximum of EUR 800 per month. To be eligible for this support, the self-employed should have earned an income in the year preceding their application, amounting to less than 50% of the average of their income from self-employment earned in the previous three years, not exceeding a limit of EUR 8,145. They should also be up to date with their social security contributions and have been registered as self-employed for at least four years.

In keeping with the objective of creating a social safety net for self-employed workers and professionals adversely affected by the crisis, a fund of EUR 1 billion has been set up in 2021 to finance the partial exemption from paying social security contributions for "freelancers" belonging to the INPS pension management schemes and those registered with private pension funds. The only ones eligible for the "discount" are freelancers and self-employed workers who have received payments and income not exceeding EUR 50,000 gross and seen a decrease in turnover or fees in 2020 compared to 2019 of no less than 33%.

Another innovative measure relates to expansion contracts, which have been extended to companies employing a minimum of 250 workers, with a view to facilitating the possibility for employees who still have another five years before they meet their pension requirements to leave their jobs while, at the same time, encouraging the recruitment of young people and training plans for workers employed in companies.

Expansion contracts have also been extended to companies with a minimum of 250 employees, with the further aim of encouraging the recruitment of the youngest workers

There has, of course, been no shortage of emergency measures. This includes a halt to redundances until 31 March, with a further 12-week extension for the ordinary wage guarantee fund, the standard allowance and the wage guarantee fund in derogation. This is an important measure for which the government has earmarked an additional EUR 5 billion.

Another provision featuring in the budget law is the extension until 31 March of fixed-term contracts, which can be renewed only once and for a maximum of 1 year, even in the absence of normal statutory conditions. With regard to active labour policies, the government has allocated EUR 500 million for a fund supporting the employment transition of workers through the reform of social safety nets, pre-empting those provided for by Europe in the "Revolving fund for the implementation of the Next Generation EU-Italy".

The 2021 budget law has also renewed the guaranteed minimum income for the 2021-2029 period, with a budget on target to rise to a maximum of EUR 477 million in the last year. Aid packages have also been provided for social groups experiencing particular hardship. The agricultural sector is one such example. The government has extended the exemption from social security contributions until 31 December 2021, along with an exemption from personal income tax for independent farmers. In the education sector, the budget law provides for the recruitment of staff, particularly for infant and primary schools, supported by a budget rising to more than EUR 1 billion in 2029.

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