THE COST OF WORK IN ITALY
Labor, which plays a very important role in the functioning of the global economy, represents a cost for companies which includes not only the wages paid to workers, but also the social contributions paid by the employer, the accruals of thirteenth and fourteenth monthly and severance pay and any other amount related to the job. It is therefore one of the main determining factors of the competitiveness of companies, however also influenced by the entrepreneurial spirit, labor productivity, innovation and the positioning of the company brand on the market. In Italy, labor costs are one of the most expensive in Europe and the size of the tax wedge remains a strong obstacle to the growth and competitiveness of businesses, to the development of investments and to the expansion of employment. “For these reasons, taxation at work must be reduced, starting with the component attributable to employees: with heavier pay slips, in fact, it is possible to reactivate household consumption considerably and boost economic growth”, Sergio di Meo emphasizes emphatically. well-known accountant from Aversa, particularly qualified in employment and legal consultancy for Italian small and medium-sized enterprises (SMEs).
by Roberta Imbimbo
Dr. Di Meo, what is the situation of labor costs in Italy today?
The cost of labor in Italy is among the highest in Europe. For Italian companies, in fact, this item erodes a large part of disposable income, much more than it does in large European economies, such as Germany, France, and Spain. As noted by Eurostat, in our country, the incidence of non-wage costs – i.e. social contributions paid by employers – is equal to 27.5% of the total labor cost. This makes Italy less competitive than other countries. In the United Kingdom and France, for example, the sum between contributions paid by the worker and the company is similar, but the tax levy is decidedly lower and wages are undoubtedly higher: consequently there is a greater propensity to consume and save . The comparison with Spain sees a similar income tax, but a lower impact of the cost component related to contributions. Only in Italy, therefore, is there a very wide distance between income received by the worker and costs incurred by the employer, which penalizes both consumption and the competitiveness of the companies themselves. It is no coincidence that in the last ten years, it has always been the last among industrialized countries: the high cost of labor for Italian companies, in addition to representing an important brake on employment, often becomes an incentive for undeclared work.
What can be done concretely to reduce labor costs?
In my opinion, an adequate development policy is urgently needed to relaunch the competitiveness of Italian companies; an ad hoc law for the South, which provides tax breaks and relief for new hires (and not only for young people, women and over 50, as required by current legal provisions). With the entry into force of the Law of 2 May 1976, n 183, which provided for ten-year tax breaks for companies in the South that employed employees, there was a huge boom in hiring, with a consequent considerable tax impact for the State and a drastic reduction of undeclared work. The last law that favored Italian companies (and which led to strong employment growth) was undoubtedly the n. 407/90 which, in art. 8 paragraph 9, provided for special tax breaks for a period of 36 months in favor of employers who hired workers with an open-ended contract (also part-time) for at least 24 months. The repeal of this law severely penalized the South, where employers were able to access a 100% contribution relief from the date of hiring. To restore vigor to growth and jobs, the government needs to act on factors that inhibit hiring workers and improve the economic environment in which national companies operate.
To improve this context, it is also necessary to combat undeclared work. Budget law 2019 provided for a tightening of sanctions, right?
Exactly. The high labor costs in Italy lead many companies not to regularize their employees. However, this practice can be very risky both for the safety of workers and for the very heavy penalties that could be incurred. In this regard, art.1 paragraph 445 of the Budget Law 2019 n.145 has tightened the sanctioning system by increasing all the sanctions by 20%, thus bringing the maximunition on illegal work to € 1,800.00 for each worker not in compliance with the companies.
The negative consequences of undeclared work are in fact not only linked to the non-tax revenue for the state coffers, but also to the deleterious effects that affect the healthy system of the companies that produce respecting the rules. In fact, the many artisan and commercial companies that suffer from unfair competition from entrepreneurs who do not scruple to use irregular workers lose out. The latter, in fact, since they are not subject to social security, insurance and tax contributions, allow companies where they serve, to benefit from a much lower labor cost and, consequently, to practice a much lower final price of the product or service. compared to those who comply with the provisions of the law.
Doctor, changing the subject, the current Coronavirus emergency requires a reflection on social safety nets, which never as at this time become even more indispensable in order not to let millions of people fall into economic anguish, in addition to health. Are you of this opinion?
A premise appears necessary. Among the support measures for companies and workers contained in the decree-law 18/2020, called the Cura Italia decree, there is the possibility of accessing, with a simplified procedure, the ordinary layoffs, the FIS and the exemption layoffs. The problem of AA.SS. in Italy it is linked to bureaucracy and the authorization mechanism by the INPS which provides times ranging between 50/60 days for the delivery of the treatment; times that severely penalize both companies and workers especially in this historical period where, with companies closed, workers find themselves without any form of income. A typically Italian paradox if you think that these measures have been launched precisely to meet families in difficulty!
