by Serena Minervini

Termination payments, in Italy TFR, are the economic compensation payable to the subordinate worker, upon termination of the employment relationship.

If you work in Italy, if you want to quantify this compensation, it is necessary to make a calculation that isn’t too simple: it is necessary to add the worker’s annual remuneration and then divide it by 13.5. It is also necessary to recalculate annually for the revaluation index (equal to 75% of inflation) plus 1.5% fixed.

The remuneration from which it is necessary to start for the calculation of severance pay, except as otherwise provided for in the individual collective agreements, is made up of all the remuneration elements of a typical nature in the contractual employment relationship, including periodic increases in seniority, indemnity, increase in shifts , lump sums, premiums and participations, other amounts recognized and paid on a not-occasional basis, etc., with the exception of reimbursement of expenses.

Once this all-inclusive calculation has been made, the amounts are revalued at December 31 of each year with a fixed rate of 1.5% plus 75% of the increase in the ISTAT index (inflation) recorded for the previous year.

The Consolidated Law on Income in Article 19 establishes the rules regarding compensation received after April 1, 2008.

According to current legislation, the severance indemnities that accrued from 1 January 2001 are taxable only for the principal amount, as opposed to the previous regulations, without considering the annual revaluations.

After determining the tax base of the TFR, the average rate that will be applicable to the same shall be determined.

For employment relationships with a duration of less than 2 years and for employee severance indemnities that have a reference income of not more than 30.000 euros, special deductions are planned from 1 April 2008.

After 8 years of uninterrupted employment, the employee, for certain cases, taxable, can ask the employer for an advance on the severance pay. This advance can only be made up to a maximum of 70% and only for urgent, documented expenses.

The costs for which you can ask for an advance of the severance pay are:

– healthcare costs, for therapies and extraordinary interventions recognized by public facilities; also includes ancillary costs, such as those required for travel and accommodation.

-the purchase of the first house, for oneself or for the children, documented by a notarial deed;

– expenses for training leave;

– expenses to be incurred during periods of optional abstention for paternity usable until the eighth year of the child.

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