How Does Redundancy Work in Italy? Thresholds, Law 223/1991 Process, Selection Criteria & TFR

Understanding how redundancy work in Italy operates is essential for any employer planning workforce reductions on Italian soil. Italy’s framework for terminating employees on economic or organisational grounds is one of the most procedurally demanding in Europe, governed principally by Law no. 223/1991 and shaped by sector-level collective agreements (CCNL). This guide walks HR managers, in-house counsel and business owners through every compliance step, from the numeric thresholds that trigger the collective dismissal procedure, through mandatory trade-union consultations and objective selection criteria, to the final settlement of TFR (trattamento di fine rapporto), Italy’s statutory severance payment.

Whether you are restructuring a single department or closing an entire production unit, the checklist, timeline tables and worked examples below will help you execute redundancy in Italy lawfully and minimise litigation exposure.

Quick Definition, Redundancy vs Dismissal in Italy

Italian employment law distinguishes sharply between termination for objective reasons (giustificato motivo oggettivo) and termination for subjective or disciplinary reasons (giusta causa or giustificato motivo soggettivo). Redundancy falls squarely within the first category. An employer invokes redundancy when it needs to reduce headcount because of genuine economic, organisational or production-related circumstances, not because of any fault on the employee’s part. The distinction matters because each pathway carries its own procedural obligations, evidentiary burdens and risk profiles for Italy termination of employment.

A disciplinary dismissal requires proof of serious misconduct or breach of contractual duties and follows a specific procedimento disciplinare. Redundancy, by contrast, requires the employer to demonstrate that the role is genuinely surplus to requirements and that no suitable alternative position exists within the organisation. When the number of proposed dismissals crosses certain statutory thresholds, the process escalates from an individual to a collective procedure, and Law 223/1991 takes centre stage.

Individual Redundancy (Small Numbers)

When an employer dismisses one or a handful of employees for objective reasons and the numeric thresholds of Law 223/1991 are not met, the termination is classified as an individual dismissal for objective justified reason. The employer must still provide a written dismissal letter stating the specific economic or organisational grounds, respect the applicable CCNL notice period (or pay indemnity in lieu), and settle TFR. For companies with more than 15 employees, a preliminary conciliation attempt before the Provincial Labour Directorate (Ispettorato Territoriale del Lavoro) is required before the dismissal letter can be issued. Failure to follow these steps exposes the employer to claims of unfair dismissal.

Collective Redundancy and the Mobility Procedure (Law 223/1991)

A collective dismissal in Italy arises when an employer intends to make a larger number of redundancies within a defined period, crossing the thresholds set out in Articles 4 and 24 of Law 223/1991. Once triggered, the employer must follow a formal mobility procedure (procedura di mobilità) that includes written notification to trade unions, mandatory consultation meetings and administrative filings with the Ministero del Lavoro. The mobility procedure was originally designed to facilitate redeployment and provide social safety-net access (the former lista di mobilità), and although the mobility lists themselves have been phased out, the underlying consultation and notification obligations remain fully in force. Collective redundancies in Italy cannot be executed lawfully without completing every step of this procedure.

Legal Thresholds, How Does Redundancy Work in Italy Under Law 223/1991?

Not every workforce reduction triggers the collective dismissal regime. Law 223/1991 applies only when specific employer-size and dismissal-number thresholds are both satisfied simultaneously.

Which Employers Are Covered?

The collective dismissal procedure applies to enterprises that employ more than 15 workers, including managers (dirigenti), across their entire organisation. The 15-employee count is assessed company-wide, not per individual site or production unit. Employers in certain sectors, notably domestic work and specific maritime categories, may be governed by separate rules. It is also important to note that applicable CCNL provisions can impose additional procedural requirements or consultation obligations that sit on top of the statutory baseline. Industry observers expect that employers operating across multiple CCNLs should review each agreement’s redundancy clauses before launching a procedure.

Counting Rules and Worked Examples

Under Law 223/1991, the collective dismissal procedure is triggered when an employer with more than 15 employees intends to dismiss at least 5 workers within 120 days in the same production unit, or across multiple units within the same province. The dismissals must stem from a reduction, transformation or cessation of business activity. It is critical to count all proposed terminations for objective reasons within the rolling 120-day window, including those already executed, to determine whether the threshold has been crossed.

Employers should be cautious about structuring dismissals in smaller tranches to avoid crossing the threshold. Italian courts have shown willingness to aggregate dismissals that appear artificially separated in time, treating them as a single collective exercise and imposing the full Law 223/1991 procedure retroactively.

Step-by-Step Consultation and Mobility Procedure Under Law 223/1991

The collective dismissal procedure is the most compliance-intensive stage of redundancy in Italy. It unfolds over a defined sequence of notifications, meetings and administrative filings. The entire process typically spans 60 to 75 days from the employer’s initial written communication, though some phases may run shorter if agreement is reached early.

Phase 1, Pre-Notification Assessment

Before initiating the formal procedure, the employer should prepare a detailed internal business case documenting the economic, organisational or production-related reasons for the proposed redundancies. This dossier should identify the affected roles, explain why alternatives to dismissal (redeployment, reduced hours, wage supplementation) have been considered and ruled out, and set out preliminary selection criteria. Thorough preparation at this stage significantly reduces the risk of procedural challenges later.

Phase 2, Written Notification to Employee Representatives and Unions

The procedure formally begins when the employer sends a written communication to the company-level employee representatives (rappresentanze sindacali aziendali, RSA, or rappresentanze sindacali unitarie, RSU) and to the relevant territorial trade-union associations affiliated with the most representative national confederations. A copy of this communication must simultaneously be sent to the Provincial Labour Directorate. The written notice must contain specific information prescribed by Law 223/1991, including: the reasons for the proposed collective dismissals, the number and professional profiles of surplus employees, the timeframe for the intended dismissals, and any measures proposed to mitigate the social impact (redeployment, retraining, early retirement incentives). Omitting required information can invalidate the entire procedure.

Phase 3, Mandatory Consultation Meetings

Within 7 days of receiving the employer’s written communication, the trade unions may request a joint examination meeting (esame congiunto). This opens a consultation phase lasting up to 45 days (reduced to 30 days for employers with fewer than 10 surplus employees). During consultation, the parties negotiate over the possibility of avoiding dismissals entirely, reducing the number of affected employees, facilitating redeployment within the group, agreeing on selection criteria, and defining support measures such as outplacement or retraining packages. Every meeting should be minuted. Although the employer is not obliged to reach an agreement, it must engage genuinely and in good faith, a pro-forma consultation that amounts to a box-ticking exercise can be struck down by a court.

Phase 4, Administrative Phase at the Labour Directorate

If the company-level consultation ends without a full agreement, either party may refer the matter to the Provincial Labour Directorate (or the Ministero del Lavoro for companies with operations in multiple regions). A further 30-day administrative consultation period follows, during which the public authority attempts to mediate. For employers with fewer than 10 surplus employees, this phase is shortened to 15 days. If an agreement is reached during either phase, it is recorded and the procedure concludes on the agreed terms.

Phase 5, Final Decisions, Notice Letters and Administrative Filings

Once the consultation and administrative phases are exhausted, whether by agreement or by the expiry of the statutory timeframes, the employer may proceed with issuing individual dismissal letters. Each letter must specify the objective reasons for the redundancy and respect the applicable CCNL notice period (or provide indemnity in lieu). Within 7 days of issuing the dismissal notices, the employer must send a final written communication to the Provincial Labour Directorate, the Regional Labour Commission and the trade unions, listing the names of the dismissed employees, the selection criteria applied, and the manner in which those criteria were implemented. This filing closes the administrative loop.

Selection Criteria and Ranking, How to Choose Employees for Redundancy in Italy

One of the most litigated aspects of collective redundancies Italy-wide is the selection of which employees will be dismissed. Law 223/1991 requires that selection criteria be objective, verifiable and applied consistently across the affected workforce. Where the consultation process produces an agreement on criteria, those agreed criteria take precedence. In the absence of agreement, the employer must apply the default statutory criteria set out in the law, which reference three principal factors: family responsibilities (carichi di famiglia), length of service (anzianità), and the technical, production and organisational requirements of the business.

Employers commonly operationalise these factors through a points-based scoring matrix that assigns weighted scores to each criterion for every employee within the relevant pool. The pool itself must be properly defined, typically all employees performing the same or interchangeable roles within the affected production unit. Artificially narrowing the pool to target specific individuals is a common ground for legal challenge.

Prohibited and Unsafe Selection Criteria

Italian anti-discrimination law prohibits selection based on gender, age, ethnicity, religion, disability, trade-union membership, political opinion, or any other protected characteristic. Criteria that appear neutral but produce a disproportionate impact on a protected group (indirect discrimination) are equally vulnerable. Selecting employees who are on maternity or parental leave, or who have recently exercised rights under Law 104/1992 (disability assistance), is likely to trigger additional scrutiny and reversal.

Sample Scoring Matrix

Employees with the highest total score are retained; those with the lowest score are selected for redundancy. The matrix, the raw data and the individual scores must be documented and retained, they form the core of the employer’s defence in any subsequent challenge. The likely practical effect of a well-documented matrix is that it significantly reduces the risk of a court finding the selection arbitrary or discriminatory.

Notice Period, Termination Pay and TFR (Severance) Explained

A frequent question from international employers is whether Italy has a statutory redundancy payment comparable to the UK’s redundancy pay or similar schemes. The answer is nuanced. Italy does not have a separate, stand-alone “redundancy pay” statute. Instead, every employee, regardless of the reason for termination, is entitled to TFR (trattamento di fine rapporto), a deferred compensation that accrues throughout the employment relationship and is paid out on termination. This is Italy severance pay in its most common form.

TFR Calculation, Formula and Worked Example

TFR is governed by Article 2120 of the Italian Civil Code. The annual accrual is calculated by dividing the employee’s annual gross remuneration by 13.5. Each year’s accrual is then revalued on 31 December by a composite index: a fixed rate of 1.5% plus 75% of the increase in the ISTAT consumer price index for the year. The total TFR payable at termination is the sum of all revalued annual accruals over the employee’s tenure.

Worked example: An employee earns a gross annual salary of €40,000 and has been employed for 5 years. Ignoring revaluation for simplicity:

• Annual TFR accrual: €40,000 ÷ 13.5 = €2,962.96 per year
• Total TFR (5 years, before revaluation): €2,962.96 × 5 = approximately €14,815
• With revaluation: each annual accrual would be uplifted by the composite index each year, producing a somewhat higher total. INPS publishes the applicable coefficients annually.

TFR is subject to separate taxation under a favourable regime (taxation applies at the average rate for the years of accrual, not at the marginal rate for the year of payment). The employer must pay TFR promptly upon termination, delays can attract interest and penalties. For employers that have diverted TFR contributions to supplementary pension funds (fondi pensione), only the portion retained by the employer is payable directly; the balance is settled through the fund.

Notice Periods vs Indemnity in Lieu

The applicable notice period Italy employers must respect is determined by the relevant CCNL and typically varies by the employee’s seniority level, role classification and length of service. Notice periods range from as little as 15 days for junior staff to several months for senior managers. The employer may choose to pay an indemnity in lieu of notice (indennità sostitutiva del preavviso), which is equal to the remuneration the employee would have earned during the notice period. This payment is separate from and additional to TFR.

When Additional Compensation Arises

Beyond TFR and notice indemnity, additional payments may arise from several sources. A collective agreement reached during the Law 223/1991 consultation may include enhanced exit packages, outplacement support or early-retirement incentives. Individual settlement agreements (conciliazione), commonly used to obtain a full and final waiver of claims, typically include a supplementary tax-advantaged payment. Where a court finds the dismissal to be unlawful, it may order reinstatement or award an indemnity calculated on the basis of length of service, generally ranging between 6 and 36 months’ salary depending on the applicable statutory regime (pre- or post-Jobs Act). Employers planning redundancy in Italy should budget for settlement costs alongside statutory entitlements.

Reporting Obligations by Entity Type

Risks, Sanctions and Alternatives to Dismissal

The consequences of getting the redundancy procedure wrong in Italy are severe. If an employer fails to follow the Law 223/1991 consultation and notification steps, or applies selection criteria that are discriminatory or unverifiable, the resulting dismissals may be declared unlawful. Depending on the applicable statutory regime (which varies based on the employee’s hiring date relative to the Jobs Act reforms of 2015), the remedies available to a court include:

• Reinstatement of the employee in their role, plus back pay and social-security contributions for the interim period.
• Indemnity in lieu of reinstatement, typically ranging from 6 to 36 months’ last salary, where reinstatement is not ordered.
• Procedural indemnity (for purely procedural defects without substantive invalidity) of between 6 and 12 months’ salary under certain regimes.

Beyond litigation risk, a botched collective redundancy can damage industrial relations, trigger retaliatory collective action and harm the employer’s reputation with regulators. Industry observers expect that the reputational cost of non-compliance is often underestimated by international companies entering the Italian market.

Employers should evaluate alternatives to outright dismissal before initiating the mobility procedure. Italian law provides several tools to reduce headcount or labour costs without termination:

• Ordinary wage supplementation (CIGO), temporary reduction of hours and pay, subsidised by INPS, for companies experiencing short-term economic difficulty.
• Extraordinary wage supplementation (CIGS), longer-term scheme available during business restructurings, crises or reorganisations.
• Solidarity contracts, collective agreements to reduce working hours across the workforce in exchange for partial wage integration.
• Voluntary redundancy schemes, incentivised exit packages offered to employees on a voluntary basis, often negotiated with trade unions.
• Internal redeployment, reassignment to different roles, departments or group companies.

Demonstrating that alternatives were genuinely considered, and documenting why they were insufficient, strengthens the employer’s defence if the redundancy is later challenged.

Practical Checklist and Employer Templates for Redundancy in Italy

The following checklist consolidates the key actions an employer must complete at each phase of the collective redundancy procedure. Retain all documentation for at least 10 years.

• Pre-procedure phase: Prepare internal business-case dossier; document economic/organisational reasons; assess alternatives (CIGO, CIGS, redeployment); identify affected roles and preliminary employee pool; engage external employment counsel.
• Notification phase: Draft and send written communication to RSA/RSU, territorial unions and Provincial Labour Directorate; ensure all required data elements are included (reasons, number and profiles of surplus employees, timeline, proposed mitigation measures).
• Consultation phase: Attend all joint examination meetings; minute each session; negotiate in good faith on scope reduction, redeployment, selection criteria and support measures; retain all correspondence.
• Administrative mediation phase: If no agreement at company level, file with Labour Directorate/Ministry; participate in mediation sessions; document outcomes.
• Dismissal execution phase: Issue individual dismissal letters referencing objective reasons and applied selection criteria; respect CCNL notice periods (or pay indemnity in lieu); calculate and prepare TFR payments.
• Post-dismissal filing: Send final communication to Labour Directorate, Regional Labour Commission and unions within 7 days listing dismissed employees, criteria and application method.
• Recordkeeping: Archive the complete file, business case, notifications, minutes, selection matrix with individual scores, dismissal letters and final filing, in a secure, auditable format.

Template documents, including a model notification letter to trade unions, a selection-criteria scoring memo and a consultation-meeting minutes template, should be prepared with the assistance of qualified Italian employment counsel to ensure they reflect the specific CCNL and factual circumstances. Early indications suggest that employers who use standardised, pre-vetted templates reduce procedural error rates substantially.

Conclusion

How does redundancy work in Italy? In short, it is a highly regulated, multi-phase process that demands meticulous planning, genuine consultation and transparent selection criteria. From verifying whether Law 223/1991 thresholds are met, through the 45-plus-30-day consultation and mediation timeline, to the final settlement of TFR and administrative filings, every step carries compliance risks that can result in reinstatement orders or significant indemnity awards. Employers considering workforce reductions in Italy should engage specialist employment counsel early, document every decision and explore alternatives before committing to dismissals. For tailored guidance on your specific situation, consult an experienced Italy-based employment lawyer.

Sources

1. Law no. 223/1991, Normattiva (Official Text)
2. Ministero del Lavoro e delle Politiche Sociali
3. INPS, Istituto Nazionale della Previdenza Sociale
4. Eurofound, Severance Pay / Redundancy Compensation (Italy)
5. CMS, Expert Guide to Dismissals (Italy)
6. L&E Global, Termination of Employment Contracts in Italy
7. Simmons & Simmons, Collective Dismissals in Italy
8. Pietro Ichino, Collective Dismissal Analysis
9. Rippling, A Guide to Dismissal, Layoff & Termination in Italy
10. ItalianPayroll, Employment Rules FAQs (Italy)