We would like to highlight the main changes in labor and business introduced by the Budget Law 2024.
The tax and contribution exemption threshold for fringe benefits has been increased for this year. This category encompasses all goods and services provided by the employer to its employees in addition to their salary, such as shopping vouchers, various types of purchase cards, sums of money disbursed or reimbursed by the employer for water, electricity, and gas bills, expenses for the rent of the primary residence, and interest on the mortgage related to the primary residence.
All these disbursements, up to a maximum of €1,000 annually, will not be included in the employee’s income used for calculating taxes and contributions. If the worker, whether employed or treated as such (e.g., project workers, co.co.co.), has dependent children, the threshold is raised to €2,000, applicable in full to both working parents, even in the case of only one dependent child. For 2024, the €258.23 annual threshold is no longer considered, and instead, the two new limits of €1,000 and €2,000 apply.
Also confirmed for 2024 is the application of a 5 percent substitute tax on productivity bonuses. These bonuses constitute economic incentives paid to workers as a reward for achieving specific objectives. This preferential regime is applicable under certain conditions: the bonus must be disbursed in accordance with collective, territorial, or corporate agreements entered into by the most representative trade union associations; these agreements must be submitted to the relevant Territorial Labor Inspectorate within 30 days of their signing; the bonus disbursement must be linked to measurable and verifiable increases in productivity, profitability, and quality; and the worker receiving the bonus must have had a labor income not exceeding €80,000 in 2023. If all these conditions are met, the productivity bonus may be subject to a 5% substitute tax, capped at a maximum of €3,000 annually.
It should be noted that, in cases where company collective agreements allow for it, the employee has the option to convert all or a portion of the bonus into company welfare benefits. Exercising this option results in tax and contribution benefits for both the company and the employee. While the performance bonus is typically subject to contributions and taxation, in the case of conversion into welfare benefits, the bonus will not be subject to either contributions or taxes, up to a maximum limit of €3,000 per year.
In practical terms, for example, if a productivity bonus is €1,000, the company will incur a cost of €1,300, as contributions will still need to be paid. However, the employee will receive a net amount of approximately €860, as contributions and taxes will be levied on the bonus, albeit at a reduced amount. Conversely, if the employee chooses to convert the bonus into welfare benefits, the cost incurred by the company will be exactly equal to the value of the bonus, in this case, €1,000, as no contributions need to be paid on that amount. The employee will receive a net amount exactly equal to the value of the bonus, without having to pay either contributions or taxes.
Lastly, the Budget Law 2024 has introduced a provision known as incremental hiring. If an employer hires a permanent worker, the associated cost is deductible from business or self-employment income with a 20% increase. In cases where the hiring pertains to disadvantaged workers, such as the long-term unemployed, disabled individuals, or adult workers living alone with one or more dependent children, the surcharge is increased to 30 percent.
The Firm is available for any necessary clarification.
(Avv. Giampiero Pino) (Avv. Eleonora Lepri) (Dott.ssa Martina Badiali)
