The 2025 Budget Law (Law No. 207/2024) includes several crucial measures related to employment and pensions in Italy. Here are the highlights of the provision by category.
Hiring, Fringe Benefits and Productivity Awards
The new law boosts the deduction of labor costs for new permanent hires by 20% in the next three years. In cases involving the stable employment of specific categories of people, the deduction may reach up to 130%. The substitute tax on productivity awards decreases from 10% to 5% until 2027. Tax exemptions for fringe benefits are confirmed for 2025-2027, with a threshold set at 1,000 euros for employees without children and up to 2,000 euros for those with children. A reduction from 24% to 20% is reserved for companies that reinvest 80% of their profits, of which at least 30% involves investments in 4.0 and 5.0 goods. The income threshold allowing to benefit from the so-called flat tax at 15% increases from 30,000 to 35,000 euros.
Tax Wedge Cut
The tax wedge cut for medium-low incomes is made structural and extended to incomes up to 40,000 euros per year. This action benefits an additional 3 million taxpayers. A fixed deduction of 1,000 euros up to 32,000 euros is observed. The cut becomes fiscal for those earning between 20,000 and 40,000 euros.
Parental Leave and Bonuses for Working Mothers
From 2025, working mothers with two or more children can enjoy an exemption, on the condition that their income is not more than 40,000 euros per year. Mothers with three or more children are exempt until the youngest child reaches the age of 18. This policy starts by 2027.
Pension Provisions
To address the lack of certain skills in the public and private sectors, two interventions have been introduced. It also aims to encourage those eligible for early retirement to remain at work (known as the Maroni Bonus). Changes are made to existing legislation for public administrations to encourage employees to stay at work even after reaching early retirement eligibility.
The pension package confirmed for 2025 includes advance retirement options currently in force (Quota 103, Ape social and Women’s option) and introduced the possibility of early retirement at 64 by combining mandatory pension with complementary ones. Pensions equal to or less than the minimum treatment will increase by 2.2% in 2025 and 1.3% in 2026. Increases are also planned for those over 70 in hardship conditions and for social allowance holders.
