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Is Italy really giving all employees a 'pay rise' from August?

The Local Italy
The Local Italy - [email protected]
Is Italy really giving all employees a 'pay rise' from August?
Will workers in Italy be getting a pay rise this month? Photo by INA FASSBENDER / AFP.

Italy's government will meet this week to agree on measures to include in a new cost of living bill. Will a de facto pay rise be among them?

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Having passed the decreto aiuti or 'aid decree' to help combat rising inflation and energy costs in May, Italy's caretaker government is now set to enact the aiuti bis decree, a €14 billion follow-up provision.

The pandemic-induced economic crisis exacerbated by Russia's war on Ukraine prompted the government to take urgent measures in the spring to extend energy bill discounts and roll on the deadline to claim Italy’s ‘super bonus 110’.

As inflation hit 8 percent in Italy in June - the most severe price spike the country has experienced since 1986 - the government recognised the need to take further steps to limit the impact of the cost of living crisis.

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Ministers are reportedly due to convene on Wednesday or Thursday to discuss which measures to include in the new bill.

The initial decree provided a one-time €200 'bonus' payment to some categories of workers, pensioners, job seekers and benefits recipients.

This time - after debate as to whether the €200 payment would be extended - the government reportedly plans to opt instead for a small income tax cut of around one percentage point over six months for earners in a certain income bracket.

READ ALSO: EXPLAINED: How to claim Italy’s €200 cost of living bonus

That's on top of an existing 0.8 percent cut that lasts until the end of December 2022, meaning total tax cuts of around 1.8 percent will be deducted from the monthly paychecks of eligible workers.

This reduction in the tax 'wedge' would no doubt be welcome news for those working in Italy, where even the state audit court has said employees face too high a tax burden.

As the tax relief is expected to last until the end of the calendar year for a six month period, the July deduction is expected to be retroactive.

So does that really mean you'll be getting a de facto pay rise if you're an employee in Italy?

Yes, if the measure passes and your gross income is under €35,000 - but don't get too excited just yet.

According to most outlets including the Corriere della Sera newspaper, workers on €35,000 will save just under €27 per month (one percent of a monthly salary of €2,692 - most Italian salaries are paid out over 13 rather than 12 months to give employees a tredicesima Christmas bonus).

A few news sites have used different calculations to arrive at €75, though haven't specified how they got there.

By Corriere's calculation, employees on salaries of €28,000 will save around €22 per month, while those on €15,000 will save less than €12.

That means total savings over the six month period of around €160 for higher earners and €69 for lower earners - not to be sniffed at, but not life-changing.

Other measures up for discussion in the new bill are an additional extension to fuel duties discounts, and a proposal to slash VAT on everday foodstuffs such as bread and pasta.

The Local will report further details of the financial aid measures included in the 'Aiuti bis' decree as they are confirmed.

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