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MONEY

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

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?

Will workers in Italy be getting a pay rise this month?
Will workers in Italy be getting a pay rise this month? Photo by INA FASSBENDER / AFP.

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 1976 – the government recognised the need to take further steps to limit the impact of the cost of living crisis.

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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MONEY

EXPLAINED: What is Italy doing to cut the rising cost of living?

Amid soaring inflation and price rises, the Italian government has announced new measures to help families and businesses keep costs down. Here's what you need to know.

EXPLAINED: What is Italy doing to cut the rising cost of living?

Italy approved a much-anticipated aid decree on Thursday, August 4th, bringing a new round of state funding intended to tackle the country’s most critical issues: from the rising cost of living and sky-high inflation to the energy and supply crisis. 

READ ALSO: Fuel tax cut and help with energy bills: Italy approves inflation aid package

The ‘aiuti bis’ aid package, worth around 17 billion euros ($17.4 billion), likely marks the last major act by outgoing prime minister Mario Draghi before an early general election next month.

The funding is seen as badly needed after inflation hit 8 percent in Italy in June – the most severe spike the country has experienced since 1976.

After weeks of speculation about exactly which measures may or may not be included in the decree, we now know it contains everything from an extension to the fuel duty cut to more help with energy bills for those on lower incomes.

Here’s what you need to know about the latest measures intended to keep the cost of living under control.

Extension to fuel duty cut 

The current discount on fuel duties is to be extended again to September 20th, though the value of the discount will drop from 30 to 25 cents. 

The discount was recently extended to August 21st but the government decided to further prolong the incentive in a bid to ease the blow that record fuel prices have dealt to consumers and businesses.

The cut was initially introduced as far back as March when the average prices at the pump for petrol and diesel both exceeded the two-euro mark.

Help with energy bills

Measures introduced in the first half of the year to help lower-income households and vulnerable people pay rising energy bills will be extended under the new decree.

It extends an existing government discount on gas and electricity bills for a further three months, until the end of 2022, as well as reducing system charges.

READ ALSO:

Italy’s tax on the ‘excess profits’ of energy companies has meanwhile been extended to June 2023 after the government reportedly received fewer payments than expected.

Tax cut for employees

Workers earning a gross income of under €35,000 are eligible for a two percent tax saving, amounting to a small monthly ‘pay rise’ until the end of this year.

“Already in the budget law we reduced social contributions by 0.8 percent; for the second half of the year this reduction goes up to 2 percent, as we’re now adding 1.2 percent”, said Economy Minister Daniele Franco at a press conference on Thursday.

As the tax relief lasts until the end of the calendar year for a six-month period, the July deduction will be retroactive.

New aid measures announced on Thursday are hoped to boost Italy’s consumer spending power as the cost of everyday goods rises. Photo by ANDREAS SOLARO / AFP

Those earning €35,000 can expect to save around a further €30 per month (1.2 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).

To find out how this may apply to you, it’s advisable to speak to an accountant or your local Italian tax agency (Agenzie delle entrate) office.

More funding for mental health treatment

The new decree will also enhance the existing ‘psychologist bonus’ (bonus psicologo) by allocating an additional 15 million euros to the measure. This will bring the total amount of funds available for the bonus to 25 million euros. 

The bonus was officially introduced at the end of July to help make mental health services more affordable, amid a pandemic-induced crisis in Italy.

All individuals with an Isee (a calculation of relative household income and wealth) lower than 50,000 euros will be eligible to receive a 600-euro voucher, which they’ll be able to use when seeing professionals listed on Italy’s official register of psychologists.

See more information about claiming the bonus in a separate article here.

Discount on public transport tickets

The government will allocate a total of 101 million euros to funding its ‘transport bonus’ (bonus trasporti); 22 million more than the original amount.

The bonus takes the form of a one-time 60-euro discount to be used on the purchase of monthly or yearly tickets for local transport services.

It will be available from September 2022 to all pensioners, students, and employees with an Isee of up to 35,000 euros.

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