2019 Budget law: new developments regarding labour and pensions

The draft 2019 Budget law was checked and approved by the State General Accounting Office on 31 October 2018 and – following the Chamber of Deputies’ publication of a package of amendments on 12 November 2018 – is now awaiting final approval by the Parliament.

The analysis of the checked and approved draft – the only one available to date – highlights that there will be a number of developments in the field of labour and pensions. In particular:

• extension of the “Southern Italy Employment” incentive (art. 20);
• creation of “Funds for the introduction of a minimum income for citizens and for the reform of the pension system” (art. 21);
• completion of the “Employment recovery plans” (art. 23);
• apprenticeship incentives, with additional funds allocated from 2018 onwards (art. 26)
• increase in the “Youth policies fund” (art. 37);
• introduction of a “Bonus for hiring young graduates and post-graduates” (art. 50).

A more detailed assessment of the most significant developments is provided below.

Developments in the field of labour and pensions

Extension of the “Southern Italy Employment” incentive

According to the draft available, national/regional operational programmes and supplementary operational programmes can include measures – up to a maximum of 500 million euro in 2019 and 2020 in the context of the specific objectives established in each programme and in accordance with European laws on state aid – to encourage businesses in Southern Italy to hire, with open-ended contracts, people under the age of 35 or people of or above the age of 35 who have been unemployed for at least 6 months.

This exemption can be combined with other exemptions or reductions in the financing rates provided for in laws in force, limited to their period of application.

Creation of “Funds for the introduction of a minimum income for citizens and for the reform of the pension system”

In terms of the matters of interest to us, the budget bill provides for the creation of a Fund at the Ministry for Employment and Welfare, called “Fund for the reform of the pension system, to include additional forms of early retirement and measures to encourage businesses to hire young people” (see “Quota 100”), which includes funding amounting to 6,700 million euro for 2019 and 7,000 million euro starting from 2020. This provision will be implemented by means of ad hoc legislative measures.

“Apprenticeship incentives”

According to the tone of the Budget law, the “incentives for apprenticeship contacts to obtain a further education technical qualification, diploma or certificate” – as set out in the so-called “Jobs act active policies” (see Legislative Decree 150/2015) – will be reduced from 15.8 million in 2019 and 22 million in 2020, to 5 million in each of the two years.

It should however be highlighted that the “youth policies fund” will be “increased by 30 million starting from 2019”.

“Bonus for hiring young graduates and post-graduates”

Art. 50 of the Budget law, “Bonus for hiring young graduates and post-graduates”, deserves particular attention.

More specifically, the article in question provides for an incentive, which is in the form of an exoneration from the payment of social security contributions (not INAIL) for a maximum period of 12 months and up to the limit of 8,000 euro for each open-ended employment contract (full or part-time) entered into in 2019 (or transformed from fixed-term into open-term).

The incentive applies to the hiring of:

–       graduates who achieve a first-class honours degree between 1 January 2018 and 30 June 2019, within the legal duration of the course, and

–       post-graduates who complete their PhD studies before their 34th birthday, within the same reference period.

According to the wording of this specific provision, the incentive does not apply:

–       to private-sector employers who have dismissed employees for justified objective reasons in the 12-month period preceding the dates of the new hires, and

–       where such employers dismiss an employee for justified objective reasons within 24 months from the date of hiring of the new employee, and the dismissed employee worked in the same business unit, with the same job position as the person hired with the benefit of the incentive in question. In such case, the employer would lose the benefit and be required to repay the amount of the exemption used.

Conclusions

The measures commented above will obviously have different impacts depending on how they are effectively enacted and finalised and whether or not future amendments are made. In fact, the next weeks will be decisive in understanding what their actual effects will be.