Severance pay (Italian TFR): when must it be paid to the employee?

The severance pay, i.e. Italian TFR “trattamento di fine rapporto”, is a sum of money that accumulates in connection with all subordinate employment relationships.

Severance pay must be liquidated not only in the event of retirement but also in the event of dismissal or resignation. Article 2120 of the Italian Civil Code also provides for the possibility for the employee, as an exception to the general principle, to request an advance payment of the severance pay even during the employment relationship, but under certain conditions.

1. In this article we will address the following issues:
2. When can one request an advance payment of severance pay?
3. Is there a deadline for the payment of severance pay?
4. What happens if the company does not pay the severance pay?

1. When can one request an advance of the severance pay?

In certain cases, the employee may request an advance on severance pay from the employer. The advance may not exceed 70% of the severance pay accumulated and set aside at the date of the request. This right can only be exercised once and, of course, the amount advanced is deducted from the employee’s total TFR.

The advance can only be requested by those who have accumulated at least eight years of service with the same employer.

The advance is granted if justified by the need to make

• medical expenses for extraordinary operations recognised by the competent public structures
• purchase of the first home for the applicant and/or children;
• expenses during maternity leave;
• expenses during training or continuing education leave.

On the other hand, the company may accept applications for advances up to an annual limit of 10% of eligible employees.

2. Is there a deadline for the payment of severance pay?

The general principle is that severance pay is paid upon termination of the employment relationship. The employee is always entitled to severance pay regardless of the causes or reasons for the termination of employment.

When the employment relationship is terminated and the payment of this sum is delayed, the employee may not know what to do. It is first necessary to know that the payment of the severance pay must be made as soon as the termination of employment occurs. Since termination, the terms set out in the National Collective Bargaining Agreements (Ccnl) must be respected.

The employee therefore only needs to refer to the timeframe indicated in his or her category’s collective agreement.

These deadlines may vary between 30 and 45 days, although for public employees the timeframe is often longer. For the latter, in fact, the payment of severance pay may take place up to two years after termination of employment.

3. What happens if the company does not pay the severance pay?

In the event of late payment of the severance pay, the former employee is always entitled to send the employer a letter of formal notice (c.d. diffida). It is always advisable to consult with a Law Firm such as ours in order to calculate the amount owed by the employer. Including interest.

Should the employer ignore the formal notice, the employee may proceed with judicial recovery through an action for an injunction, which in cases such as the recovery of termination benefits and employment claims, will be immediately enforceable. This means that the employee, without having to wait, will be able to immediately initiate enforcement proceedings – e.g. an attachment – to obtain satisfaction of his or her claim.