On the construction site, contracts, productivity, overtime and incentives are all being managed. It’s a race to secure resources

The battle over the final Budget Bill of this parliamentary term is already underway. Although the decisive moment will come when we have a clear picture of the available resources – as is always the case in a process that requires direct liaison with Brussels. Following statements by the Prime Minister, Giorgia Meloni, and the Minister for Labour, Marina Calderone, the labour package looks set to be quite significant. It has the dual aim of supporting wages and businesses. But let’s take a closer look at the measures being considered by the experts, which are distinct from the IRPEF reduction with a 33 per cent rate for incomes up to 60,000 euros, which is also a priority for the Meloni government.

A key measure is the extension of the tax exemption for renewals of national collective labour agreements, with a view to facilitating wage adjustments in line with the cost of living and strengthening the link between productivity and wages. Under the previous budget, wage increases paid to private-sector employees in 2026, in accordance with collective agreements signed between 1 January 2024 and 31 December 2024, are subject to a substitute tax of 5 per cent in lieu of personal income tax (IRPEF) and regional and local surcharges, in accordance with collective agreements signed between 1 January 2024 and 31 December 2026. The measure applies to private-sector workers whose income from employment – in 2025 – does not exceed 33,000 euros. According to the technical report accompanying the 2026 Budget, approximately 3.8 million workers are potential beneficiaries of the 5 per cent substitute tax on pay rises paid to private-sector employees in 2026, in implementation of the collective agreements signed between 1 January 2024 and 31 December 2026. Both the Prime Minister, Giorgia Meloni, and the Minister for Labour, Marina Calderone, have expressed their intention to renew the measure in the next Budget Bill as part of a broader range of measures to support wages and productivity.

With a view to the 2027 budget currently being drawn up by the government, there are also plans to further strengthen performance-related bonuses, given the progress made, partly thanks to favourable tax measures. Under the 2026 budget, the substitute tax on production bonuses (and on employees’ profit-sharing entitlements) was reduced from 5 per cent to 1 per cent. It applies to amounts ranging from 3,000 to 5,000 euros. The technical report accompanying the previous Budget Act estimated that around 250,000 people would be affected. The Budget Act then extended until 2026 the provision stipulating that, for dividends paid to employees and deriving from shares allocated by companies in lieu of performance-related bonuses, 50 per cent of the amount is included in the income tax base (excluding the portion of such dividends exceeding the €1,500 limit, for which full inclusion in the tax base remains in force). Bonuses linked to contracts providing for performance-related bonuses and profit-sharing had already benefited from a reduction in the tax rate from 10 per cent to 5 per cent under the 2023 Budget Law; this measure was subsequently confirmed in the 2024 Budget and extended by the 2025 Budget Act. According to the latest figures from the Ministry of Labour, updated as at 15 July, the number of employees benefiting from this additional pay linked to company performance has risen to over 4.2 million – 4,241,031 to be precise: the average annual bonus paid to these workers has exceeded €1,800, standing at €1,815.43, representing an increase of €210.19 compared with December 2025.

Still on the subject of wage support, the government is also considering extending the 15 per cent tax rate on allowances and pay supplements into next year. Under the previous budget, it was stipulated that, for the 2026 tax year, sums paid up to an annual limit of €1,500 to private-sector employees, in the form of: allowances and supplements for night work (Article 1, paragraph 2, of Legislative Decree 66/2003 and the National Collective Labour Agreements); surcharges and allowances for work carried out on public holidays and weekly rest days (as specified in the National Collective Labour Agreements); shift allowances and other emoluments relating to shift work (as provided for in the National Collective Labour Agreements). This measure applies unless the employee expressly waives it in writing. These measures are applied by tax withholders in the private sector to employees whose income does not exceed 40,000 euros in the year 2025. The technical report accompanying the previous Budget Law estimates that 2.3 million workers will be affected by this measure. Also under the 2026 Budget Law, the 15 per cent supplementary allowance on gross pay for night work and overtime on public holidays carried out between 1 January and 30 September 2026 has been reintroduced. The benefit is intended for workers in the food and drink service sector and in the tourism and hospitality sector, including spa resorts, whose income from employment does not exceed 40,000 euros (2025 tax year). Here too, an extension is reportedly being considered.

Another key issue is stable employment, particularly for young people and women, who are facing greater difficulties today, despite the sharp rise in employment (which is, however, driven by the over-50s). With the 1 May decree, the government has revised the incentives to support stable employment for young people and women. In total, the measure has allocated €934 million over the three-year period 2026–2028: €497.5 million for the under-35 bonus; 175 million for the conversion of fixed-term contracts (lasting up to 12 months) into permanent contracts, again for young people; €141.5 million for the women’s bonus; and the remaining €120 million for the incentive for stable employment for the benefit of the over-35s who are unemployed within the Single Special Economic Zone (ZES Unica) for Southern Italy. With this four-pronged package of measures, the government estimates it will encourage a further 110,700 permanent contracts. The government is considering extending these measures into 2027 and, resources permitting, further strengthening them.