Civil servants: waiting times for severance pay have been reduced, but only for some

The long process of phasing out severance pay for civil servants, leading to a partial return to the normal arrangement – whereby severance pay is paid immediately upon retirement, without the delays imposed since the 2010–11 public finance crisis – will cost 3.1 billion over ten years.

This figure is significantly lower than the colossal sums set out in the estimates submitted by INPS to the Constitutional Court in the protracted legal dispute on this issue, which put the cost at up to 15.6 billion for the immediate abolition of the deferral mechanisms currently in force. But note this: the budget measure, in line with the preliminary steps taken last year, deals exclusively with old-age pensions. And even so, it generates a cost that can only be managed gradually: in the hope that this will be sufficient to avert the threat of a ruling of unconstitutionality, which would necessitate immediate, sweeping action, bringing the massive costs indicated by the social security institution back into play.

It is precisely in response to repeated calls from the constitutional judges that the public sector is gradually and partially phasing out the payment of severance pay in instalments. The new rule, as explained in last Saturday’s edition of *Il Sole 24 Ore*, will be implemented in two stages: in the first three years, starting in 2028 (as there is no scope for this in 2027), it reduces by three months per year the time between retirement and the payment of the first instalment of the severance pay, a period already shortened from 12 to 9 months by the previous Budget Law. From 2031, it will then address the threshold amount – currently set at 50,000 euros – above which payment in instalments applies, raising the ceiling for the initial tranche by 10,000 euros per year until it is abolished from 1 January 2035. At that point, those retiring on the basis of age or length of service will receive their severance pay immediately, just like private-sector employees. Others will not.

The budget makes no mention of those who will leave their posts due to reaching retirement age, or perhaps because they find work in the private sector. It therefore leaves the current timetable unchanged, which in such cases requires a 24-month wait for the first instalment and then pays the severance pay in annual instalments of up to 50,000 euros each, until the third instalment, which settles the account regardless of the amount. These severance payments exceeding 100,000 euros will therefore continue to be delayed for five years (often extended by other administrative hold-ups).
The new rules will return to the Constitutional Court on 14 January, the date set for the final hearing on the matter, precisely to give the Government time to take action. On that day, it will become clear whether the countermeasures in the Budget Law will be sufficient to avoid a ruling of unconstitutionality which, without intervention, would have been inevitable.

The matter has, in fact, been hanging in the balance for a long time. As early as 2019 (judgement 159), the judges had emphasised the urgent need to review legislation that was ‘not without its problematic aspects’. In 2023 (judgement 130), they returned to the issue, calling for ‘reform to be made a priority’. However, this did not materialise until the ultimatum of 5 March this year (order 25), which set a date of 14 January 2027 for the final verdict. On that occasion, the judges will be called upon to strike a delicate balance. This is because severance pay, regardless of the reason for leaving employment, is always deferred remuneration and is protected by Article 36 of the Constitution; yet the decisions cannot disregard another crucial constitutional principle, namely the balance of public finances.