The Italian TFR or “Trattamento di Fine Rapporto” is something that many foreign employers are curious about.
The TFR is something all employers are required to set a side as a severance payment for the employees, and it is paid to the employee when they leave the company, whether it is to search for a new employment or at the end of their career.
The calculation for the TFR is as follows:
- Take the employee’s gross annual salary (from 1 January to 31 December) and divide it by 13.5.
- From that result you deduct the taxable income that regards INPS (Italian Social Security / pension agency) multiplied by 0.5%.
The TFR is then increased according to a percentage that is communicated by ISTAT (the National Statistical Institute).