TFR Severance Pay in Italy: How It Works and When You Get Paid

In a Nutshell

TFR (Trattamento di Fine Rapporto — Italy's statutory severance pay, also called "liquidazione" or "buonuscita") is a sum your employer sets aside for you every month. You don't see it in your regular payslip — you receive it all at once when your employment ends, for any reason. Someone who works 15 years on a gross salary of €1,800 per month typically accumulates around €25,000–30,000 gross in TFR. This is a non-waivable right: you cannot give it up, and no contract can strip you of it.

At a Glance

Cost	Nothing for the employee. Tax is applied directly by the employer.
Timeline	Payment: 30–90 days from end of employment (varies by national collective agreement). Treasury Fund via INPS: 30 days from application.
Where in Rome	INPS (Italy's social-security agency — Via Ciro il Grande 21, EUR district); Patronati (free union-affiliated offices — CGIL, CISL, UIL, ACLI) for free assistance.
Documents needed	Payslips, CU (annual tax/income certificate), termination letter; for the Guarantee Fund: proof of admission to insolvency proceedings (in case of bankruptcy).

How TFR Is Calculated

The formula is straightforward: every year your employer sets aside your gross annual salary divided by 13.5. This works out to roughly 7.41% of your annual gross pay.

Practical example:

• Gross annual salary: €24,000 (including the 13th-month bonus)
• TFR accrued in one year: €24,000 / 13.5 = €1,778
• After 10 years: approximately €17,780 gross (before revaluation)

Almost all pay components count towards TFR: base salary, seniority increments, 13th-month bonus, overtime, performance bonuses. Documented expense reimbursements and meal vouchers up to the tax-exempt threshold are excluded.

Each year, TFR already accrued is revalued at a fixed rate of 1.5% plus 75% of the ISTAT consumer price inflation. If annual inflation is 3%, the revaluation is 3.75%. The employer pays an 17% substitute tax annually on this revaluation.

Where Your TFR Goes Each Month

You have three options, and you must choose within the first 6 months of employment.

TFR held by the employer (companies with fewer than 50 employees): your employer keeps the money in-house and pays it out when employment ends. If the company goes bankrupt before then, the INPS Guarantee Fund (set up by L. 297/1982) steps in and pays the TFR within 60 days of proven insolvency.

Treasury Fund at INPS (companies with 50 or more employees): by law (L. 296/2006), TFR as it accrues is paid monthly into INPS (Italy's social-security agency). Your money is safe even if the company shuts down. You can check your balance using SPID (Italy's digital identity for accessing online public services) on the INPS Personal Pension Portal.

Supplementary pension fund: you can redirect your TFR to a sector pension fund (Cometa for metalworkers, Fonte for retail, Fonchim for chemicals, Espero for education, Perseo Sirio for public-sector workers) or an open fund. Advantages: lower taxation at 9–15% (versus the standard rate), potentially higher returns, and often an additional employer contribution (typically 1–2%). Drawback: the money stays locked in until retirement, except for specific advances.

Watch out for the "tacit consent" rule (DLgs 252/2005): if you haven't made a choice within 6 months of being hired, your TFR is automatically channelled into the sector pension fund for your industry.

When You Receive the TFR

TFR is paid out in every case of employment termination:

• Voluntary resignation (even without just cause)
• Dismissal (for any reason)
• End of a fixed-term contract
• Retirement
• Death of the employee (paid to the spouse, children or heirs)
• Mutually agreed termination
• Company bankruptcy (via the INPS Guarantee Fund)

The exact deadline depends on the CCNL (national collective labour agreement for your sector): retail employees must be paid within 45 days of termination, metalworkers within up to 90 days, catering workers within 30–60 days. For public-sector employees timelines are longer: up to 12 months for amounts between €50,000 and €100,000, up to 24 months for higher amounts.

If your employer misses the deadline: send a formal written demand (diffida) by registered post. If there is no response, you can apply to the Labour Court for an injunction (decreto ingiuntivo) or, in the event of bankruptcy, file a claim with the INPS Guarantee Fund.

How TFR Is Taxed

TFR is not added to your other income: it is subject to separate taxation at a rate calculated on the average income of your last 5 years. In practice:

• Average salary (€24,000–28,000/year): TFR tax rate around 18–23%
• Higher salary (€40,000–50,000/year): tax rate around 30–35%
• TFR redirected to a supplementary pension fund: taxed at 9–15% (far more favourable)

Your employer calculates and remits the tax — you receive the net amount.

Requesting an Advance While Still Employed

You have the right to request up to 70% of accrued TFR before employment ends, but only if you have at least 8 years of seniority with the same employer and only once in your career. Eligible reasons are: extraordinary medical expenses (yours or a family member's), purchase or renovation of a primary home, parental leave or training leave.

If your TFR is in a pension fund, conditions differ slightly: you can request 75% for buying or renovating a primary home (after 8 years) or for medical expenses (at any time), and 30% for other personal needs (after 8 years).

The process: submit a written request to your employer with supporting documents (medical estimate, notarial deed for property). The employer normally responds within 60–90 days.

Mistakes to Avoid

1. Signing a "TFR waiver". This is legally impossible — TFR is a non-waivable right enshrined in the Italian Civil Code. Any document purporting to waive it is null and void.
2. Receiving TFR in cash off the books. Every payment must appear on your payslip and on the annual CU income certificate. Without documentation, you cannot prove you received it.
3. Not keeping your payslips. They are proof of your accrued TFR. Keep them for at least 10 years after your employment ends.

Special Cases

Foreigners leaving Italy: your TFR entitlement survives even if you return to your home country. Just give your employer an IBAN for payment (Italian or foreign accounts both work).

Public-sector employees hired before 31/12/2000: a different regime applies — TFS (Trattamento di Fine Servizio), managed by INPS's Public Employees Division, calculated differently (80% of salary for years of service). For anyone hired from 1 January 2001 onwards, the rules are the same as the private sector.

Business transfer: TFR accrued with the old employer transfers to the new employer (art. 2112 Civil Code). You lose nothing.

Unpaid TFR and limitation period: the right to TFR expires 5 years from the date it was due (art. 2948 Civil Code). To interrupt the clock, a registered letter to your employer is enough.

Official Sources

• INPS — TFR
• INPS — Treasury Fund
• INPS — TFR Guarantee Fund
• Agenzia delle Entrate (Italy's tax-revenue agency) — Employment Income
• COVIP — Pension Fund Supervision
• Ministry of Labour

Legal references: Codice Civile art. 2120 e 2122 (L. 297/1982), L. 296/2006 art. 1 c. 755-756, DLgs 252/2005, DPCM 20/12/1999, DL 78/2010 art. 12, Direttiva UE 2008/94/CE.