Redundancy incentive plans: An option to mitigate the effects of the ban on layoffs

As most readers will be aware, in order to maintain employment levels during the pandemic, the prohibition on employers executing collective layoffs and exercising their right to terminate contracts for objective reasons has been extended, with certain exceptions.[1]

In this context, with Law Decree No. 104 of August 14, 2020, the legislature provided an innovative and non-traumatic solution for terminating employment that can be implemented without violating the ban on layoffs: collective agreements for mutual termination, otherwise known as redundancy incentive plans.

This option (i) requires a very short period of time for implementation of the plan, definitely less than the duration of a collective layoff procedure; (ii) does not involve notice charges; and (iii) entitles an employee who voluntarily participates in the plan to the Naspi unemployment benefit usually received only in case of dismissal and not in case of termination of employment by mutual consent.

Key to understanding this provision is the concept that it is not a collective layoff procedure, but rather a method for employees to participate voluntarily in a company collective agreement, with the relative incentives; termination of the employment relationship then derives from that participation. This highlights the consensual nature of the provision and means that only participating employees see their employment terminated under the terms of the agreement.

Due to the emergency nature of the provision, workers who participate in these types of agreements shall be provided access to the Naspi benefit until the prohibitions on collective and individual layoffs for objective reasons are lifted (i.e., June 30, 2021 or December 31, 2021).

From a practical standpoint, the first step in the procedure is for an employer to enter into a collective agreement with major national trade unions. In this regard, the Italian National Social Security Institute (INPS) with Message No. 689/2021 recently clarified that—for the purposes of the effectiveness of such company collective agreements—what is important is not that all of the major national trade unions sign the agreement, but rather that at least one of these trade unions signs the collective agreement, as well as the employee’s participation in the agreement.

The second step consists of stipulating an individual agreement between the employer and the employee to be ratified in what is considered a “protected venue,” i.e., before the unions.


In conclusion, it is clear that this path can be particularly useful both for employers, who can use it to deal with the problem of sizing their company workforces in a flexible and less traumatic way during this time of great economic uncertainty, and for participating employees, who have access to the Naspi benefit even though the employment relationship is being terminated by mutual consent.

[1] Please refer to our article “Latest updates on the ban on layoffs during the Covid-19 pandemic

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