The “August Decree”: What does it mean for employment relationships?

The Italian government has enacted what is known as the “August Decree” (Law Decree no. 104 of August 14, 2020), containing, among other things, new furlough arrangements, a benefits contribution exemption for new hiring, the extension of a ban on dismissals, and the extension of fixed-term contracts.

Having been introduced by a decree-law, these measures may be subject to amendments by Parliament at the time of their conversion into law.


The Italian government has introduced an additional 18 weeks to furlough arrangements that can be used from July 13 to December 31, 2020.

More specifically:

  • The first nine weeks are free of charge, but they may cover the process previously sought and authorized under the previous emergency regulations (e., the “Decreto Rilancio” and “Decreto Cura Italia”) for the period after July 12, 2020;
  • The additional nine weeks may be provided solely on the condition that the previous nine-week period was fully authorized and used. In addition, in order to benefit from the additional nine weeks, employers must make an additional contribution to the Social Security National Body (INPS). The amount of the contribution depends on the reduction in turnover that the company suffered as a result of the suspension/slowdown in business activity, based on a comparison between the first half of 2020 and the first half of 2019. The contribution is 9% if revenue dropped by less than 20%, or 18% in the absence of any reduction in revenue, determined based on the remuneration that would have been due to employees for the hours not worked during the suspension/slowdown in activity. No contribution is required from employers whose revenue dropped 20% or more, or those who started their businesses after January 1, 2019.

As an alternative to the additional 18 weeks , employers who used furlough programs in May and June 2020 (or have already requested temporary lay-offs and used them, even partially, after July 12, 2020) may choose an exemption from social security contributions (with the exception of premiums and contributions due to INAIL, the National Institute for Insurance Against Accidents at Work). That exemption is available until December 31, 2020 for a maximum period of four months and may go up to double the hours of previous furlough periods used in May and June 2020.

The effectiveness of the provisions relating to this contribution exemption is subject to authorization from the European Commission.

contribution exemption for new hiring and for Southern Italy 

In addition to the furlough programs, the Italian government has provided a total exemption from social security contributions (excluding premiums and contributions due to INAIL) for up to six months from the date of hiring for employers who hire permanent employees until December 31, 2020 (with the exception of apprenticeship contracts and not including employees who have had permanent employment contracts with the same company in the previous six months). That exemption also applies to the conversion of fixed-term contracts into permanent employment contracts.

Moreover, the August Decree has introduced a 30% (excluding premiums and contributions due to INAIL) reduction in social security contributions for new hiring in the southern region of Italy to stimulate economic growth in disadvantaged areas.


The most widely discussed provision is the extension of the ban on dismissals. Unlike the Italian government’s previous emergency provisions, this one introduces a mobile system of variable duration, closely linked to the use of furlough programs or, alternatively, to the contribution exemption.

Pursuant to the decree, employers who have not fully used furlough arrangements (or the exemption from contributions) will not be able to proceed with either collective or individual layoffs (i.e., dismissal for economic and/or organizational reasons) until the furlough arrangements have been employed to the fullest extent (or the exemption period ends).

The ban on dismissals does not apply in case of:

  • permanent termination of the business activity due to liquidation (unless all or part of a going concern is sold off);
  • bankruptcy without temporary exercise of the business;
  • execution of a collective company-level agreement signed by major national trade unions that provides incentives to terminate employment relationships.

It is essential to note that the complex wording of this provision leaves open extensive potential interpretations of the exclusions. For this reason, we are expecting clarification from Parliament or the Ministry of Labor on whether the ban on dismissals applies to employers who have never used (or will not use) the furlough arrangements.


In order to balance the above-mentioned dismissal ban, the August Decree provides flexibility concerning fixed-term contracts. Until December 31, 2020, it is possible to renew or extend fixed-term agreements, for one time only and for a maximum period of 12 months within the overall limit of 24 months, without the need to specify the grounds for doing so (Italian, causale), a departure from the general regulations.

On the other hand, the Italian government has revoked the provision (contained in the law converting the “Decreto Rilancio”) concerning automatic extension of fixed-term contracts, even as temporary staff contracts, for a period equal to the length of suspension of business activity.


The August Decree does not directly modify the emergency regulations aimed at encouraging working remotely, and it remains strictly related to the state of emergency. Indeed, until October 15, 2020 (the expiration of emergency status now extended until January 31, 2021) employees may be allowed to work remotely even in the absence of a specific written agreement.

Under previous emergency provisions, employees with children under 14 years old were entitled to work remotely, but that right was subject to the suspension of educational services and, therefore, remains effective only until September 14, 2020.

After September 14, employees entitled to work from home will include only disabled employees and those who assist disabled family members, as well as employees who, based on a company’s physician assessment, are most at risk of infection due to age or a specific condition (e.g., immunodepression or oncological pathology).

However, in all these cases, the right to work remotely is subject to the condition that remote work is compatible with the employee’s work activity.


It seems that the emergency situation is still far from over. Therefore, in the current state, it is necessary to remove any possible interpretative doubts regarding emergency measures, thus allowing companies to better plan effective strategies for restart.

Seguici su