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Italy: new government revives extraordinary wage subsidy for companies in crisis

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Italy

A measure recently reintroduced by the new Italian Government gives companies in crisis who have wholly or partially ceased trading the opportunity to apply for financial support to guarantee employee wages. This article sets out the details and conditions of the revived provision.

In a Decree Law effective from 29 September 2018, the new Italian Government has reintroduced the possibility for companies that cease their business or part of it to request an extraordinary wage subsidy (CIGS) in crisis situations. A similar provision was abolished by the previous Government, giving rise to complaints from both companies and unions.

As clarified by the Ministry of Labour in its memo of 4 October 2018, the new provision aims to safeguard employment by providing funds to enable companies in crisis to either continue operating or sell their business, by rehiring redundant employees.

Companies may request access to this wage subsidy if they are ceasing or have already ceased, production, even partially. The subsidy can be obtained in three situations:

  • when there is a material possibility of a quick transfer of the undertaking and consequent rehiring of employees;
  • when the company wishes to carry out a re-industrialisation (i.e. transform the activity) of the production site;
  • when the redundant employees are involved in active re-employment policies put in place by the relevant Region.

However, this extraordinary wage subsidy is subject to some limits. Firstly, the measure is only valid for the years 2019 and 2020. Second, there is a maximum 12-month limit on its duration.

In addition, before filing the request for CIGS, an agreement between the company and trade unions must be signed before the Ministry of Labour, with the possible involvement of the Ministry of Economic Development (MISE) and the relevant Region. This agreement will specify the terms of the CIGS, including provisions for an employee suspension plan and measures regarding the re-employment or management of redundant employees.

Finally, it should be noted that as the Government allocated a limited budget for this new instrument, the financial commitment required needs to be checked for each specific case. As a consequence, when all the allocated amount has been used, this instrument will not be available any more.

The (re)introduction of this new instrument needs to be carefully considered by companies when planning a total or partial cessation of business because of its great impact on budget and on the timing of the process of making redundancies as a result of cessation of business.

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