In a land with 18 different labour contracts reform is vital

Financial Times – July 6th 2014


One of the most important measures introduced in March by Matteo Renzi, Italy’s prime minister, was a decree aimed at giving more flexibility to the labour market by allowing companies to hire 20 per cent of their workforce for up to three years, instead of 12 months, on rolling short-term contracts, writes Sarah Gordon.

Although trade unions called for the decree to be rescinded, the Italian business community welcomed the move.

“The proposal to extend temporary contracts to three years will help a lot” says Massimo Lupi, an employment lawyer. “As of now, you have to provide significant reasons for terminating a temporary contract, and if you fail, it is transformed into a permanent one. This frightens Italian entrepreneurs”.

But businesses said that were many other measures needed to improve the environment for hiring, particularly on rules governing dismissal and reducing the cost of labour for employers.

Giovanna Brambilla runs Value Search, a Milan-based executive search company. She says the most important next step would be to make it easier to dismiss workers. “If a company has more than 15 [permanent] employees it is almost impossible to break the contract with an employee unless there is professional misconduct or if the company is in very serious financial difficulty”, she says. “The result is that in the fourth quarter of 2013 new permanent labour contracts fell by 9 per cent compared to the same period of 2012”.

Mr Lupi says the rules discourage the growth of Italian companies. In addition, employers were put off hiring by the high cost of employing staff – including taxes and allowances.

“I would prefer to hire in Germany and France rather than in Italy”, says Eraldo Bianchessi, chief executive of Rollon, a manufacturing company headquartered in Vimercate near Milan. “The rules [in Italy] are changing from one year to another, one government to another”.

He also argues that more reform is required. Mr Lupi agrees: “In the 1950s, [France’s] Gen de Gaulle said how can anyone govern a nation that has 246 different kinds of cheese? In Italy we have 18 different kinds of labour contract. We must simplify the rules”.

Sarah Gordon