Italian Severance Pay (TFR): How It Accrues and How It Is Calculated

TFR, trattamento di fine rapporto, is the lump sum every employer in Italy must pay an employee when the employment relationship ends. Anglophone readers researching an Italian job offer often assume it works like a US severance payment, something triggered only by a layoff. It does not.

TFR is deferred pay. A portion of what you earn each year is set aside by law rather than paid out immediately, and it comes back to you as a lump sum whenever the relationship ends, whether that is a dismissal, a resignation, retirement, or simply the end of a fixed term contract. This page works through the formula, the annual revaluation, where the money actually sits while you are still employed, and a full worked example over several years.

Information verified on 20 July 2026. This page provides general legal information and does not constitute legal advice for an individual situation.

TFR is deferred pay, not a severance penalty

Art. 2120 c.c. opens with a simple rule: "in ogni caso di cessazione del rapporto di lavoro subordinato, il prestatore di lavoro ha diritto ad un trattamento di fine rapporto", meaning in every case of termination of an employment relationship, the worker is entitled to TFR. The phrase "in ogni caso", in every case, is doing real work here: the entitlement does not depend on why the relationship ended.

That is the point most often missed by anglophone readers. A worker who resigns to take another job, a worker who is dismissed for giusta causa, and a worker whose fixed term contract simply expires are all owed their accrued TFR on the same basis. It is not a reward for being laid off and not a punishment charged to the employer for firing someone; it is pay the worker already earned, held back by statute and released at the end.

What counts toward the calculation: the retribuzione utile

The annual quota is based on the retribuzione utile, the useful pay, for that year. Under art. 2120 c.c., comma 2, this includes all sums paid in connection with the employment relationship on a non occasional basis, including the cash value of benefits in kind, but excludes anything paid purely as expense reimbursement, unless the applicable collective agreement (CCNL) provides otherwise.

If work was suspended during the year for a reason covered by art. 2110 c.c., such as illness or injury, or where wage integration (cassa integrazione) applied, the pay the worker would have earned under normal conditions is still counted toward that year's quota (art. 2120 c.c., comma 3). A worker on a covered leave does not lose TFR accrual for that period.

In practice, the retribuzione utile normally includes base salary, regularly paid overtime, and any mensilità aggiuntiva the CCNL provides for, such as a 13th or 14th month payment, since these are all paid on a non occasional basis in connection with the job. A genuinely one off, discretionary bonus is more likely to fall outside it, though the exact boundary depends on how the applicable CCNL classifies the payment; the statute's own test, non occasional pay tied to the employment relationship, is the one to apply when in doubt.

This page covers TFR for private sector employees. Public sector employees accrue a related but distinct entitlement, generally referred to as TFS or TFR depending on hire date and role, governed by separate rules with different timing and payout mechanics; it is outside the scope of this page.

The formula: divide by 13,5

Art. 2120 c.c., comma 2 sets the calculation: each year of service contributes a quota equal to that year's retribuzione utile divided by 13,5. A year worked in full contributes a full quota; a partial year is reduced proportionally, and any fraction of a month equal to or greater than 15 days counts as a full month.

On a salary of 28.000 euro for a full year, the quota is 28.000 divided by 13,5, which comes to 2.074,07 euro for that year. That figure accrues every year of the employment relationship and forms the base the annual revaluation is applied to.

Rivalutazione: how the balance grows each year

The accrued balance, excluding the quota that accrued during the current year itself, is revalued every 31 December. The rate is 1,5% fixed plus 75% of the increase in the ISTAT FOI index (the consumer price index for worker and employee households) measured against the same index in December of the prior year, and the revaluation compounds year over year (art. 2120 c.c., comma 4).

The most recently finalised coefficient available at the time this page was verified covers TFR accrued through 31 December 2024, revalued at 31 December 2025: ISTAT communicated on 16 January 2026 that the applicable rate was 2,311148%, based on a December 2025 FOI index reading of 121,5. Because this rate depends on inflation, it changes every year and should always be checked against the current ISTAT figure rather than assumed to hold from one year to the next.

Worked example: a 28.000 euro salary over 6 years

Take a worker earning a steady 28.000 euro a year in retribuzione utile, employed for 6 years. Each year contributes a fresh quota of 2.074,07 euro (28.000 divided by 13,5), and the prior balance is revalued each 31 December before the new quota is added. The table below uses rounded, illustrative revaluation rates for years 1 through 5, since only the most recent year's rate is a verified current figure; year 6 uses the real, ISTAT sourced rate for 2025.

Two things stand out from the table. First, revaluation only ever applies to the balance that existed before the current year, never to the quota that just accrued, so the boost from revaluation is small in the early years and grows as the balance grows. Second, because the rate tracks inflation, a run of low inflation years compounds slowly, while a high inflation year (as illustrated in year 4 above) adds noticeably more.

In practice, each year's quota is also reduced by the small 0,50% deduction described below, which funds the general pension system rather than the worker's own TFR. The 0,50% is calculated on the retribuzione imponibile, the salary base, not on the TFR quota itself. Applied to this example that is 0,50% of 28.000 euro, roughly 140 euro a year, which is around 6,75% of that year's quota. It is large enough to notice, and it is why a payslip's accantonamento figure sits visibly below a pure salary divided by 13,5 calculation.

The 0,50% deduction: a separate law, not art. 2120 c.c.

A small additional contribution, 0,50% of the retribuzione imponibile, is deducted from each year's TFR quota and paid toward the Fondo pensioni lavoratori dipendenti, the general employee pension fund. This deduction is set by L. 297/1982, art. 3, which raised employer contribution rates by 0,30% and then a further 0,20% specifically to be recovered by deducting them from the worker's TFR quota for the relevant period.

It is a common mistake to attribute this 0,50% deduction to art. 2120 c.c. itself. Art. 2120 c.c. sets the TFR formula and the revaluation; the 0,50% pension fund deduction is a distinct rule from a different law, and the two should be cited separately.

Where your TFR actually sits while you are employed

Three destinations are possible, and they are mutually exclusive for any given portion of accruing TFR. The default, absent any other choice, is that TFR keeps accruing in azienda, held by the employer itself, for employers below the Fondo di Tesoreria threshold described next.

Employers with at least 50 employees are generally required to transfer TFR that stays with the company into INPS's Fondo di Tesoreria, a fund established by L. 296/2006, art. 1, comma 755, so that INPS rather than the employer holds and eventually pays that portion of the balance. Separately, a worker can choose, or be defaulted into under the silenzio-assenso mechanism at D.Lgs. 252/2005, directing ongoing TFR accrual to a fondo di previdenza complementare, a private pension fund, instead of leaving it with the employer at all. That choice is normally made within six months of hire; TFR sent to a pension fund is held there, outside both the employer's own accounts and INPS's Fondo di Tesoreria.

When TFR is actually paid, and the anticipazione advance

TFR becomes due the moment the employment relationship ends, for any reason. There is no single statutory payout deadline for an ordinary termination; the practical timing is usually governed by the applicable CCNL or the employer's normal payroll cycle.

Where an employer is insolvent, INPS's Fondo di garanzia, established by L. 297/1982, art. 2, exists specifically to step in and pay the TFR the employer itself cannot. A worker can apply to the fund once 15 days have passed from the deposit of the stato passivo (the list of the insolvent employer's admitted debts) in a bankruptcy proceeding, or after the relevant court decision if that listing was challenged, or from the homologation of a concordato preventivo (a court approved composition with creditors). Where the employer is not subject to ordinary insolvency proceedings at all but simply fails to pay, the worker can still reach the fund after enforcement action against the employer's own assets has proven insufficient. Once a request is accepted, the fund pays within 60 days.

A worker does not have to wait until the relationship ends to see any of this money. With at least 8 years of service with the same employer, a worker can request a one time anticipazione, an advance, of up to 70% of the TFR accrued so far. The request must be justified by either documented extraordinary medical expenses or the purchase of a first home for the worker or their children, evidenced by a notarial deed, and it can only be granted once during the employment relationship, with employers limited each year to satisfying a fixed share of requests. Whatever is advanced is later deducted from the final TFR payment (art. 2120 c.c.).

TFR and NASpI are two different things

If your employment ends involuntarily, you may be able to claim both TFR and NASpI at the same time, and it helps to keep them straight. TFR is the lump sum covered on this page, owed whenever employment ends for any reason. NASpI is a separate monthly unemployment benefit, paid only where the job loss was involuntary and specific contribution requirements are met.

See our companion page on NASpI, Italy's unemployment benefit for how that monthly figure is calculated, including its own worked example.

For the wider landscape of Italian law this site covers, see our Italy hub.

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