Your employees' severance pay: what it really costs you

The provision on your balance sheet is not idle money: it is a liability revalued every year at the company's expense. We start from your own figures to see what it weighs and what can be done.

In short

  • Severance pay accrued in the company is a liability towards employees, revalued each year by a fixed 1.5% plus 75% of inflation, with the revaluation borne by the business.
  • On that revaluation the company pays a 17% substitute tax: two items that rise together with inflation.
  • Above a certain employee count severance pay does not stay in the company anyway, but flows into the INPS Treasury Fund: from 2026 the threshold is dynamic and steps down gradually from 60 to 40 by 2032.
  • Your company's financial statements are public: we read them before the meeting and arrive with the cost already quantified.

Why is severance pay a cost that grows on its own?

Every year you set aside 6.91% of gross pay for each employee. While the employment relationship continues that sum sits on the balance sheet as a severance pay provision, that is, as a liability towards staff. So far it is deferred pay: you would be paying it in any case.

The part that weighs is different. Each year the provision must be revalued by a fixed 1.5% plus 75% of inflation, and that revaluation is a cost to the business, not to the employee. On top of it sits the 17% substitute tax that the company pays on the revaluation itself. These are two items that rise with inflation — on a sizeable provision, across several financial years, the difference shows.

What changes with the Treasury Fund threshold?

This is the most frequently misunderstood point, and since 2026 it has also changed. Until 31 December 2025 the threshold was fixed at 50 employees, calculated differently depending on when the company was established. From 1 January 2026 the criterion is dynamic: company size is checked every year against the previous calendar year's average headcount, and if the threshold is exceeded the obligation starts the following year. The threshold itself steps down by law over time: at least 60 employees from 2026, at least 50 from 2028, at least 40 from 2032. Above the threshold in force, severance pay does not stay in the company: it must be paid monthly into the Treasury Fund managed by INPS. That removes the basis for the most common argument in favour of keeping it in-house, namely that severance pay remains liquidity available to the business. The calculation and payment obligations remain; access to the money does not.

Which tax levers open up with a pension fund?

On severance pay transferred to supplementary pension schemes the company deducts from taxable income a share of the amount transferred — 4%, rising to 6% for companies with fewer than 50 employees — and obtains a partial exemption from the Guarantee Fund contribution and from certain indirect charges. On the amounts transferred, the revaluation borne by the company also ceases.

The allocation, however, remains each employee's own decision: the company does not make it. What you can influence is the quality of the information you provide and any employer contribution to the fund, which is your lever and weighs on how attractive you are as an employer.

Who it is for

When is this calculation worth redoing?

These are the situations in which the provision stops being a line on the balance sheet and becomes a decision.

The provision weighs on the balance sheet

It has grown over the years and nobody has checked recently what it costs to keep it where it is.

You are approaching the Treasury Fund threshold

Since 2026 the threshold is dynamic and checked every year: crossing it changes your obligations and dismantles the idea that severance pay stays available as liquidity.

You want to add an employer contribution

It is the lever the company genuinely controls, and it affects recruitment and retention more than it costs.

Your employees are asking questions

The choice is theirs, but providing correct information is the company's responsibility: we help you provide it.

The tax and economic impact

The four numbers that determine the cost

Rates should always be checked for the current financial year together with your accountant.

6.91% The share of gross pay set aside each year for every employee
1.5% + 75% Annual revaluation of the severance pay provision, borne by the company
17% Substitute tax on the annual revaluation, paid by the company
4% / 6% Deduction on severance pay transferred to a pension fund, depending on company size
How we work

From balance sheet to decision, in five steps

We take the first step before we meet you, and it asks nothing of you.

  1. 01

    We read your financial statements

    They are public: we start from the provision on the balance sheet and how it has moved in recent years.

  2. 02

    We quantify the annual cost

    Revaluation and substitute tax: what it costs you today to keep the provision where it is.

  3. 03

    We check the threshold

    The previous year's average headcount, the dynamic threshold in force and the obligations that follow for your structure.

  4. 04

    We simulate the alternatives

    Deduction, exemptions and liquidity: what would change by transferring severance pay to a pension fund.

  5. 05

    We coordinate with your advisers

    We take the result to your accountant and payroll consultant, and the decision is made together.

How we fit in

Our place alongside those already advising you

We do not replace your existing advisers

Your accountant and payroll consultant stay exactly where they are. We bring the financial and pension component in support of their expertise, inside the processes your company already runs.

One point of contact for you

We coordinate the technical discussion between professionals ourselves. You do not have to act as go-between for whoever keeps the books, runs payroll and proposes solutions.

Nothing is needed to get started

Your financial statements are public and we analyse them before we meet. At the first meeting we arrive with concrete ground to work from, without asking you for preparatory paperwork.

Your employees' severance pay costs you more money every year. That is no accident: the mechanism is designed to make it grow exponentially, year after year. Find out how much you could save with our simulator.
Go to the simulator →
Frequently asked questions

What business owners ask us most often

The cost is not the provision itself, which is deferred pay in any case, but the annual revaluation: a fixed 1.5% plus 75% of inflation, borne by the company, plus the 17% substitute tax on that revaluation. When inflation rises, both items rise with it. On a sizeable provision and across several financial years the figure becomes significant, and it should be read off the balance sheet rather than estimated by eye.
Until 31 December 2025 the threshold was fixed at 50 employees. From 1 January 2026 it became dynamic: it is checked every year against the previous calendar year's average headcount, and if it is exceeded the obligation to pay into the INPS Treasury Fund starts the following year. A gradual step-down is already set by law: at least 60 employees from 2026, at least 50 from 2028, at least 40 from 2032. Above the threshold in force, severance pay does not stay in the company: it must be paid monthly into the Treasury Fund. The obligations stay, the availability of the money does not.
No. The allocation of severance pay is a decision that belongs to each individual employee, and the company cannot steer it. What the company can do is inform them properly, provide clear tools for making the decision, and consider introducing an employer contribution to the fund — which is a lever that does belong to the company and affects how attractive it is as an employer.
On severance pay allocated to supplementary pension schemes the company deducts from taxable income a share of the amount transferred — 4%, rising to 6% for companies with fewer than 50 employees — and benefits from a partial exemption from the Guarantee Fund contribution and from certain indirect charges. The revaluation borne by the company also ceases on the amounts transferred. The rates should always be checked for the current financial year with your accountant.
No. Your company's financial statements are a public document and we analyse them before we meet: we arrive at the first meeting having already read the severance pay provision and reconstructed how it has moved over recent financial years. That lets us start from concrete ground without asking you for preparatory paperwork or taking time away from your business.

Didn't find your question? Write to us directly — we answer personally.

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Severance pay: employer or pension fund

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Severance pay with the employer or in a pension fund

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Your contact for corporate services

Giulio Salvador
Contact

Let's talk over a coffee

You need not prepare anything for the first meeting: we have already read your financial statements. Write to us or stop by our office in Vittorio Veneto.

Office
Via delle Terme 2, 31029 Vittorio Veneto (TV), Italy
Phone
+39 327 558 4213
Email
vittorioveneto.p13@allianzbankfa.it
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