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Financial Participation

The interest in employee financial participation increased a little when, due to the privatization process in the 1980s and 1990s, a number of different participation schemes were created. The incidence of profit-sharing and employee share ownership remains low, however.


Rules and regulations governing profit-sharing schemes are set at company level. State Decree No. 67 of March 1997 provided for partial tax relief for profit-sharing schemes up to 1% of the total payroll amount. Between 2007 and 2008, up to 5% of wages could be tax-exempted, but this was capped to 3% by the Interministerial Decree of 7 May 2008. It was laid down that employers offering their employees profit-sharing schemes benefit from a 25% reduction in social security contributions. Employee contributions are paid for by the state. The annual income threshold for such benefits is set at 35,900 Euro. The maximum amount of tax relief is set at 6,000 Euro.1

Share Ownership

If a company issues new shares to its employees for less than their market value, the benefits will not be taxable. This treatment is not valid for already existing schemes.

If employees acquire existing schemes, they will be subject to income tax.

The taxable quantity will be the market value of the shares at that time, reduced by the price payable under the option. The tax must be withheld by the employer, who will also have to pay social security contributions. Italian income tax is a progressive tax scheme, varying from 23%-43%.2

Since July 2006 there is a new tax decree: employees receiving share options after 4 July 2006 have to pay ordinary income tax on the difference between the sum paid by the employee and the share market value on the date of assignment.

Capital gains are taxed at a flat rate of 12.5% for non-qualifying shareholding in a company.

In September 2006 the budget proposed to introduce a single tax rate of 20% for capital gains, including interest and dividend income.

Known examples of such companies3

A well-known instance is Alitalia. When the national air company found itself in a serious financial situation in 1996, the social partners agreed on a recovery plan involving a reduction of labour costs through financial participation based on the employees subscribing to shares. The employees purchased more than 20% of the capital.

A typical case for the privatization process is the ENI company (Ente Nazionale Idrocarburi SpA), a petrol company. Its privatization process started in 1995 with a public offer sale in four successive tranches. The state remained owner of about 30% of the shares and the other 70% were put on the market for a capitalization of more than 50 billion Euros. The employees received an advance up to 70% of the severance pay of the put aside value. About the half of the employees subscribed to the offer and thus held about 3% of the shares on the market. Today they own about 1 % of the capital.

The case of Gucci is not linked to the privatization process but rather the result of an agreement by the social partners. In 2000 it was decided that each employee in all the countries the company is operating in should progressively be assigned 32.25 shares with the obligation to keep them for at least three years and to form an association of shareholder employees.

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.