Pay slip: how it changes starting from March

In collaboration with our partner F2DThis week we look at the recent changes that have occurred in Italians’ paychecks.

What do these innovations consist of? Change in Irpef and introduction of the new single and universal allowance for dependent children: these are the changes introduced with the latest Budget Law and which involve numerous tax and social security changes whose effects will be seen precisely in from the March pay slip.

New Irpef brackets

As regards Irpef, with the beginning of 2022, the brackets have changed, the rates applied and the calculation of employee deductions. Previously, in fact, there were five brackets: up to 15,000 euros with a rate of 23%; from 15,001 euros to 28,000 euros with a 27% rate; from 28,001 euros to 55,000 euros with a 38% rate; from 55,001 euros to 75,000 euros with a 41% rate; and, finally, over 75,000 euros, with a rate of 43%.

The rates have now been reduced to four:

• up to 15,000 euros with a 23% rate
• from 15,001 euros to 28,000 euros with a 25% rate
• from 28,001 euros to 50,000 euros with a 35% rate
• over 50,000 euros with a 43% rate

Basically this it means that for incomes from 15,000 to 28,000 euros the tax rate is lowered from 27% to 25%; for incomes up to 50,000 euros the 38% rate is reduced to 35%, while the previous rate of 41% disappears, since above 50,000 euros a single rate of 43% is foreseen.

The remodulation of deductions

However, there are 4 new features relating to the remodulation of deductions:

• expansion of the first income threshold subject to deduction, which goes from 8,000 to 15,000 euros
• for the second income threshold (from 15,000 to 28,000 euros) the size of the fixed component of the deduction goes from 978 to 1,910 euros. The method of calculating the variable component is also changed: equal to 1,190 euros for an income of 15,000 euros, it decreases as the income increases until it disappears once it reaches 28,000 euros
• for the last income threshold subject to deduction – between 28,000 and 50,000 euros – the maximum deduction goes from 978 to 1,910 euros. The latter figure relates to incomes of 28,000 euros and decreases reaching zero once the threshold of 50,000 euros is reached.
• an increase of 65 euros is expected in the deduction applicable to the income range between 25,000 and 35,000 euros.

The integrative treatment

The revision of the rates and calculation of employee deductions has inevitably reshaped the supplementary treatment. The new regulation establishes that:

• for annual incomes up to 15,000 euros it will continue to be paid directly by the withholding agent in the salary slip
• for incomes up to 28,000 euros the benefit may be recognized, in the presence of the conditions established by the law, when filing the tax return
• for incomes above 28,000 euros, the previous deduction foreseen for incomes from 28,000 to 40,000 euros is abolished.

The benefits provided by the new Budget Law also include the contribution relief for employees with taxable social security salary of up to 35,000 euros per year (i.e. 2,692 euros gross per month) of 0.8 percentage points. It will only be valid for the year 2022 and, at the moment, operational instructions from INPS are awaited.

Parents, beware: the single and universal allowance is coming

Another fundamental innovation, for those who are parents, concerns the introduction ofthe single and universal allowance which replaces all previous tax deductions provided for dependent children up to 21 years of age. Starting from the salaries of March 2022, the previously foreseen allowances will be replaced by the new measure, provided by INPS. To access it, however, it is necessary to apply to INPS via the specific page available on the Social Security Institute website.

However, there is up to five years to request any arrears of family allowances, for families with children due up to 28 February 2022, which can be paid on the salary slip.

Finally, it should be underlined that from the March salary the tax deductions will be automatically recognized from 1 March only for children who turned 21 by 31 March 2022 (if present in the NoiPa database). For children who turn 21 after this date, the application must be submitted on the NoiPA website or via a paper form.

All the innovations illustrated will have important impacts on the pay slip and companies will have to be able to adapt quickly.