In Italy, cash and share incentive plans are commonly offered. These plans are most prevalent for top management, especially when it comes to share-based incentives. While cash-based incentive plans are widespread across various employee levels, equity-based plans remain more exclusive to senior executives and key managerial positions. The objective of these plans is to align the interests of employees with the company’s long-term goals, foster retention, and reward performance.

Common Cash Incentive Plans

• Performance Bonuses: The most widespread cash incentive plan involves annual or periodic bonuses linked to individual, team, or company-wide performance metrics. These metrics often include financial targets (eg, EBITDA, revenue growth) or key performance indicators (KPIs) tailored to the employee’s role. These bonuses can be (i) subject to individual negotiations, thus directly linked to the specific employment contracts and/or assignment letters related to the individual employee; or (ii) they can be provided by national and/or company-wide collective bargaining agreements and thus apply to the entire workforce or to a homogeneous group of employees.
• Retention Bonuses: Although these are not as common in Italy as in other jurisdictions, they are offered to retain key employees during transitional phases such as mergers, acquisitions, or large-scale projects.
• Sales-Based Commissions: Widely used for sales roles, commissions are directly tied to revenue generated or sales targets achieved.

Common Share Incentive Plans

• Stock Option Plans: Employees, primarily top executives, are granted the right to purchase company shares at a fixed price after a vesting period. These plans are designed to align executive decision-making with shareholder interests.
• Restricted Stock Units (RSUs): These are awarded as part of compensation packages but become vested after a specific period or upon meeting performance targets. Normally, RSUs are subject to a vesting period. They are typically structured to retain key personnel.
• Employee Stock Purchase Plans (ESPPs): Although less common, some large corporations offer ESPPs, allowing employees to purchase company shares at a discounted price, fostering a sense of ownership and loyalty.

These plans are structured to comply with Italian labour and tax regulations, which provide specific benefits and tax breaks for share-based incentives under certain conditions. Additionally, companies must ensure that such plans do not lead to discrimination among employees, and they must comply with disclosure obligations to regulatory authorities.

In Italy, the main differences between cash and share incentive plans offered by listed and non-listed companies relate primarily to regulatory requirements and taxation.

Regulatory Requirements

Listed companies

Publicly traded companies are subject to stringent regulatory frameworks, including compliance with government regulations established by the National Commission for Companies and the Stock Exchange (Commissione Nazionale per le Società e la Borsa, or CONSOB) and adherence to the Consolidated Law on Finance (Testo Unico della Finanza, or TUF). These regulations mandate comprehensive disclosure of incentive plans, ensuring transparency and protection for investors.

Indeed, the TUF Legislative Decree No 58 of 24 February 1998 and CONSOB’s Resolution No 11971 of 14 May 1999 (Regolamento Consob in materia di Emittenti, or “Regolamento Emittenti”) set forth specific rules on employee shareholding applicable to issuers with shares listed on regulated markets or widely distributed among the public.

These provisions pursue distinct objectives:

• the protection of information for a wide range of stakeholders who might be adversely affected by the impact that employee shareholding plans may have on the company’s economic, equity and financial metrics, as well as the risk that the issuance of new shares in execution of such plans could dilute the value of existing shareholders’ securities; and
• the protection of the position of employee-shareholders within the company.

More specifically, Article 114-bis of the TUF, titled “Market disclosure on the allocation of financial instruments to corporate representatives, employees, or collaborators” plays a critical role in ensuring transparency. This provision, further detailed by Article 84-bis of Regolamento emittenti, mandates specific disclosure obligations for issuers with financial instruments either listed or widely distributed among the public. These issuers are required to inform the market when implementing remuneration plans based on financial instruments allocated to corporate representatives, employees, or collaborators within the company and its group. The law also imposes the obligation to obtain approval of such plans at the ordinary shareholders’ meeting and regulates the information that must be made available to the public.

Additionally, listed companies must comply with international financial reporting standards, such as IFRS 2, which governs the accounting of share-based payments.

Non-listed companies

Non-listed companies operate within a less stringent regulatory framework. They are not subject to mandatory public disclosure obligations regarding incentive plans, thereby benefiting from greater discretion in their structuring and implementation. Nonetheless, they remain bound to comply with applicable national tax and social security legislation governing employee compensation.

Tax Consideration

Listed companies

Employees benefiting from share incentive plans in listed companies may be eligible for favourable tax treatments, especially if the plans meet specific criteria set forth by the Italian tax authorities. For instance, under certain conditions, income derived from qualified stock options can be taxed as capital gains rather than ordinary income, resulting in a lower tax burden.

Non-listed companies

Private companies may face different tax treatments depending on their internal structure, and employees may have fewer options for reducing tax liabilities related to their share-based compensation.

It should also be noted that, in Italy as elsewhere, shares offered under incentive plans by publicly listed companies are traded on public markets, enabling employees to ascertain the actual market value of their shares. Conversely, private companies do not have a public market for their shares, making it challenging for employees participating in such plans to accurately assess the economic value of the equity granted to them.

In summary, while both listed and private companies in Italy utilise cash and share incentive plans, listed companies are more inclined towards equity-based incentives due to regulatory frameworks and market liquidity. Private companies, facing challenges related to share liquidity and valuation, often opt for cash-based incentives or synthetic equity structures to achieve similar motivational objectives.

At the time of writing, there are no significant legal, regulatory, or tax developments expected in this area. However, it should be noted that the 2025 Budget Law (Law No 207 of 30 December 2024) has recently introduced certain specific changes, particularly with regard to the following.

Interventions on Productivity Bonuses

The reduction of the substitute tax rate to 5% on amounts paid as performance bonuses or profit-sharing for private sector employees with fixed-term or permanent employment contracts is confirmed for the 2025–2027 period. This reduction applies to employees whose employment income in the previous tax year did not exceed EUR80,000, as already provided for 2024 by the latest Budget Law. The reduced tax rate is applicable up to a maximum taxable income of EUR3,000 gross, increased to EUR4,000 for companies that involve employees in the organisation of work on an equal footing.

Tax Measures on Corporate Welfare

Specific requirements are established whereby amounts paid or reimbursed by employers for rent and maintenance expenses of properties leased by employees (as welfare bonuses) with permanent contracts between 1 January and 31 December 2025, will not be included (for the first two years from the hiring date) in taxable income, up to a total limit of EUR5,000 per year. For the tax years 2025, 2026 and 2027 (notwithstanding the ordinary provisions of the Italian Income Tax Code, “TUIR”), the value of goods transferred and services provided to employees, as well as the amounts paid or reimbursed by employers to employees for the payment of domestic utility bills (including integrated water services, electricity and natural gas) and rent or mortgage interest on the primary residence, up to a total limit of EUR1,000, will not be considered for income tax purposes. This limit is raised to EUR2,000 for employees with children who are financially dependent (including children born outside of marriage, recognised children, adopted, affiliated or foster children).

Management by Objectives (MBO)

The most prevalent cash incentive plan is the “management by objectives” (MBO) system, typically reserved for management and top executives, that links incentives to the achievement of individual or area-specific objectives.

Its widespread adoption is largely due to its mandatory nature under the principal collective labour agreement for the industrial sector, the Contratti Collettivi Nazionali di Lavoro Dirigenti Industria (the “CCNL”).

Recently introduced Section No 6-bis of the CCNL explicitly states: “Companies must implement variable remuneration systems linked to specific indices or results.”

Structure and models of MBO implementation

Various models exist for implementing MBO incentives. Notably, the 30 July 2019 renewal agreement for the CCNL introduced a new model tailored specifically for top executives with strategic responsibilities. This model aims to strengthen the bond between the company and its senior leadership through a two-part incentive structure:

• Short-Term Incentives: A portion of the MBO is evaluated annually, rewarding results achieved within the same period.
• Long-Term Incentives (LTI): The remaining portion is allocated over a medium/long-term period (eg, three years), with differentiated vesting percentages. The deferred component is disbursed only at the end of the third year, contingent upon the executive’s continued employment and non-resignation.

Typically, 50% (or another percentage defined at the company level) of the MBO is paid upon achieving annual objectives, while the remainder is accrued and disbursed at the end of the long-term period if medium/long-term objectives are met.

Key phases of MBO

• Defining Objectives: Managers set strategic objectives aligned with the company’s mission, vision and overall strategy. These objectives must be specific, measurable and clearly articulated, considering the competitive environment and internal resources.
• Communication and Individual Assignment: Objectives are communicated both at a general level to all employees and individually through personalised communications detailing annual targets. The clarity and precision of communication are critical for employee understanding and alignment.
• Performance Monitoring and Evaluation: Progress is regularly monitored or assessed within a specific timeframe against the defined objectives.

A common issue with significant challenges: the legal implications of failing to set objectives

A recurring issue in MBO implementation is the employer’s failure to define objectives, despite committing to do so. This omission raises significant legal questions.

Previously, case law approach, now outdated, classified the setting of objectives as a “suspensive condition” for the accrual of the right to the bonus.

According to this view, in the event of failure to assign objectives, Article 1359 of the Italian Civil Code would apply, which provides that the condition is deemed fulfilled if it failed due to reasons attributable to the party with an interest in preventing its fulfilment.

In practical terms, under this legal interpretation, the failure to set objectives would automatically result in the employer’s obligation to pay the bonus to the executive.

However, recent case law has shifted. Today, prevailing case law holds that, in the absence of established objectives, the employee cannot request judicial intervention to define the parameters of the bonus and its amount (eg, Milan Labour Court, No 538/2019). This is because the employer’s omission constitutes a contractual breach subject to the general principles of civil law (Article 1218 of the Italian Civil Code), which gives rise solely to liability for damages, known as perdita di chance or “loss of opportunity” damages (Turin Court of Appeal, 8 May 2019, No 226).

In essence, the employer’s breach does not automatically result in a right to compensation. Instead, the executive must bear the burden of proving the existence and extent of the harm suffered.

On this matter, the Supreme Court of Cassation has stated that such harm represents “a concrete and actual lost opportunity to obtain a specific benefit, not a mere expectation, but an independent asset, legally and economically capable of autonomous evaluation, which must consider its impact on the individual’s financial position” (Corte di Cassazione, 30 January 2018, No 2293).

The court has further emphasised that “the existence of such certain harm (even if not its amount), consisting of the loss of a current opportunity, requires proof, even presumptive (provided it is based on specific and concrete circumstances), of objective elements from which the current existence of the harm can be inferred with certainty or a high degree of probability” (Corte di Cassazione, 31 May 2017, No 13818).

Therefore, in cases where the employer fails to establish objectives, the executive must demonstrate and prove that they could have achieved those objectives had they been set.

This evidentiary burden, while potentially achievable through presumptions, is particularly onerous for the executive, as they must show that:

• the conditions for achieving the objectives were concretely met or that, had the objectives been set (using reasonable comparative parameters), they would have been entitled to the bonus;
• the non-payment of the bonus was due to the employer’s unlawful conduct; and
• the damages claimed as compensation are an immediate and direct consequence of that conduct.

Stock Option Plan

The most common equity incentive plan for employees in Italy is the stock option plan.

This plan does not differ from similar incentive schemes in other countries.

In short, it grants employees the right to purchase company shares at a predetermined price (“strike price”) after a certain period (“vesting period”). If at the end of the vesting period, the market value of the shares exceeds the set price, the employee can exercise the option and realise a financial gain.

This mechanism originates from Article 2099 of the Italian Civil Code, which allows for profit-sharing as part of an employee’s overall compensation package. Its legal framework is further defined by Articles 2349 and 2441 of the Italian Civil Code, which outline two possible methods for distributing shares:

• Extraordinary Profit-Sharing: The company may allocate profits to employees by issuing a special category of shares of the same value, which are granted free of charge; or
• Capital Increase With Share Allocation: The company may approve a capital increase and simultaneously allocate shares to employees for consideration (in this case, two scenarios may arise: employees purchase the shares by subscribing and paying their price – typically at a nominal value, which is lower than market value – or the shares are distributed among employees as part of their compensation package).

In Italy, the offering, granting or vesting, or exercise of share awards/options under an incentive plan may trigger specific securities law requirements, particularly when the company offering the shares is listed on a regulated market.

According to the TUF Legislative Decree No 58 of 24 February 1998 and the Regolamento Emittenti, companies listed on regulated markets must comply with disclosure obligations and may be required to issue a prospectus when offering financial instruments to employees.

However, there are exemptions under Article 34-ter of the Regolamento Emittenti and Article 1(4) of the Prospectus Regulation (EU Regulation 2017/1129). For example, no prospectus is required when financial products are offered, granted, or to be granted to directors or former directors, employees or former employees, provided that a document containing information on the number and nature of the financial instruments, the reasons, and the details of the offer is made available.

Also, as explained in the 1.2 Market Practice (Public v Private Companies), Article 84-bis of the Regolamento Emittenti mandates specific disclosure obligations for issuers with financial instruments either listed or widely distributed among the public. These issuers are required to inform the market when implementing remuneration plans based on financial instruments allocated to corporate representatives, employees or collaborators within the company and its group. The law also imposes the obligation to obtain approval of such plans by the ordinary shareholders’ meeting and regulates the information that must be made available to the public.

For non-listed companies, these obligations are generally less stringent. No prospectus is required, but companies must still comply with civil and tax regulations related to employee compensation and ensure the fair valuation of shares.

In Italy, the promotion and communication of a share plan to employees may be subject to certain restrictions under financial services legislation, particularly if the shares are considered financial instruments. The regulation stems from both national and European laws, specifically the TUF and the Prospectus Regulation (Regulation (EU) 2017/1129), which governs the offering of securities to the public.

Indeed, if the promotion and communication meet specific conditions, as described in sections 1.2 Market Practice (Public v Private Companies) and 2.1 Prospectus or Filings, the incentive plan may fall within an exemption from the requirement to issue a prospectus.

In Italy, a local company can indeed provide funding for the costs of an incentive plan for its employees, but there are some aspects to consider in relation to tax, corporate and necessary authorisation regulations.

For example, if the local company buys shares on the market, the purchase must comply with Italian laws and regulations regarding market transparency and the discipline of securities transactions (eg, under the supervision of CONSOB). If the payment involves transferring funds to the parent company for the management of the plan, it could be considered an intercompany transaction (between companies within the same group) and must comply with Italian tax regulations regarding transfers of funds between related companies.

In Italy, the process for granting a share plan to an issuer is primarily governed by the TUF and the Regolamento Emittenti. The process involves the following steps.

Board Resolution

Pursuant to Articles 2349 and 2441 of the Italian Civil Code, the board of directors approves the share incentive plan, defining the beneficiaries, terms of allocation, number of shares/options, and the implementation schedule.

Shareholders’ Meeting Approval

For listed issuers, Article 114-bis of the TUF requires approval of the share plan by the ordinary shareholders’ meeting. This approval must be preceded by the publication of a specific informational report in accordance with Article 84-bis of the Regolamento Emittenti. The report outlines the details and objectives of the plan.

Grant Under Deed

Once the plan is approved, the allocation of shares or options is formalised through a deed, which specifies the number of shares, the exercise or strike price, the vesting period, and the conditions for exercise.       

Individual Grant Notice

Beneficiaries receive a formal grant notice detailing the terms and conditions of the plan, including any lock-up provisions or restrictions on shares.

Finally, it is important to note that Article 114-bis of the TUF and the provisions of the Regolamento Emittenti aim to ensure transparency and investor protection, requiring issuers to disclose the details of share incentive plans to the market through specific notices and official documentation.

In Italy, there are no specific exchange control restrictions on an employee sending currency out of Italy to pay for shares; an employee selling shares and bringing currency into Italy; or a local employer sending currency out of Italy to fund a plan. However, the following reporting obligations must be considered.

Reporting Obligations

Employee selling shares and sending currency into Italy

No restrictions apply, but the funds received may trigger tax reporting obligations. Specifically, the employee must declare the income from the sale of shares in their annual tax return (Modello Redditi). If the foreign financial institution is not part of Italy’s automatic reporting network, the employee must also comply with the RW section of the tax return to disclose foreign-held assets.

Local employer sending money abroad to provide funding for the plan

There are no restrictions on outbound payments related to share plans, but employers must ensure that the transactions are properly documented for accounting and tax purposes. Additionally, they must verify that payments are compliant with anti-money laundering (AML) and transfer pricing regulations, where applicable.

An employee is taxed at the moment the option right is actually exercised (regardless of the date of issuance or delivery of the shares), with the taxable base being the difference between the normal value (determined pursuant to Article 9 of the TUIR) and the amount paid by the employee at the time of exercising the option right.

This clarification was provided by the Italian Revenue Agency (Agenzia delle Entrate) in its Response No 23/2020, following a query from an unlisted parent company seeking to determine the exact moment when taxation on shares offered to its employees should occur, and the appropriate taxable base to be considered.

Shares granted under corporate welfare initiatives may benefit from favourable tax treatment.

As for social security contributions, the Italian National Institute of Social Security (Istituto Nazionale della Previdenza Sociale, or INPS) provided clarification in its Memorandum No 123/2009, issued in line with Law Decree No 112/2008.

The memorandum confirms that income derived from the exercise of stock options is excluded from the contribution base for social security purposes. Specifically, the difference between the market value of the shares at the time of exercise and the price paid by the employee is always excluded from the taxable contribution base. The date of assignment for social security purposes coincides with the date of option exercise, regardless of whether the material delivery of the shares occurs at a later time.

The taxation of shares is governed by Article 51, paragraph 2, letter g) of the TUIR. This provision states that if the value of the shares granted to the majority of employees does not exceed EUR2,065.83 each in a given tax period, the amount is excluded from taxable income at the time of the grant. However, the exemption is lost, and the amount becomes taxable in the tax period when the shares are sold, provided the shares are disposed of before at least three years have passed from the date they were granted. The exemption also does not apply if the shares are repurchased by the issuing company or the employer.

Article 51, paragraph 2, letter g) of the TUIR states that if the value of the shares granted to the majority of employees does not exceed EUR2,065.83 each in a given tax period, the amount is excluded from taxable income at the time of the grant. This benefit is subject to the condition that the shares are not disposed of before at least three years have elapsed from the date of their acquisition. If the shares are sold before this three-year period has passed, the previously exempt amount will be subject to taxation in the tax period when the sale occurs. The exemption also does not apply if the shares are repurchased by the issuing company or the employer.

To promote employee share ownership, the above-mentioned provision ensures that the value of shares offered to employees up to the specified threshold does not form part of their taxable income.

In Italy, the local employer has the following obligations.

Income Tax Withholding Obligation

The employer is required to withhold and pay income tax (Imposta sul reddito delle persone fisiche, or IRPEF) on income arising from the exercise of stock options, the assignment of restricted shares, or the vesting of RSUs.

• Taxable Value: The income tax is calculated on the difference between the fair market value of the shares at the time of exercise or assignment and the price paid by the employee, if applicable.
• According to TUIR, income from stock options is classified as employment income and subject to progressive IRPEF rates (except as provided by Article 51, paragraph 2, letter g), as previously stated).

Social Security Contributions

The local employer is not required to pay social security contributions on income derived from the exercise of stock options: as clarified by INPS Circular No 123/2009, the difference between the market value of the shares at the time of exercise and the price paid by the employee is excluded from the social security contribution base.

Corporate Tax Deduction for the Employer

The local employer may obtain a corporate tax deduction under certain conditions.

Reimbursement to the parent company

If the local employer reimburses the parent company for the costs related to the incentive plan, such costs are generally deductible from taxable income as personnel expenses, provided that there is an appropriate cost-sharing agreement and a demonstrable link between the expense and the benefits received.

In the event of a dispute regarding the deductibility of costs arising from cost-sharing agreements, presenting the contract related to the services provided by the parent company to its subsidiaries and the corresponding invoices will not be considered sufficient. It will be necessary to provide specific evidence of the actual or potential benefit obtained by the subsidiary receiving the service (as per Italian Supreme Court rulings Nos 16480/2014 and 17535/2019).

Purchase of shares for employees

Expenses incurred to purchase shares for employee incentive plans are deductible under Article 95 of the TUIR, as long as the shares are part of a variable remuneration plan linked to company performance.

Italian tax law provides a favourable tax treatment for the value of shares offered to employees under specific conditions. If the plan meets these conditions, the benefit is treated as part of the company’s welfare scheme and the value of the shares does not contribute to the employee’s taxable income. The conditions are:

• shares must be offered to all employees;
• the total value of the shares must not exceed EUR2,065.83 per person per tax period; and
• the shares must not be disposed of or repurchased by the issuing company or employer within three years from their allocation.

Failure to meet these conditions results in the loss of the tax benefit.

Claw-back and malus clauses are enforceable under Italian law and can be applied to share or cash awards in incentive plans, especially in regulated sectors such as banking, finance and insurance, where they are mandatory.

Indeed, the regulatory framework governing claw-back and malus clauses is particularly developed in the banking sector. In this regard, Banca d’Italia’s Circular No 285/2013 establishes specific rules on remuneration, setting out requirements both for the compensation of top managers and for incentive schemes, which must include claw-back or malus provisions.

With respect to top management remuneration, the circular links incentives to long-term performance, requiring that at least 50% of variable remuneration be allocated through risk-based capital participation instruments and be subject to an appropriate retention policy.

Regarding incentive schemes, the circular mandates that claw-back and malus clauses apply, at a minimum, to incentives granted and/or paid to individuals who have engaged in or contributed to:

• conduct that violates legal, regulatory or statutory provisions, or any applicable codes of ethics or conduct, resulting in significant financial losses for the bank or its clients;
• other conduct inconsistent with legal, regulatory or statutory obligations, as further specified by the relevant regulations;
• violations of obligations under Article 26 or, where applicable, Article 53, paragraph 4 onwards, of the Consolidated Banking Act (Testo Unico Bancario, or TUB), or breaches of remuneration and incentive regulations; and/or
• fraudulent or grossly negligent behaviour detrimental to the bank.

Similarly, the insurance sector is subject to specific regulatory requirements under IVASS Regulation No 38/2018 (consolidated version). This regulation mandates that the remuneration of directors with executive powers should maintain an appropriate balance between fixed and variable components. The variable component must account for the risks associated with the role, the company’s performance, and the achievement of long-term objectives.

Labour Law Issues and Acquired Rights

In Italy, a cash or share plan can indeed give rise to labour law issues. These plans are closely linked to the employment relationship and may involve questions related to acquired rights, discrimination, and termination of employment. For instance, once an employee has met the conditions for receiving the incentive, the related benefit may be considered an acquired right, making it difficult for the employer to unilaterally modify or revoke it without the employee’s consent.

In cases of termination, the impact of the plan on the employee’s entitlements will depend on the specific terms of the plan and the nature of the termination. Good leaver/bad leaver clauses are frequently used to distinguish between different types of termination:

• Good Leaver: The employee may retain the shares or receive the cash incentive even after the employment ends (eg, termination due to retirement or mutual agreement).
• Bad Leaver: The employee may forfeit the incentive (eg, termination for just cause).

However, legal disputes may arise if the employee challenges the reason for termination, which could affect the application of these clauses. Italian courts tend to assess the fairness of termination very strictly, and an invalid dismissal might entitle the employee to retain the benefits of the plan.

Consultation With Employee Representatives

There is no general legal obligation for the employer to consult with or obtain approval from trade unions or works councils before offering a cash or share plan. However, consultation may be required if the plan is introduced through a collective bargaining agreement or if the company has pre-existing agreements with employee representatives that regulate employee benefits.

In some cases, especially in large companies, involving unions or employee representatives at an early stage may help ensure smoother implementation and reduce the risk of future disputes.

In Italy, post-vesting or post-employment holding periods can be included in incentive plans as contractual obligations between the employer and employee.

These periods are typically designed to align the employee’s interests with those of the company over a longer time horizon. They are not explicitly regulated by law and are neither encouraged nor discouraged by Italian legislation. However, such provisions are commonly used in regulated sectors, such as banking and finance, where European and Italian regulatory frameworks require deferral and retention periods for variable remuneration to promote prudent risk management (eg, Directive (EU) 2019/878 for credit institutions).

In Italy, employee consent is generally not required for the collection and processing of personal data in relation to a cash or share plan if the processing is necessary for the performance of the employment contract or to comply with legal obligations imposed on the employer.

This is in line with Article 6(1)(b) and (c) of the General Data Protection Regulation (GDPR). However, it is essential for the employer to ensure compliance with the GDPR principles of transparency, purpose limitation, and data minimisation.

Key Considerations

• Clear and Detailed Privacy Notice: The employer must provide the employee with a clear and detailed privacy notice, explaining the purposes and legal basis for data processing, the categories of data collected, and how the data will be used and transferred, especially if it involves cross-border transfers.
• Consent: This is required only if the processing involves data not strictly necessary for the execution of the plan or if it falls outside the scope of employment obligations (eg, for marketing purposes).
• Standard Contractual Clauses: If personal data is transferred outside the European Economic Area (EEA), the employer must ensure that adequate safeguards are in place, such as standard contractual clauses (SCCs) or an equivalent mechanism.

In summary, while consent is not a general requirement, the employer must strictly adhere to GDPR provisions to lawfully process and transfer personal data related to cash or share plans.

In Italy, there is no strict legal requirement to translate cash or share plan documents into Italian.

However, based on the underlying principles of the Italian legal system, such as transparency and good faith (Articles 1175 and 1375 of the Italian Civil Code) in contractual relationships, as well as data protection regulations that require clear and comprehensible communication, it is advisable to provide key documents in both Italian and the original language.

A dual-language contract or translated documentation can help ensure that employees fully understand their rights and obligations, reducing the risk of future claims regarding unclear or misunderstood terms.

In Italy, corporate governance guidelines and disclosure requirements apply, particularly for companies listed on regulated markets.

As stated below, listed companies must comply with transparency obligations as set out in the TUF and the Issuers’ Regulation issued by CONSOB (see 4.2 Remuneration Regulation and Reporting).

Specifically, Article 114-bis of the TUF requires listed companies to disclose detailed information to the market regarding compensation plans based on financial instruments, including share and cash plans. The adoption of such plans must be approved by the company’s shareholders’ meeting, and information on the key terms, beneficiaries and financial impact must be provided through a detailed explanatory report (as per Article 84-bis of the Regolamento Emittenti).

For unlisted companies, there are no specific disclosure requirements regarding share or cash plans, except for compliance with general obligations related to financial reporting and transparency. However, best practices suggest ensuring appropriate internal documentation and governance procedures to manage and monitor incentive plans effectively.

In Italy, there are regulations and reporting requirements applicable to remuneration, particularly for companies listed on regulated markets and for specific categories of employees such as directors, executives with strategic responsibilities, and key management personnel. These requirements aim to ensure transparency, fairness, and shareholder oversight in the determination and disclosure of remuneration.

Listed Companies

Transparency and shareholder oversight

Under Article 123-ter of the TUF and CONSOB’s Regolamento Emittenti, listed companies must prepare a remuneration report, divided into two sections:

• Section I describes the company’s remuneration policy for directors, statutory auditors, and key management personnel and is subject to a binding vote by shareholders.
• Section II reports on the implementation of the remuneration policy, including individual remuneration details for directors and other key figures. This section is subject to a non-binding advisory vote.

Claw-back and malus provisions

As per paragraph 3.1 Malus/Claw-back, listed companies are encouraged to adopt claw-back and malus clauses on variable compensation linked to financial performance.

Private Companies

While private companies are not subject to the same detailed reporting obligations, they must comply with general labour law principles of non-discrimination, equal pay, and contractual good faith (Articles 1175 and 1375 of the Italian Civil Code).

Additionally, collective agreements (the CCNL) often regulate specific remuneration aspects, including bonuses and severance payments.