From gross to net: contributions, IRPEF, local surcharges and the year-end adjustment

Andrea signed a contract for 30,000 € gross a year and expected 2,500 euros at the end of each month. Far less reaches his account, and the payslip lists contributions, IRPEF, surcharges, credits and a mysterious tax-free amount. Every line follows a precise rule. Anyone who knows them can check their own net pay instead of simply accepting it.

How a payslip is laid out

Every busta paga follows the same pattern, whatever software produced it. At the top come the earnings: base salary, seniority increments, overtime, allowances. Next the deductions, social security first and tax second. At the bottom sits the net figure, the money that actually lands in the bank account.

In this arrangement the employer plays two parts. Towards INPS, the national social security institute, it is the only party legally bound to pay contributions, including the employee's share. Towards the tax authorities it acts as withholding agent: it keeps back IRPEF from the salary and pays it to the Treasury on the employee's behalf, using form F24.

• Gross pay: all of the month's earnings
• Minus the employee's social security contributions
• Equals the month's taxable pay
• Minus IRPEF withholding, net of credits
• Minus instalments of the regional and municipal surcharges
• Plus any tax-free sums or credits paid through payroll
• Equals net pay

Social security contributions

The first deduction concerns social security. INPS explains that a contribution rate is a percentage applied to contributory pay for each type of insurance: invalidity, old age and survivors, unemployment, sickness, wage guarantee fund. Adding up the insurances due for a category of workers gives the overall rate.

For employees in the employees' pension fund, the pension rate stated by INPS is 33%. The worker does not pay all of it: one part falls on the employee and the rest on the employer. The other rates vary with the business sector, the size of the company, the worker's grade and the type of contract.

The employer pays the whole amount and recovers the employee's share by deducting it from the payslip, under what is called the right of recourse. INPS sets two limits: recourse can only be used at the end of the current pay period, and it is not allowed for back contributions, except those owed under a contract or by law.

That last rule protects the employee. If an inspection uncovers an undeclared worker, or the business comes forward on its own to regularise, the employer must pay the whole contribution debt and cannot take from the worker the share that would normally have been theirs.

The INPS news item on the 2026 figures adds two useful thresholds. The annual ceiling on contributory pay is 122,295 euros. On pay above 56,224 euros a year, which is 4,685 euros a month, an additional contribution rate of 1% applies. Crossing that line makes the social security deduction grow.

The same item sets a floor as well. The minimum daily wage for 2026 is 58.13 euros, equal to 9.5% of the minimum pension paid by the employees' fund, itself 611.85 euros a month. It is the lowest level that daily pay has to respect, a safeguard for workers on low wages.

From taxable pay to IRPEF withholding

Social security contributions shrink the base on which IRPEF is worked out: the Agenzia delle Entrate lists them among the items that reduce total income. On the payslip this becomes a precise step. Tax is withheld on the taxable pay left once the employee's contributions have been taken off.

On that figure the employer applies the tax brackets, projected over the year. For 2026 the consolidated text of article 11 of the income tax code sets 23% up to 28,000 euros, 33% up to 50,000 euros and 43% above. Each rate only bites on the slice of income inside its own bracket.

Each month the employer subtracts the employment credit from gross tax. Article 13 builds it in three bands: 1,955 euros up to 15,000 euros of income, an amount that starts at 1,910 euros and tapers until 28,000 euros, then a band that falls to zero at 50,000 euros. Between 25,000 and 35,000 euros another 65 euros are added.

The monthly figure is an estimate. The employer only knows the salary it pays and assumes the job lasts the whole year. If the worker changes job, has other income or only works a few months, the month's withholding may turn out too high or too low. The year-end adjustment puts things right.

The credit is scaled to the period worked in the year. Someone hired in September does not get the full credit, only the part matching the days worked. For the first band, though, article 13 sets a floor of 690 euros, which rises to 1,380 euros for fixed-term contracts.

All of this happens month by month on the basis of what the employee has told the employer. Anyone who wants the credits for dependent family members taken into account has to declare them; otherwise withholding stays higher and the difference only comes back through the 730 return.

Regional and municipal surcharges

National IRPEF comes with two surcharges. The municipal one, the Finance Department explains, is set by each municipality at a rate that may not exceed 0.8%, save for statutory exceptions such as Rome. A municipality can set an exemption threshold and different rates for each bracket.

The municipal surcharge applies to total income net of deductible charges and is only due if IRPEF, after credits, is due for the same year. It is paid as an advance and a balance. The advance is 30% of the surcharge worked out with the previous year's rate and taxable income.

For an employee, all of this happens through the payslip in instalments. The 730 section C instructions separate the previous year's municipal balance from the current year's advance, both withheld by the employer. The regional surcharge is withheld by the employer too, as that section's withholding lines show.

The municipality that counts is the one where you had your tax domicile on 1 January of the year the surcharge relates to. Someone who moves in February therefore pays that year's surcharge to the town they left. Where a municipality uses several rates, they must follow the national IRPEF brackets and rise with them.

A municipality can also set an income-based exemption threshold. Below it no surcharge is due; above it, the surcharge applies to the whole of total income, not only to the part over the threshold. It is worth checking your own municipality's resolution before estimating next year's net pay.

Fringe benefits and meal vouchers

Not everything a company provides counts as taxed salary. The same INPS item on the 2026 figures confirms a limit of 1,000 euros a year for goods, services and utility refunds provided by the employer, rising to 2,000 euros for employees with children. Within that limit fringe benefits leave net pay untouched.

Electronic meal vouchers, according to the same source, remain free of tax up to 10 euros per voucher. A voucher worth more is taxed on the excess. On the payslip these items often sit in a separate section, with nothing deducted, or appear for information only.

The year-end adjustment and the Certificazione Unica

At year end, or when the job ends, the employer recalculates IRPEF over the whole period and compares it with the tax already withheld. If it kept too much, it pays the difference back on the adjustment payslip; if it kept too little, it recovers the gap. That is why the December payslip often looks unlike the others.

The final result goes into the Certificazione Unica, which the employer hands to the employee and sends to the Agenzia. It shows the year's income, withholding, surcharges and tax-free sums. The same figures flow into the pre-filled return, where section C picks up the CU boxes line by line.

In section C each kind of withholding has its own line. Besides IRPEF and the regional surcharge, the municipal surcharge takes three: the advance for the year the return covers, the balance for that same year and the advance for the current year. Reading them separately explains the instalments seen on the payslip.

Anyone who had several employers in the same year needs to take extra care. Each employer applied the brackets and credits as if it were the only one, and total withholding may fall short. The tax return brings everything together and reveals any tax still owed.

A method for checking your payslip

The first check covers personal and contract details: level, grade, type of contract, hiring date. A wrong grade changes the contribution rates; a wrong hiring date changes the days over which credits are scaled. These details slip past easily and weigh on the whole year.

The second check is on earnings. Overtime hours, allowances and expense refunds must match what was agreed. The third is on deductions: contributions should move with gross pay, IRPEF with taxable pay. A sudden jump without a pay rise deserves a question to the payroll office.

The last check happens once a year, on the Certificazione Unica. Add up what the payslips withheld and compare it with the CU boxes. If the figures do not match, ask the employer for a correction before accepting the pre-filled return, because the return takes the CU exactly as it stands.