Fixed-Term Contract: Definition and Rules Under Italian Law

What a Fixed-Term Contract Is

The Italian Ministry of Labour defines a fixed-term contract as an employment contract with a duration fixed in advance by an end date; an open-ended contract, by contrast, has no end date set beforehand.

The end date must be put in writing: without it, the contract counts as having no end date, meaning open-ended, from the very start. There is only one exception, noted by the same ministry page: relationships that do not go beyond 12 days.

Practical example: a company hires a warehouse worker to cover a spike in activity ahead of the holiday season. The contract states a start date and an end date: when that date arrives, unless extended, the relationship ends on its own, with no need for a dismissal.

Anyone who signs a fixed-term employment contract therefore accepts, from day one, a known end date. It is one of the main differences from an open-ended employment relationship, which stays open until one of the two parties decides to end it.

Maximum Duration and Justified Reasons: How Long It Can Last

Legislative Decree 81/2015, in article 19, sets a standard maximum duration of 12 months. An employer can go beyond that limit, up to a maximum of 24 months, only if one of the reasons set out in the same law applies: temporary needs unrelated to ordinary activity, replacing other employees, or a temporary and significant increase in ordinary activity.

If the employer goes past 12 months without a justified reason, the contract is not voided: it automatically converts into an open-ended contract, starting from the day the thirteenth month begins.

Extensions and Renewals: The Limits Set by Legislative Decree 81/2015

Extending or renewing within the first year needs no justified reason; after 12 months it does, drawn from the same reasons already seen for going past the standard duration.

The law allows at most 4 extensions, counted over the entire 24 months of the relationship rather than the single contract; this only applies if the initial duration stays under 24 months. A fifth extension is not simply void: it converts the relationship into an open-ended contract from the day it begins.

Renewing the contract with the same worker, once the previous one has expired, also requires a minimum gap: 10 days if the expired contract lasted up to 6 months, 20 days if it lasted longer. An employer who rehires before these deadlines sees the new contract convert into an open-ended one from day one.

The 20% Cap on Staff

Beyond the duration limits, article 23 of Legislative Decree 81/2015 sets a quantitative cap: fixed-term contracts cannot exceed 20% of the open-ended employees on a company’s payroll, unless a collective agreement provides otherwise. Companies with up to 5 employees can still hire one fixed-term worker, even beyond this share.

Exceeding the 20% cap does not convert the excess contracts into open-ended ones: it exposes the employer to an administrative fine. The fine equals 20% of pay if only one worker is in excess, or 50% if there is more than one, calculated for each month or fraction of a month beyond 15 days.

The Cost for the Employer: The NASpI Contribution

Hiring on a fixed-term basis also costs more on the contributions side. Law 92/2012, article 2, paragraph 28, imposes an additional contribution on fixed-term contracts to fund NASpI, Italy’s unemployment benefit, set at 1.4% of taxable pay. The same article raises that contribution by a further 0.5 percentage points at every renewal of the same contract.

At every renewal, even through a staffing agency, the additional contribution rises by a further 0.5 points; an open-ended contract carries none of it.

Fixed-Term or Open-Ended: The Difference That Matters

The main difference lies in the end date, known in advance in a fixed-term contract and absent in an open-ended one, which continues until the employer or the worker decides to end it. Anyone weighing whether to accept a fixed-term contract, or whether to work as a freelancer instead, can compare the two paths by also looking at the labor market as a whole. The choice between salaried work and self-employment often runs through a VAT number for those without a subordinate relationship to an employer.

How a Fixed-Term Contract Is Activated

Hiring on a fixed-term basis requires, as with an open-ended hire, a written contract stating the end date; once the 12-month limit is crossed, the applicable justified reason must also be specified in the contract. If the relationship ends at the agreed date, the worker has access to NASpI, funded in part by the additional contribution described above.