EOR – Employment of Record: does it work in Italy?

The idea behind Employment of Record is simple: a company wants to hire a person in a country where it does not yet have its own corporate structure and entrusts a local entity with the formal management of the employment relationship. The EOR thus becomes the contractual employer, while the client company continues to be responsible for the employee’s professional activities.

This model can be particularly attractive to international companies seeking to enter a new market quickly. However, when the destination country is Italy, the apparent simplicity of the arrangement may give rise to a number of legal issues.

The key point is not, in fact, whether a foreign company may use an EOR service. Rather, it is necessary to understand how the employment relationship is actually organized and whether the structure adopted is compatible with Italian employment and immigration rules.

The issue arises from the distinction between the employer and the user company

In a standard employment relationship, the party that hires the employee is also, as a general rule, the party that organizes and directs the employee’s activities.

Employment of Record, by contrast, introduces a third party. The EOR formally employs the worker and manages the administrative aspects of the relationship, while the client company normally determines the employee’s duties, coordinates the day-to-day work and actually makes use of the professional services provided.

It is precisely this separation that makes it necessary to examine the structure in light of Italian legislation.

The Italian legal system does, in fact, recognize an arrangement in which the employer and the entity for which the employee actually works are not the same: "somministrazione di lavoro". This is, however, a specifically regulated legal institution. The Ministry of Labour describes somministrazione di lavoro as a relationship involving an authorized agency, the user company and the supplied worker.

An important consequence follows for companies considering an EOR: it is not sufficient to give the service a different name or to contractually characterize the relationship as mere outsourcing. What matters above all is how the relationship operates in practice.

An EOR is not automatically equivalent to a somministrazione agency

This is probably the most important aspect to consider.

In Italy, the activity of somministrazione di lavoro is reserved for operators that are authorized and registered with the Albo nazionale delle Agenzie per il lavoro (National Register of Employment Agencies). The Ministry confirms that registration in the Register is a prerequisite for lawful operation in the sector and distinguishes, among others, agencies authorized to provide somministrazione services from those carrying out intermediation or recruitment and selection activities.

For this reason, an international EOR service should not be assessed simply on the basis of its ability to process payroll, enter into employment contracts or manage tax and social-security obligations.

The decisive question is a different one: is the provider genuinely supplying an administrative service, or is it making a worker available to the client company?

In the latter case, the arrangement could fall within the scope of the rules governing somministrazione di lavoro and therefore require the involvement of an operator authorized under Italian law.

When immigration comes into play

The issue becomes even more delicate when the worker is not yet in Italy.

A company may be interested in an EOR precisely because it wants to avoid, at least initially, setting up an Italian company. If, however, the worker is a citizen of a country outside the European Union, the employment relationship must be coordinated with the procedure required to enable that person to work legally in Italy.

At this point, the contract with the EOR cannot be considered in isolation. It is necessary to establish which entity employs the worker, what activity is carried out, where it is carried out and what role the foreign company actually plays.

In other words, the fact that an EOR is willing to enter into an Italian employment contract does not, in itself, mean that the arrangement automatically constitutes a suitable basis for the entry of a foreign worker into Italy.

The immigration process must be based on a genuine employment situation that is legally coherent. Therefore, before using an EOR as a solution for transferring personnel to Italy, it is advisable to assess both the employment-law and immigration aspects at the same time.

The right question is not “who pays the salary?”

When assessing an EOR project, focusing exclusively on payroll management can lead to an incomplete picture.

It is much more useful to reconstruct the relationship based on how it operates in practice. Who assigns tasks to the employee? Who sets priorities and objectives? Who supervises the work? For which company are the services performed? At which premises or in which territory is the activity carried out?

The answers to these questions help determine the true nature of the relationship.

This approach is particularly important because Italian law does not treat somministrazione di lavoro as a simple form of administrative outsourcing. The system provides for specific rules and an authorization system for operators carrying out this activity.

Consequently, the use of an EOR requires a concrete assessment of the structure selected, rather than merely checking the commercial agreement entered into between the companies.

EOR and Italy: a possible solution, but not “plug and play”

Employment of Record should not be regarded in Italy as a tool that can automatically be substituted for a local employer.

The model may have a role to play in the international organization of personnel, but its application must be assessed in relation to the specific structure of the employment relationship. In particular, when the worker is permanently made available to another company, the Italian rules governing somministrazione di lavoro come into play and, consequently, so do the requirements applicable to authorized operators.

The issue becomes even more important when the worker must enter Italy from abroad. In that case, in addition to ensuring compliance of the employment relationship, it is necessary to correctly identify the applicable immigration route.

For a foreign company, therefore, the most prudent strategy is to view an EOR not as a shortcut, but as one of several possible ways of organizing its workforce. In some cases, it may be compatible with the project; in others, it may be more appropriate to use an authorized agency, hire through an Italian entity, or structure the arrangement through a genuine services relationship or an intra-company transfer.

The choice will depend above all on the nature of the activity, the role of the Italian or foreign company involved, the worker’s position and the expected duration of the worker’s presence in Italy.

Ultimately, an EOR can work in Italy only when the actual structure of the employment relationship is compatible with the Italian regulatory framework. For this reason, before proceeding, it is essential to analyze not only the contract with the EOR provider, but the entire operating model and, for foreign workers, also the implications relating to entry into and residence in Italy.

The same logic applies to anyone who, after a period of work and residence in the country, subsequently wishes to consider a different pathway, potentially one connected with Italian citizenship: correctly determining the employment relationship and the worker’s immigration status remains an essential element throughout the process.

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The content of this article is intended to provide general information on the topic. For doubts or specific cases, it is advisable to seek specialized legal advice tailored to your particular situation.

Article written by Alessia Ajelli, Managing Associate of LCA Studio Legale, Italian lawyer specialized on Italian immigration and citizenship law.