Practical guide
Caretaker severance pay (TFR): calculation and payout
Severance pay (trattamento di fine rapporto, TFR) is the sum due to the caretaker when the employment relationship with the condominium ends. It accrues each year of service under Article 2120 of the Italian Civil Code and must be set aside progressively, so that in the end the condominium has the funds to pay it. For the manager, understanding the TFR is essential both to process payslips correctly and to build a prudent budget: the TFR is a real cost, even though it is not paid each month. This guide explains how it is calculated, how it is revalued and how it is paid, and why it must always be reserved in the condominium's accounts.
What the TFR is and when it is due
Severance pay is deferred remuneration: it accrues during the relationship and is paid on termination, whatever the cause, resignation, dismissal, retirement or expiry of a fixed-term contract. It is a worker's right governed by Article 2120 of the Italian Civil Code.
For the employer condominium the TFR is a commitment that grows year after year. Even though the outlay happens only at the end of the relationship, the accrued amount is a debt to the worker and must be treated as such in the condominium's financial management.
How the annual accrual is calculated
Each year's accrual is worked out under the criterion of Article 2120 of the Italian Civil Code: the useful pay for the year is divided by 13.5. The share so obtained is added up year by year and makes up the accumulated TFR the worker has earned.
Useful pay includes, unless otherwise provided, all sums paid in connection with the relationship on a non-occasional basis, including any in-kind components such as the value of the service accommodation. The calculation is usually entrusted to a labour consultant or a payroll service, but the manager should understand the logic in order to check the figures.
- Annual share = the year's useful pay divided by 13.5
- The shares add up year by year forming the accumulated amount
- Useful pay also includes recurring in-kind benefits
Revaluation of the accumulated amount
The TFR shares set aside in previous years are revalued each year. The revaluation is made up of a fixed rate of 1.5% plus 75% of the increase in the ISTAT consumer price index against the reference month. In this way the accumulated amount keeps part of its value over time.
The revaluation applies only to the accumulated amount from previous years, not to the current year's share. It is an element that affects the condominium's debt to the worker and must be updated in the calculation of the accrued TFR.
The payout at the end of the relationship
On termination the condominium pays out the accrued TFR, applying the taxation provided for this form of deferred remuneration. The payout must be made within the correct time and manner, together with the other final entitlements such as portions of holidays, leave and the extra month's salary.
To avoid being caught unprepared, the condominium must have reserved the necessary sums over time. A budget that ignores the TFR accrual risks lacking enough liquidity at termination, forcing extraordinary contribution requests to the owners.
Reserving the TFR in the condominium accounts
The accrued TFR is a debt to make visible in the accounts, so that the owners have a real picture of the commitments. Staff cost is not just the monthly payslip: it includes contributions, the extra month's salary and the TFR share, and all this must be shared under Article 1123 of the Italian Civil Code.
With AmministraPro you record staff costs, keep track of the full cost including the TFR and link everything to the millesimi allocation, reducing the risk of surprises at termination. The features are described on the /funzioni page and the plans with their costs on the /prezzi page.
Frequently asked questions
How is the annual TFR share calculated?
Under Article 2120 of the Italian Civil Code, each year's share is obtained by dividing the year's useful pay by 13.5. The shares add up year by year and form the accumulated TFR. Useful pay includes, unless otherwise provided, sums paid on a non-occasional basis, including recurring in-kind benefits.
How does the TFR revaluation work?
The amount accumulated in previous years is revalued each year with a fixed rate of 1.5% plus 75% of the increase in the ISTAT consumer price index. The revaluation applies only to shares from past years, not to the current year's share, and updates the condominium's debt to the worker.
When is the TFR paid to the caretaker?
The TFR is paid out on termination, whatever the cause: resignation, dismissal, retirement or expiry of the contract. It is paid with the taxation provided for deferred remuneration, together with the other final entitlements such as portions of holidays, leave and the extra month's salary.
Is the TFR a cost to budget every year?
Yes. Even though the outlay happens only at the end of the relationship, the TFR share accrues each year and is a debt of the condominium to the worker. Reserving it in the budget avoids running short of liquidity at termination and having to ask the owners for extraordinary contributions.
Does service accommodation affect the TFR calculation?
It may, because useful pay for TFR purposes normally includes sums and benefits paid in connection with the relationship on a non-occasional basis, including in-kind components such as the value of the accommodation. The calculation should be entrusted to a labour consultant, who applies the correct criteria to the specific case.
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