TFR (severance pay) and final entitlements when employment ends
Simulation of TFR, final entitlements and advance
What you are entitled to, at the end of employment or as an advance
When employment ends, besides the last monthās pay there are the TFR (Italian end-of-service pay), unused holidays, the accrued 13th and 14th month and, in some cases, notice indemnities and other sums. TFR can also be requested in advance, during employment, under certain conditions. This tool estimates what is due to you at the end of employment, gross and net of tax and contributions, or what you can obtain as an advance and the provisional tax, starting from two dates and your monthly pay. It is an indicative simulation: it does not replace the calculation made by the employer, INPS and the tax authority, nor advice.
The calculator
How the calculation works
How TFR builds up
TFR builds up year by year. For each year of service an instalment equal to annual pay divided by 13.5 is set aside; for fractions of a year the instalment is reduced proportionally, and fractions of a month of at least fifteen days count as a full month. Annual pay includes all sums paid on a non-occasional basis, additional monthly payments included, unless the collective agreement provides otherwise. If during the year there are absences for sickness, accident, compulsory maternity leave or wage supplementation, TFR accrues as if the work had been done; for unpaid absences, such as unpaid leave, the instalment does not accrue.
Revaluation and substitute tax
Every 31 December the TFR accrued up to the previous year is revalued at 1.5% fixed plus 75% of the rise in the ISTAT consumer price index for worker and employee households compared with December. If the index falls, 1.5% remains. In the year employment ends, the index of the month of termination is used and the fixed part is calculated in twelfths. Substitute tax is paid each year on revaluations, at 11% for the years 2001 to 2014 and 17% from 2015, and reduces the fund; for this reason revaluations already taxed are not taxed again when the TFR is paid. For 2026 ISTAT has published the indices up to September: for terminations after that month the tool uses the latest known index and says so.
Pension funds, INPS Treasury Fund and advances
From 2007 the worker can direct future instalments to a pension fund or, in companies with at least 50 employees, TFR not paid into a fund goes to the INPS Treasury Fund, which pays it on termination. Instalments paid to a pension fund are not received on termination and are not taxed at that time; they do, however, enter the calculation of the tax rate. Anyone who has already received an advance, which can be requested only once after eight years of service and up to 70% of the TFR, sees it deducted from the total.
How the tax on TFR is calculated
Tax on TFR is calculated with separate taxation, that is, outside the income of the year. The taxable TFR, net of revaluations already taxed, is divided by the years of service and multiplied by twelve: this is the reference income. The IRPEF brackets are applied to this amount and the average rate is obtained, which is applied to the whole TFR. For 2026 the brackets are 23% up to 28,000 euro, 33% up to 50,000 and 43% above. From 1 January 2027 Legislative Decree 117/2026 replaces articles 17 and 19 of the TUIR (Consolidated Income Tax Act) with articles 21 and 11 of the new text, with the same rules. For the part accrued up to 2000 the earlier rules apply, with a reduction of 309.87 euro per year of service. For fixed-term contracts of up to two years the tax is reduced by 61.97 euro per year, proportionally if hours are reduced. The law also provides for using the brackets in force at 31 December 2006 if more favourable: the tool flags this for very high reference incomes but does not calculate it. Afterwards the tax authority may recalculate the tax with the average rate of the previous five years.
Other entitlements
Unused holidays and leave and the accrued 13th and 14th month are ordinary pay: they carry INPS contributions and enter the yearās income with IRPEF and surcharges, which the tool estimates in a simplified way. The indemnity in lieu of notice, due when the employer dismisses without having the notice worked, carries INPS contributions and is taxed at the TFR rate on the amount net of contributions; if instead the worker resigns without notice, the amount is owed to the employer and is deducted. Contractual indemnities linked to years of service are taxed with a reduction of 309.87 euro per year; other sums for termination, such as a redundancy incentive or a supplementary indemnity, are taxed at the TFR rate.
What to keep and report
Keep the contract or hiring letter, the latest payslips showing the balance of holidays and leave and the accrued TFR balance, any statement from the pension fund or the INPS Treasury Fund, and the resignation or dismissal letter with its dates. The employer provides the final settlement statement and, the following year, the Certificazione Unica showing the sums subject to separate taxation. If you received an advance, look for the employerās document or notice: they are needed for the final adjustment. Remember that the TFR or the tax authorityās recalculation may appear in the following yearās tax return, with a possible request for payment or a refund. In case of resignation, resignations are notified to the employer and to the Ministry of Labour through the online procedure. If something does not add up, ask the employer or the payroll consultant for the detail.
To work out an employeeās net pay and employer cost you can use the labour cost tool, while the hyper-depreciation calculator and the organisational structures checklist are for businesses. For your specific case you can talk to the firmās payroll consultant.
Frequently asked questions
Is TFR taxed like salary?
No. Separate taxation applies: the rate is obtained from the IRPEF brackets on a reference income that depends on the TFR and the years of service, and it is usually lower than the rate on salary.
If TFR goes to a pension fund, do I receive it on termination?
No. Instalments paid to a pension fund stay in the fund and are collected when the benefit is paid, with the tax treatment provided for supplementary pensions. The employer pays only the TFR left with the company and, with at least 50 employees, INPS pays the Treasury Fund part.
How is the notice indemnity calculated?
The total monthly pay, additional monthly payments included, is multiplied by the months of notice not worked. If the employer dismisses, the worker receives it; if the worker resigns without giving notice, it is owed to the employer.
Why can the result differ from the statement I received?
Because the calculation rebuilds the years with constant pay, apart from the increase you can enter, and uses reference values for contributions and surcharges. Enter the TFR accrued at the end of last year, if you know it, to get closer.
Notice and sources
The tool is a simulation for information purposes and is not tax, employment or legal advice. Results depend on the data entered and on the assumptions stated in the result; the final amount is the one calculated by the employer, INPS and the tax authority. The following are not modelled: the reduction of the tax levy under paragraph 8 of article 21 of the new TUIR (implementing decree not identified), funds and agreements with their own rules, executives, death of the worker, and terminations before 2026.
Last legal check: 12 November 2026. Reference sources: Civil Code, arts. 2118 and 2120; Presidential Decree 917/1986 (TUIR), arts. 11, 17 and 19; Legislative Decree 117/2026 (new TUIR from 1 January 2027), arts. 11, 19 and 21; Legislative Decree 47/2000, arts. 11 and 12; Legislative Decree 252/2005; Law 296/2006, art. 1, paras. 755 ff.; Law 199/2025; ISTAT, FOI index excluding tobacco and note on coefficients.
Contact the firm
Write to us: we will review your situation together.
Contact us
Write us a few lines; we reply on working days.