Severance Pay Calculator
How is Italian severance pay (TFR) calculated?
The annual TFR is the gross pay / 13.5. It is revalued every year with the ISTAT index (75%) plus a fixed 1.5%. Separate taxation is based on the average tax rate of the last 5 years.
Calculator
Online TFR (Severance Pay) Calculator
Calculate your Severance Pay and find out how much you are entitled to
TFR (Severance Pay) Calculation Results
| Year | Annual Quota | Revaluation | Accumulated TFR |
|---|
How the TFR (Severance Pay) Calculation Works
TFR (Trattamento di Fine Rapporto), or Severance Pay, is a sum that the employer sets aside each year and pays to the employee upon termination of the employment relationship.
- Annual quota: equal to the annual salary divided by 13.5.
- Revaluation: the accrued TFR is revalued each year with a fixed rate of 1.5% plus 75% of the ISTAT index.
- Taxation: TFR is subject to separate taxation, with an average rate calculated on the reference income.
Note: this calculator provides an indicative estimate. For an exact calculation, consult your employment consultant or accountant.
More Details
How the Severance Pay (TFR) Calculation Works
TFR (Trattamento di Fine Rapporto), commonly known as "severance pay", is a sum that the employer sets aside each year and pays to the employee at the end of the employment relationship.
The TFR Formula
TFR is calculated in two steps:
1. Annual Accrual
Each year, the gross annual salary divided by 13.5 is set aside:
Annual quota = Gross Annual Salary / 13.5
From the annual quota, 0.50% of pay is subtracted: it is the additional contribution to the INPS employees' pension fund (Fondo pensioni lavoratori dipendenti, art. 3 of Law 297/1982).
2. Annual Revaluation
The accumulated TFR is revalued each year using this formula:
Revaluation = 1.5% fixed rate + 75% of the ISTAT consumer price index
The revaluation is subject to a substitute tax of 17%.
Practical Example
An employee with a gross annual salary of 30,000 EUR for 10 years:
- Gross annual quota: 30,000 / 13.5 = 2,222.22 EUR
- INPS contribution: 30,000 x 0.50% = 150.00 EUR
- Net annual quota: 2,072.22 EUR
- Gross TFR after 10 years (with revaluations, ISTAT index at 2%): approximately 23,750 EUR
- Net TFR (after separate taxation): approximately 18,470 EUR
TFR Taxation
TFR is subject to separate taxation and is not added to the annual income:
- The reference income is calculated: TFR / years of service x 12
- The corresponding IRPEF rate is applied to that income
- The tax is: rate x taxable TFR amount
This taxation method is generally more favorable than the standard IRPEF income tax.
TFR in the Company vs. Pension Fund
| Aspect | TFR in the Company | Pension Fund |
|---|---|---|
| Return | 1.5% + 75% ISTAT index | Variable (potentially higher) |
| Taxation | Average IRPEF rate | From 15% to 9% (−0.30 points for each year of membership beyond the fifteenth) |
| Tax Deductibility | No | Up to 5,300 EUR/year (from 2026) |
| Liquidity | Only at end of employment | Advances after 8 years |
| Risk | Tied to the company | Diversified |
When Is It Paid
- Private sector: within 30-45 days from the end of the employment relationship
- Public sector: 12 to 24 months from the end of employment
- You can request an advance of up to 70% after 8 years of service for purchasing a first home, medical expenses, or parental leave
