Italian law, implementing European Directives from 2003/4, provides that – save for more favourable provisions set out by national collective agreements – employees must be granted a statutory minimum period of four weeks of holiday, of which two are to be enjoyed within the reference year and the remaining two within 18 months from the end of the reference year.

In principle, the statutory minimum period of four weeks of holidays cannot be replaced by the payment of an indemnity in lieu of vacation.  According to case law, holidays that have not been enjoyed cannot be forfeited and they are automatically carried forward in the following year(s).  If they are not used before the termination of employment, the employee will receive an indemnity in lieu of vacation calculated on the basis of salary at the time of payment.

Holiday pay

During a period of vacation an employee must benefit from a salary equal to that which the employee would have received if he/she had worked.  Any individual or collective agreement that provides for a less favourable treatment is ineffective (Supreme Court Decision 14955 of 2000).

In the absence of a legislative framework specifying the elements of the remuneration which must be taken into account, Italian case law states that the holiday indemnity should be determined by collective bargaining or by individual agreement, and confirms that – in any case – it must ensure that the employee's pay is the same as the employee would have received if working (Supreme Court Decision 5408 of 2003).

In light of this principle, the national collective agreement for employees of the trading sector provides that the holiday indemnity must correspond to the employees' "global" salary; in other words, it is to be calculated taking into consideration not only the base salary but also all the additional elements of the remuneration which have a "continuous" nature, except for reimbursement of expenses and remuneration for overtime.  The employees' global salary includes commissions where the employee is paid, in whole or in part, on a commission basis.

Similarly, the national collective agreement for employees of industrial companies provides that during holidays employees must receive their global salary, excluding only those elements that have an occasional nature.

Illness during holiday

On several occasions the Supreme Court has affirmed that illness of an employee suspends the course of holidays (except in the case where the illness does not prevent the effective enjoyment of the holiday), since the purpose of the holidays is to allow the recovery of the psycho-physical energies by the employee through rest and recreation (see Decision 2515 of 1996).  This position is in compliance with EU case law which has found that under the European Working Time Directive the employee's holiday rights cannot be impacted by sickness leave.