24/06/2023

Calculation of Severance Pay Provision in Turkey

Severance Pay

Severance pay is a crucial aspect of employee rights and labour regulations in Turkey. It serves as financial compensation for employees who are terminated without just cause or due to certain qualifying circumstances. This article provides an overview of the calculation of severance pay provisions in Turkey, exploring the legal framework, eligibility criteria, and the factors considered in determining the amount of severance pay. Understanding these provisions is essential for both employees and employers to ensure compliance with labor laws and to protect the rights of workers.

Legal Framework and Eligibility

The calculation of severance pay in Turkey is primarily governed by the Turkish Labor Law No. 4857. According to the law, employees are entitled to receive severance pay if their employment contract is terminated without just cause or if they resign due to specific reasons outlined in the law.

Eligibility for severance pay is determined by the employee’s length of service with the employer. Generally, employees who have worked for at least one year continuously are eligible for severance pay. However, there are exceptions and specific rules for certain types of employment, such as seasonal work or fixed-term contracts.

Calculation Method

The calculation of severance pay in Turkey is based on the employee’s length of service, the most recent gross monthly salary, and certain coefficients determined by the law. The formula used for calculating severance pay is as follows:

Severance Pay = (Last Gross Monthly Salary × Coefficient) × Length of Service

The coefficient values are determined based on the length of service as follows:

  • For the first year of employment: 30% of the most recent gross monthly salary.
  • For the second year of employment: 30% of the most recent gross monthly salary for each year.
  • For the third and subsequent years of employment: 30% of the most recent gross monthly salary for each year.

For example, if an employee with a gross monthly salary of 5,000 Turkish Liras (TRY) has worked for four years, the severance pay calculation would be as follows:

Severance Pay = (5,000 TRY × 0.3) + (5,000 TRY × 0.3) + (5,000 TRY × 0.3) + (5,000 TRY × 0.3) = 6,000 TRY

It’s important to note that the gross monthly salary used in the calculation does not include additional payments such as overtime, bonuses, or commissions. Only the regular salary paid to the employee is considered.

Exceptions and Limitations

There are certain exceptions and limitations to the calculation of severance pay in Turkey. These include:

  1. Maximum Limit: The severance pay cannot exceed the amount corresponding to the employee’s compensation for ten years of service.
  2. Employee Misconduct: If an employee’s employment contract is terminated due to serious misconduct, severance pay may be reduced or completely waived.
  3. Resignation by Employee: If an employee resigns for reasons not specified in the law, such as health reasons or the fulfillment of retirement conditions, they may be entitled to a reduced severance pay.

Conclusion

The calculation of severance pay provisions in Turkey is an important aspect of employee rights and employer obligations. It ensures that employees receive fair compensation upon termination of their employment contracts. Understanding the legal framework, eligibility criteria, and calculation method is essential for both employees and employers to ensure compliance with labor laws and to protect the rights of workers. By adhering to these provisions, organizations can maintain a fair and equitable work environment while upholding their legal responsibilities towards their employees.

Azkan Group can support you in your Employer of Record (EOR) and payroll requests (also called Umbrella Company) in Turkey. We can manage your HR requests even if you don’t have a legal entity in Turkey.