Understanding EoR concept in Turkey

EoR concept Turkey

The EoR Concept in Turkey and Its Legal Framework

In Turkey, the concept of Employer of Record (EoR) is present and serves as a valuable service for companies. Although it is not specifically regulated by Turkish law, EoR providers offer vital assistance to foreign businesses, allowing them to manage employment and administrative duties like contract execution, payroll, and social security registration. This solution helps foreign companies establish a presence in Turkey without having to physically set up their own legal entity right away.

Increasing Demand for EoR Services in Turkey

The demand for EoR services has risen significantly, especially among foreign companies looking to enter the Turkish market quickly and efficiently. These services enable foreign businesses to hire local talent and ensure compliance with Turkish labor laws while minimizing tax risks. Companies frequently use these services to assess the local business environment before establishing a permanent presence or to employ staff in Turkey without creating a local entity.

Factors Driving the Growth of EoR Services

Various factors are fueling the growth of EoR services in Turkey:

  1. Flexibility in Hiring: Companies need more flexibility in recruitment, especially post-pandemic.
  2. Mitigating Compliance Risks: EoR services help foreign businesses navigate local labor and tax laws more effectively.
  3. Administrative Streamlining: These services ease the administrative burden on foreign companies by handling local HR and compliance tasks.

Legal Context of EoR in Turkey

Currently, Turkish law lacks specific regulations governing the EoR model. While there are no direct laws or judicial precedents that clarify this model, it is somewhat analogous to temporary employment arrangements in its triangular structure involving a staffing provider, an employee, and a client.

Comparing EoR to Temporary Employment in Turkey

In a temporary employment setup, an employee is hired by an agency but works for another company. The agency handles all employment duties and the employee’s salary. However, Turkish labor law has clear rules regarding temporary employment, unlike the less-defined EoR concept. Temporary employment contracts have a strict four-month limit and require specific permits from the Turkish Employment Agency.

Special Considerations for EoR and Temporary Employment

Personnel service providers in Turkey need a license from the Turkish Employment Agency to legally operate. Engaging in employment activities without such a license can lead to severe administrative penalties. Moreover, Turkish courts have held both lending and borrowing companies jointly liable for employees’ claims when operations were conducted without proper authorization.

Tax Implications of the EoR Concept

Utilizing EoR services can help foreign companies avoid creating a permanent establishment and the associated tax implications. However, there’s no absolute guarantee that Turkish authorities won’t identify the foreign company as the actual employer during an audit, especially if the employee meets other criteria like holding power of attorney for the foreign business.

Future of the EoR Concept in Turkey

As long as the global talent shortage persists, demand for EoR services will likely continue to grow. However, there’s also a growing trend for professionals to move abroad for direct employment. It remains to be seen if legal frameworks around EoR will become more clearly defined. For long-term business operations in Turkey, setting up a dedicated establishment is still advisable.