Severance Pay is one of the right of the workers that is being envisaged in the Turkish Labour Law.
It is the monetary benefit that is paid collectively by the employer to the workers whose employment contract ends in one of the situations defined in the Law No. For each full year from the date of commencement to the date of exit, the employee is paid severance pay over 30 days’ gross wage. Payments are made at the same rate for periods increasing from one year.
The maximum amount of severance pay is determined and announced twice a year by the Ministry of Treasury and Finance, separately for the “January-June” and “July-December” periods. This amount calculated for the second period of 2022 is 15 thousand 371 Liras and 40 Kurush.
Severance pay is not subject to social insurance premium up to the exemption amount.
From the point of view of Tax Law, the monthly amount of severance pay that does not exceed the severance pay ceiling is not subject to income tax. However, in the event that the employee is paid severance pay or a payment based on the seniority year under another name in accordance with the employment contract or the collective bargaining agreement to which the empolyee is a party, and if this payment is over the severance pay ceiling on the date of termination, it would be necessary to calculate income tax for the amounts exceeding the ceiling.
In essence, there is no legal obstacle for an employer to pay severance pay as a lump sum payment above the maximum amount of severance pay. In other words, the Turkish Labour Law does not obstruct such an exceeding payment. However, in these cases, premium and tax exemption will be applied for the portion up to the severance pay ceiling. If a severance payment is made above the ceiling, then the amount exceeding the ceiling should be subject to income tax and insurance premiums and payroll.
Finally, the entire severance payment must be subject to stamp duty (7.59 per thousand as of the date of this article).
