Advices to Employers Regarding the Upcoming Pension Reform in Turkey

November 24, 2022by Bünyamin Esen0

As it is known, a retirement reform is on the agenda of the Turkish labour life. In this regard, the Ministry of Labour and Social Security of the Republic of Turkey is currently preparing a new regulation bill regarding “Employees waiting for retirement age” (also known as EYT in Turkey).

According to the Turkish Social Security Law, there are three conditions for receving an old-age pension in Turkey: (i) Fulfilling certain insurance period, (ii) fulfilling certain number of premium payment days and (iii) fulfilling a certain age. Those who are not old enough to retire but fulfilled the other conditiones are known as EYT(employees waiting for the retirement age) in Turkey.

Preparations on this issue are currently being carried out by the Ministry’s and the Social Security Institution’s bureaucracy, and the amendmend bill is expected to come to the agenda of the Turkish Grand National Assembly as of December 2022 and to be enacted as of January or February 2023.

The prospective retirement reform regulation is expected to provide the opportunity for retirement without waiting an age condition for the employees who were insured for the first time before the date of 8th of September, 1999.This has the potential to create an experienced personnel shortage for companies due to retirement of the employees with high seniority, in addition to the burden of payments of severance pay to retiring personnel.

The reform may provide the change or annulment of age conditions for retirement for employees who have started their working life as of 8th of September 1999 and earlier.

With the current expectations, those who have started their social insurance at the latest by the date of 08.09.1999 are within the scope of the new pension reform, and those who are insured after this date are not expected to be covered by the forthcoming law.

Therefore, it would be appropriate for employers to make a risk assessment about their staff who are expected to retire within the new reform, as considering the employees who have started their social insurance on the date of 08.09.1999 and earlier.

When a legal regulation is made within the scope of EYT, severance pay and unused annual leave wages have to be paid for employees whose social insurance start date is at the latest as of 08.09.1999 and who are retirement from our company. Thus, we advise employers to prepare their 2023 budgets accordingly.

This has to be noted that, retired employees within the new reform will have the right to keep on working by being declared from the Social Insurance Support Premium. However, the retired employee has an additional premium and tax burden upon the sholders of the employer, between 5-15 % of the wage.

Details regarding EYT Retirement Reform will be able to be determined more clearly with the submission of the law proposal to the Parliament as of December 2022.

If the bill will be enacted by January 2023, as expected, it will be possible for 1.5 million employees in total nationwide to retire immediately within 2023.

In sum, the new retirement reform is expected to affect employers in the year 2023 severely. In this context, the employers are advised to take about the following to actions regarding the forthcoming reform:

  • Budgeting payments of the severance pay and unused annual leave wages for those who are expected to be retired as of 2023.
  • Implementing a noval talent management strategy regarding those employees who will be leaving their jobs due to retirement with the new law.
  • Strengthening the infrastructure of their HR teams who will be dealing secondary effects of the pension reform in the calendar year of 2023.

Bünyamin Esen

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