Details in Payment of Severance Pay to Retiring Employees

November 23, 2022by Bünyamin Esen0

Concerns about the new pension reform, which is expected to be enacted by the Turkish Parliament as of January 2023, are common in the Turkish business life. With the prospective reform to be made, it is expected that 1.5 million people in total will be able to retire immediately, out of 4.5 million employees waiting for retirement across Turkey. As an important point, these employees are required to payed their severance pay while retiring and this creates a heavy burden upon the sholders of Turkish employers.

In this article, we have compiled the answers to frequently asked questions about severance pay to be paid to employees who quit their job due to retirement.


Q: Do employees have to pay severance pay and notice pay when they retire?

According to the Labor Code No. 1475, retirement is a situation that requires workers to be entitled to severance pay. According to the Article 14 of the Act No. 1475, the employee will be entitled to severance pay if the employment contract is terminated by the employee in order to receive old age, retirement or invalidity pension or lump sum payments from social security institutions or social insurance funds.

In addition to the severance pay, the employee who submits a petition to the employer that he/she wants to leave the job for retirement also deserves the wages of the remaining annual leave rights (not used yet), again in accordance with the Labor Law No. 4857.

However, the retired employee is not required to give notice period to the employer. In this framework, the employee may leave the workplace immediately by making a notice of termination on the grounds of retirement. In this case, the employer is not able to receive notice compensation from the employee, nor is it required to pay any notice compensation to the employee.

Q: How will the severance pay of retiring employees to be calculated?

Retired employees will receive severance pay for their working time at their last workplace. Severance pay in the amount of 30 days’ gross wage will be given for each working year. Employees with wages exceeding the severance pay ceiling (current ceiling for the second half of the year 2022 is TRL 15,371 per month) will be paid compensation equal to the ceiling amount for each working year.

If the employee agrees, it may be possible to make the payment in installments. However, if the employee does not accept, the payment shall be made in advance as of the date of leave of work.


Q: Our employee, who will retire, worked in our company for several periods with interruptions? How will we calculate the seniority of this worker, which is the basis for severance pay?

The seniority to be taken as a basis for the severance pay of the insured working at the workplace with interrupted periods is calculated by adding up the total working periods. This is so, as according to the Act No. 1475, the seniority of the workers is calculated by considering the period of time he/she have worked in one or different workplaces of the same employer, regardless of whether the service contract has continued or has been re-concluded with intervals.


Q: Our employee, who will retire, was working in the company we have legally transferred to us, we took over his employment contract as well when we transfer the company. How will we calculate the seniority of this worker, which is the basis for severance pay?

In case of transfer or transfer of workplaces or transfer from one employer to another employer or transfer to another place, the seniority of the worker is calculated over the total of the duration of the service contracts in the workplace or workplaces.

In case the workplace is transferred or changed hands in any way, both employers are responsible for the severance pay. However, these responsibilities of employers who transfer the workplace are limited to the periods they work with the employee and the wage level of the employee during the transfer.


Q: We had previously paid the severance pay and liquidated it at the request of our worker. At that time, we had restarted our worker’s seniority. Now, while our employee retires, do we need to pay severance once again for the previous period?

According to the Labor Code No. 1475, no severance pay is required to be paid more than once for the same seniority period. For this reason, it is not necessary to pay severance pay again for the periods in which the severance pay was liquidated at the request of the worker. For the seniority period after the re-start period, the severance pay must be paid over the last paid wage.


Q: The wages of our retired personnel are paid in the form of a commission over the products he/she markets and sells, and it changes every month. How should we calculate severance pay?

In cases where the wage is not fixed, and being paid with diverse methods such as per piece, tuning, lump sum or percentage method, the average wage to be found by dividing the wage paid in the last year by the days worked during that period shall be taken as the basis for the calculation of the severance pay.

Bünyamin Esen

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