When is severance pay due?

Severance pay is compensation paid to an employee who has worked for the same employer for a long period when the employment contract ends for one of the reasons set out in the law. It is governed by Article 14 of the former Labour Law No. 1475, which is still in force. Severance pay is not due on every departure; both the length of service and the way the contract ends are decisive.

The basic requirement: at least one year of service

The employee must have worked at workplaces belonging to the same employer for a total of at least one year, even if the contract was interrupted. Periods spent at different workplaces of the same employer are added together.

When is severance pay due?

• The employer terminates the contract without just cause based on the employee's conduct contrary to morality and good faith.
• The employee terminates the contract for just cause listed in the law, for example non-payment or underpayment of wages, underpayment of social security contributions, workplace bullying (mobbing), a material change in working conditions to the employee's detriment, or health reasons.
• The employee leaves to perform compulsory military service.
• The employee leaves in order to receive an old-age pension or a lump-sum payment.
• For those insured before 1999, the employee leaves voluntarily after meeting the retirement conditions other than age (insurance period and number of contribution days).
• A female employee leaves voluntarily within one year of her marriage.
• The employee dies; the compensation is paid to the legal heirs.

Resignation and mutual agreement

An employee who resigns without just cause is, as a rule, not entitled to severance pay. However, if the employee leaves for a just cause listed in the law, such as the employer's failure to pay wages, this is not a resignation but a termination for just cause, and the right to severance pay arises. It is therefore important to state the reason for leaving clearly and in writing.

Where the contract is ended by mutual agreement, severance pay does not arise automatically under the law; whether it is paid depends on the agreement. In practice, where the mutual agreement is proposed by the employer, the employee is expected to receive a reasonable benefit. Before signing such an agreement, make sure you understand which rights you are waiving.

Just cause termination: watch the time limit

In some cases, the employee's right to terminate for just cause is subject to a time limit. For example, where termination is based on conduct contrary to morality and good faith, the right must be exercised within six working days of learning of the situation and, in any event, within one year of the event. If you face a just cause for termination, it is therefore important to obtain legal advice without delay.

How is severance pay calculated?

• Thirty days' wages are paid for each full year of service; periods exceeding a full year are paid proportionally.
• The calculation is based not on the basic wage but on the "gross wage including benefits". Regular payments and benefits in money or money's worth, such as transport, meal allowances and bonuses, are added to the wage.
• The wage used is the last gross wage.
• The annual amount may not exceed the statutory cap. The cap is linked to the maximum retirement bonus paid to the highest-ranking civil servant and is updated twice a year; the cap in force on the termination date applies.
• Only stamp duty is deducted from severance pay; no income tax or social security contributions are deducted.

Example calculation

The example below is only intended to illustrate the method; the figures are hypothetical. For an employee who has worked for six years and four months with a gross wage including benefits of TRY 40,000:

• For the full years: 6 × TRY 40,000 = TRY 240,000
• For the additional four months: TRY 40,000 × 4 / 12 ≈ TRY 13,333
• Gross severance pay: approximately TRY 253,333
• Only stamp duty is deducted from this amount; the remainder is paid to the employee.
• If the gross wage including benefits exceeds the severance cap in force on the termination date, the calculation is based on the cap instead of the wage.

What if it is not paid?

Severance pay becomes due as soon as the contract ends and must be paid immediately. If it is not paid on time, interest runs from the termination date at the highest interest rate applied by banks to deposits.

Limitation period and litigation

• The limitation period for severance pay is five years from the end of the contract.
• Applying to a mediator is mandatory before filing a lawsuit. If no agreement is reached, a lawsuit may be filed with the labour court.
• The limitation period does not run during mediation.
• Notice pay, overtime, annual leave and other employee receivables may be claimed together with severance pay in the same application.

How it differs from notice pay

Notice pay is compensation paid by the party that terminates an indefinite-term contract without observing the notice period, and it is separate from severance pay. Notice periods range from two to eight weeks depending on the employee's length of service. No notice pay arises where the contract is terminated for just cause; where the employer terminates without giving notice, the employee may be entitled to both severance pay and notice pay.

Practical tips

• Before leaving, check your length of service and your social security service record via e-Devlet.
• If you are leaving for just cause, state your reason in writing, preferably through a notary.
• Keep your latest payslips and documents showing regular payments made to you.
• Before signing a release or mutual termination agreement, have the amount checked to see whether it covers all your entitlements.

Whether severance pay is due, and how much, must be assessed in each case according to the length of service, the wage structure and the way the employment ended.