Severance and Notice Pay: Calculation for Foreigners in Turkey

The most-discussed item in labour law is severance pay and notice pay when employee leaves work. For foreign employees, these compensations are often important material rights; when correctly calculated, same protections as Turkish employee apply regardless of employee's foreign status. This guide explains foreign employees' severance and notice pay rights and calculation principles.

Turkish Labour Law's Coverage of Foreign Employees

In Turkey, both foreign and Turkish employees:

• Benefit from same labour law protection,
• Have same severance and notice rights,
• Can file lawsuit at labour court with same process.

This equality ensures foreignness creates no adverse discrimination in employment relationship. Every foreigner employed with work permit begins to have these rights.

Severance Pay

Earning Conditions

Main conditions sought legally to earn severance pay:

• Having worked specific period (minimum seniority per prevailing legislation),

• Employment contract ending for severance-pay-creating reason:

  • Termination by employer in absence of justified reason,
  • Termination by employee with justified reason (health reason, ethics and good faith violation, force majeure, etc.),
  • Termination due to military service or retirement,
  • Female employee leaving due to marriage (within specific period),
  • Employee's death.

Severance pay is generally not paid to resigning employee; exceptions are as stated above.

Calculation Method

Elements considered in severance pay calculation:

• Full years worked and remaining day count,
• All-in monthly wage (giydirilmiş ücret) — not just bare salary, includes premium, bonus, holiday pay, regular benefits like meal and transport,
• In calculation, 30 days as one wage, for each full year worked.

A ceiling is determined in law for severance pay; this ceiling is typically a high amount and most employees fall below ceiling. However, ceiling may be effective for high-paid foreign managers.

Aralıklı (Intermittent) Working

In situations of intermittent work:

• Reasons for breaks matter,
• In some situations, breaks aren't considered in seniority calculation,
• Transitions between company groups are carefully evaluated.

Tax on Severance Pay

Severance pay is exempt from income tax up to specific amount; however, portion above ceiling is subject to tax. Stamp duty also applies.

Notice Pay

Earning Conditions

Notice pay:

• When employment contract is terminated without observing notification periods,
• Is rule applied to termination by both employer and employee,
• No earning period requirement (unlike severance pay).

Notification Periods

Notification periods determined in law exist per employee's seniority. As period increases, notice period also increases. During this period:

• Employee actually continues employment contract,
• Employer must give job-search leave for employee to find new job,
• Termination occurs at end of period.

If employer terminates contract without complying with this period, wage equivalent to notice period must be paid to employee; this is notice pay.

Calculation

Notice pay:

• Is the portion of the all-in monthly wage falling on the notice period,
• All-in wage is taken as the basis (same as for severance),
• Tax exemption is more limited, unlike severance pay.

Practical Issues for Foreign Employee

1. All-In Wage Instead of Bare Salary

Foreign managers generally receive standard salary + additional benefits (lodging, vehicle, health insurance, annual premium, education contribution, etc.). In compensation calculation, the monetary equivalent of these benefits is included. This significantly increases the compensation amount.

2. Foreign Currency Salary

Foreign employees sometimes receive salary in foreign currency. In compensation calculation:

• Often converted to TL at termination date rate,
• If different basis is foreseen in contract, that applies,
• Court considers concrete justice principle in parity disputes.

3. Home-Country Pension Account

If employee has SGK-equivalent social security account in home country, period worked in Turkey can be transferred to home-country pension account within social security agreements.

4. Off-Payroll Payments

Some employers pay employee part of salary off-payroll to evade tax. This practice:

• Is against employee; compensation calculation is done over payroll record,
• When taken to litigation, real wage can be determined with witness and bank records,
• Creates tax evasion risk for both employer and employee.

Foreign employees should be careful on this; receiving salary through fully-declared bank transfer where possible is recommended.

Legal Routes if Compensation Not Paid

When employer doesn't pay compensation, employee:

1. Mediation

In labour cases, mediation is mandatory pre-stage. Process:

• Application to mediator,
• Meeting within specific period,
• Parties' settlement effort,
• If settlement reached, document is signed and has court decision nature.

If settlement not reached, lawsuit is filed.

2. Labour Court Lawsuit

At labour court:

• Expert reports (particularly for wage and benefits calculation),
• Witness statements,
• Documents

are evaluated. Additional translator may be needed for foreign employee.

3. Enforcement Proceeding

If court ruling in favour or mediation document exists, employee can collect compensation by initiating enforcement proceeding. Lien can be applied on employer's salary, bank accounts, or real estate.

Risk Management from Employer's Perspective

Practical recommendations for employers:

1. Payroll must be net and correct — real wage must be in records,
2. Document termination process — disciplinary, performance evaluation reports,
3. Provision for severance pay — predictability in financial planning,
4. Social security agreement notification for foreign employee,
5. Settlement clauses in employment contract — monetary equivalent of variable services.

Important Documents from Employee's Perspective

Documents employee must carefully preserve at start and during employment relationship:

• Employment contract,
• Pay slips,
• Bank transfer receipts,
• Social security notifications,
• Performance evaluation reports,
• Disciplinary and warning correspondence,
• Annual leave usage records.

When dispute arises, these documents form foundation of defence.

Legal Support

In Antalya, for foreign employees and companies employing them, MONA HUKUK provides comprehensive support in labour law: compensation calculation analysis, mediation negotiation, lawsuit filing and tracking, enforcement and collection — on all fronts professional team is with you. Termination of employment relationship must be concluded fairly and lawfully for both employee and employer.

Contact us at contact@monahukuk.com or call +90 (242) 606 14 32 to schedule a consultation in Antalya.