Severance Pay in Turkish Employment Law: Entitlement, Calculation and Limitation

Severance pay (kıdem tazminatı) is compensation paid to an employee who has worked for the same employer for a certain period when the employment contract ends in one of the ways listed by law. Its legal basis is Article 14 of the former Labour Law No. 1475, which remains in force under provisional Article 6 of Labour Law No. 4857.

When is severance pay due?

Under Article 14 of Law No. 1475, severance pay is due where the employment contract:

• is terminated by the employer other than for just causes attributable to the employee, such as conduct contrary to morality and good faith,
• is terminated by the employee for just cause (for example non-payment of wages, health reasons, or the employer's conduct contrary to morality and good faith),
• ends due to compulsory military service,
• ends in order to receive an old-age, retirement or disability pension or lump-sum payment,
• is ended by an employee who has met the retirement conditions other than age (insurance period and number of premium days),
• is ended by a female employee within one year of marriage,
• ends on the employee's death.

If the employee resigns voluntarily without just cause, severance pay is generally not due.

One-year service requirement

Severance pay is calculated for each full year of service from the start of employment; in practice, at least one year of service with the same employer is therefore required. Periods exceeding a year are paid at the same rate. Periods at different workplaces of the same employer and under contracts re-established at intervals are combined, but no payment is made again for periods for which severance pay has already been paid.

How is it calculated?

Severance pay equal to 30 days' wages is paid for each full year of service. The calculation is based on the last wage and includes not only the basic wage but also cash and cash-equivalent contractual and statutory benefits provided to the employee (such as regular transport and meal allowances and bonuses).

However, the amount payable for one year of service may not exceed the statutory severance pay cap. The cap is linked to the retirement bonus payable to the highest-ranking civil servant and is updated twice a year; the cap in force at the date of termination applies.

Late-payment interest

If severance pay is not paid on time, in a lawsuit the judge awards the highest interest rate applied to deposits for the period of delay.

Mediation and limitation

For lawsuits concerning employment receivables such as severance pay, applying to a mediator before filing suit is a precondition under Labour Courts Law No. 7036. Severance pay claims are subject to a five-year limitation period from the end of the employment contract.

Common mistakes

• an employee terminating for just cause without clearly stating the reason in the termination notice,
• signing a release or "I have received all my rights" statement without reading it,
• an employee who has met the retirement conditions leaving work without first obtaining the Social Security Institution's letter confirming eligibility for severance pay.

This article is for general information purposes only and does not constitute legal advice.