Severance pay refers to a compensation that employers are required to provide employees whose job contract is ended due to listed reasons under Turkish Labor Law. Severance pay approximately amounts to a month of gross salary for every year that the employee was with the company.
Turkish Severance Pay system is governed by the article 14 of Turkish Labor Law numbered 1475. (Law No. 1475 Date of Enactment: 25.08.1971 Published in the Official Gazette 0n 01 Sept 1971, No. 13943) Although all provisions of Law no.1475 is outlawed by the entry into force of current Turkish Labor law, no: 4857, article 14 of Law no 1475 is still in force by the virtue of article 120 and provisional article 6 of law no. 4857.
Article 14 on the Severance Pay reads that,
In the case of annulment of the service contracts of the employees who are amenable to this Act:
1. Except for the reasons stated by the employer in sub-clause II of Article 17 of this Act; (Corresponds article 25 of Turkish Labor Law. No. 4857)
2. Pursuant to Article 16 of this Act by the employee, (Corresponds article 24 of Turkish Labor Law. No. 4857)
3. Due to compulsory military service,
4. In order to receive an old age pension, pension fund or invalidity pension or to receive a full payment from the statutory institutions or retirement funds to which they are affiliated;
5. Due to their voluntary severance upon completing the insurance period and the number of days to pay premium prescribed for putting an employee on an old age pension as per the conditions other than the prescribed ages in sub-clauses (a) and (b) of sub-paragraph (A) of the first clause of Article 60 of Law no. 506 or as per Provisional Article 81 of the same Law;
6. In the case that the woman dissolves the contracts voluntarily within a year beginning from the date of marriage or
7. In the case that termination of contract upon the employee’s death,
a severance pay equal to 30-day salary shall be paid to the employee by the employer for each full year which has passed during the period of the service contract beginning from the starting date of employment. For periods exceeding one year, the payment shall be made on the basis of the same proportion.
CONDITIONS FOR SEVERANCE PAY
There are two conditions for the entitlement to severance pay of the employees who are covered by the Law no.4857.
a) An employee qualifies for severance pay if he or she has worked at the same or different workplaces of employer, at least for one full year.
b) Termination of employment should be considered within the specified categories of termination of contracts described under article 14 of Law no. 1475.
A. LENGTH OF SERVICE
At least one full year (365 days) of employment service is the essential requirement in the establishing eligibility for the severance pay. Lenght of employment service refers to the period of service with allowable breaks defined in the Labor Law. Calculation of length of services plays crucial importance in the entitlement of the severance pay. In accordance with article 55 of the Turkish Labor Law, following periods are regarded within the length of services;
a) Days on which the employee fails to report to work owing to an accident or illness (however, time which exceeds the period foreseen in subsection I (b) of Article 25 shall not be treated as worked)
b) Days on which the female employee is not permitted to work before and after her confinement, in accordance with Article 74. (Accordingly all female employees are entitled to maternity leave from work (8) eight weeks before and (8) eight weeks after the confinement. In the case of multiple pregnancies, additional (2) two weeks added to the entitled (8) eight weeks leave before the confinement.)
c) Days on which the employee is unable to report to work through having been called up for military exercises or for the performance of a statutory obligation, other than compulsory military service, (up to a maximum of 90 days in a year)
d) Fifteen days of any period during which the employee has not worked because of the temporary but interrupted suspension of operations for longer than one week owing to force majeure, on condition that he has subsequently resumed work;
e) Periods reckoned as having been worked, envisaged in Article 66.
f) Weekly rest days and national and public holidays;
g) Half-days of leave granted in addition to Sundays to employees working in radiological clinics, in accordance with the regulation issued under Act No. 3153;
h) Days on which the employee is unable to report for work because of having to attend meetings of mediation and arbitration boards, acting as an employees’ representative on such boards or before a labor court, serving as an employees’ or union representative on boards, committees or meetings organized under the relevant legislation or attending conventions, conferences or committee meetings of international organizations dealing with labor matters;
i) Up to three days’ leave on the occasion of the employee’s marriage and up to two days’ leave on the occasion of his parent’s, spouse’s, sister’s or brother’s or child’s death;
j) Other leave granted by the employer;
k) Annual leave with pay granted to the employee in pursuance of the application this Act.
B. TERMINATION OF EMPLOYMENT
Eligibility for the severance pay mostly depends on the reason for the termination of employment. From the outset, it should be noted that, under current regime, an employee, who ended his/her own employment through resignation , is not entitled to severance pay. On the other hand in the case of termination of employment contract by employer, in comformity with the notice periods  described under article 17 of the Turkish Labor Law, employee is entitled to severance pay.
Moreover, in order to qualify with severance pay, contract of employment should be terminated in conformity with one of the specified reasons under article 14 of Law no. 1475. Employees are entitled to severance pay if their contracts are terminated in pursuant to article 24 and 25 of Turkish Labor Law, except reasons prescribed under sub-clause II of Article artcile 25 of Turkish Labor Law; Termination of employment by employer for immoral, dishonourable or malicious conduct or other similar behaviour. Article 24 and 25 of Turkish Labor Law, list the circumstances which employees and employers may terminate employment contracts immediately without invoking notice periods.
It should also be noted that, type of employment contract, whether it is definite or indefinite, is not a matter in the entitlement of severance pay.
To summarize in the termination of employment contract due to following reasons employers are required to pay severance pay.
CALCULATION OF SEVERANCE PAY
Severance pay is calculated on the basis of last month’s gross salary of the employee and exempted from income tax. Severance pay is only subject to stamp tax.
In the calculation of severance pay, in addition to the monthly gross salary, wage and salary related remunerations including benefits, allowances, premiums are taken into account.
Gross salary, which is used in the calculation of severance pay, can not exceed the ceiling determinied every six months by the Ministry of Labor and Social Security. Between 01 Jan. 2016 and 31 December 2016, Severance Pay Ceiling is 4092,53 TL.
Basic formula for the calculation of severance pay is as below;
Gross Salary / 365 * Lenght of Service (days) – Stamp Tax (0.00759 * Gross Salary)
Please note that, when considering other benefits or premiums in addition to gross salary, summation of daily gross income (gross salary + benefits and etc.) is taken into account for the calculation of severance pay.
[box] TURKISH LABOR LAW (You will be directed to the https://www.ilo.org) Law No. 4857 Date of Enactment: 22.05.2003 Published in the Official Gazette 0n 10 June 2003, No. 25134[/box]
 Law no.4857, Art. 25. - The employer may break the contract, whether for a definite or indefinite period, before its expiry or without having to comply with the prescribed notice periods, in the following cases:
I. For reasons of health
a) If the employee has contracted a disease or suffered an injury owing to his own deliberate act, loose living or drunkenness, and as a result is absent for three successive days or for more than five working days in any month.
b) If the Health Committee has determined that the suffering is incurable and incompatible with the performance of the employee’s duties. In cases of illness or accident which are not attributable to the employee’s fault and which are due to reasons outside those set forth in (a) above and in cases of pregnancy or confinement, the employer is entitled to terminate the contract if recovery from the illness or injury continues for more than six weeks beyond the notice periods set forth in article 17. In cases of pregnancy or confinement, the period mentioned above shall begin at the end of the period stipulated in Article 74. No wages are to be paid for the period during which the employee fails to report to work due to the suspension of his (her) contract.
 Law no.4857, Art. 66 - The following periods shall be considered as the employee's daily working hours:
a) the time required for employees employed in mines, stone quarries or any other underground or underwater work to descend into the pit or workings or to the actual workplace and to return there from to the surface
b) travelling time, if the employee is sent by the employer to a place outside the establishment,
c) the time during which the employee has no work to perform pending the arrival of new work but remains at the employer’s disposal,
d) the time during which the employee who ought to be performing work within the scope of his duties in the establishment is sent on an errand for his employer or is employed by him in his household or office, instead of performing his own duties,
e) the time allowed to a female employee who is a nursing mother to enable her to feed her child,
f) the time necessary for the normal and regular transportation of groups of employees engaged in the construction, maintenance, repair and alteration of railways, roads and bridges to and from a workplace at a distance from their place of residence.
Time for transportation to and from the establishment which is not a requirement of the activity but is provided by the employer solely as a form of amenity shall not be regarded as part of the statutory working time.
 In the case of resignation after fulfilling required conditions for retirement in the social security system except age limit, by providing an official document to the employer from Social Security Institution stating this condition, employee shall be entitled to severance pay.
Notice periods are determined under the article 17 of Labor Law. Minimum notice periods are set on the basis of length of employment. Accordingly;
|Less than (6)six months||(2)two weeks|
|Between (6)six months and (18)eighteen months||(4)four weeks|
|Between (18)eighteen months and (36) thirty-six months||(6)six weeks|
|More than (3) three years||(8)eight weeks|