Severance and notice pay must comply with legal requirements on eligibility, calculation, and taxation, using total gross earnings with all benefits such as meal, transportation, and fuel allowances and applying rules based on length of service. Compliance depends on accurate records, current legal limits, and timely, documented payments to reduce legal and financial risks.
Introduction – Why Compliance Comes First
When it comes to severance and notice pay, the real cost of a mistake is not just financial. It also creates legal exposure and reputational damage. In Türkiye, compliance with labor law is not merely a payroll task. It is a critical part of risk management and organizational fairness. Miscalculating severance or notice pay, even unintentionally, can lead to labor court claims, administrative fines, and long-term harm to an employer's brand.
This guide translates Turkish labor law obligations into clear, practical steps for HR professionals. It will help you embed compliance into HR processes, ensuring both legal accuracy and employee trust.
Understanding the Basics
- Severance Pay
Severance pay is a one-time payment owed to employees whose employment ends under certain legal conditions. Eligibility generally requires at least one year of continuous service. It also requires termination by the employer, except for valid "just cause" under Article 25/II of the Labor Law.
Employees can also receive severance pay if they resign for legally recognized reasons under Article 24, such as resignation due to health and safety concerns making it harmful or dangerous to continue working. Also, pursuant to Article 120 of Labor Law No. 4857, Article 14 of the still-applicable Labor Law No. 1475 ("Law No. 1475") lists the specific circumstances in which severance pay is owed to employees. In this context, these circumstances include military service as well as retirement or marriage for female employees within one year of marriage, as provided under Article 14 of Law No. 1475.
Termination due to the employee's death also triggers severance pay.
- Notice Pay
Notice pay compensates employees or employers when the legally required notice period is not respected.
The length of the notice period depends on the employee's length of service:
- 0–6 months: 2 weeks
- 6–18 months: 4 weeks
- 18–36 months: 6 weeks
- More than 36 months: 8 weeks
If the employer dismisses an employee without letting them work during the notice period, they must pay the equivalent gross salary plus all other economic benefits for that period.
If an employee leaves without notice, they may owe notice pay to the employer.
What to Include in Calculations
For both severance and notice pay, calculations must be based on gross earnings, not just the base salary.
Items to include are:
- Base gross salary
- Meal, transportation, and fuel allowances
- Company car usage (monetary equivalent)
- Mobile phone benefits
- Private health or life insurance premiums
- Pro-rated bonuses, commissions, and stock options
Together, these components form the "total remuneration" under Turkish labor law.
Severance Pay Maximum Limit
Severance pay is calculated based on 30 days' gross pay for each year of service. However, this amount is limited to the legal maximum determined in accordance with the maximum annual retirement bonus payable to the highest-ranking civil servant under the still-effective Article 14 of Law No. 1475.
From July 1 to December 31, 2025, the maximum limit is TRY 53,919.68 per year of service. Even if an employee's monthly earnings are higher, this maximum must be applied for each year of service.
Tax Treatment
Severance pay is exempt from income tax and social security premiums but is subject to stamp duty at 0.759%. Notice pay is subject to income tax and stamp duty but is not subject to social security premiums. This is confirmed under Article 80 of Law No. 5510 on Social Insurance and General Health Insurance and Supreme Court precedents.
a) Severance Pay Calculation Example:
- Service: 5 years 6 months (5.5 years)
- Monthly gross earnings: TRY 150,000
- Maximum limit: TRY 53,919.68/year
- Gross severance = 53,919.68 × 5.5 = TRY 296,558.24
- Stamp duty (0.759%) = TRY 2,251.05
- Net severance = TRY 294,307.19
b) Notice Pay Calculation Example:
- Service: 20 months (6-week notice period)
- Monthly gross earnings: TRY 150,000
- Weekly gross earnings = 150,000 ÷ 4.348 ≈ TRY 34,500
- Notice pay = 34,500 × 6 = TRY 207,000 (gross)
Compliance Risks and Prevention
Common mistakes include using outdated severance maximum limits, omitting certain benefits from the calculation, misapplying notice periods, and confusing tax treatment between severance and notice pay.
To prevent these risks;
- Update payroll systems with the current maximum limits twice a year (January 1 and July 1).
- Keep complete records of all employee benefits in monetary terms.
- Train HR staff annually on labor law changes.
- Involve legal counsel for high-value or sensitive terminations.
HR Compliance Checklist
Before finalizing severance and notice payments, confirm that:
- The employee meets eligibility criteria (for severance).
- The correct notice period was applied or compensated.
- All benefits are included in gross earnings.
- The maximum limit was applied correctly (for severance).
- Taxes and stamp duty are calculated accurately.
- Payment is processed on termination.
- Documentation is archived for legal audit.
Conclusion
Accurate severance and notice pay calculations are not just a payroll function. They are a core element of labor law compliance. By following these guidelines, HR professionals can protect their organizations from legal disputes, maintain employee trust, and safeguard their company's reputation. In Türkiye's evolving employment landscape, compliance is not optional. It is the best defense.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
