Turkey Payroll and Benefits Guide

What global businesses need to know about payroll in Turkey

Turkey stands at the gateway of Europe and Asia, and brings with it strong links with those two very different parts of the world. The Turkish economy is highly varied: manufacturing makes up more than 20% of its GDP, while services such as tourism are helping support its burgeoning service sector.

Turkey has a large and relatively young population: around half of its 85 million people are under the age of 30. Increasingly high levels of education mean that foreign businesses can access a workforce that is strong in both quality and quantity. However, the other side of the coin is Turkey’s economic turbulence: inflation was running at around 65% as of the start of 2024, and is having major impacts on wages, living standards, and the wider Turkish economy.

It’s for that reason that understanding the payroll and employment regulations in Turkey is absolutely critical. This guide gives you a solid starting point.

Getting Started 

The key online platform to use when setting up a business in Turkey is MERSIS, which is the central registry number system. It’s here where articles of association and memorandum (once notarized) should be submitted, and also where a tax number can be obtained. Before doing so, a name for the business must be chosen and registered, and a corporate bank account opened. 

The minimum share capital requirements were substantially increased at the start of 2024. They now stand at 50,000 Turkish lira for a limited liability company (approximately £1300; $1650; €1500) and TRY 250,000 for a joint-stock company (approx. £6500; $8200; €7600). However, the continual weakening of the Turkish lira in the foreign exchange markets means that, compared to a few years ago, these levels have barely changed in real terms for foreign enterprises.

At least 25% of the share capital must be placed in the state-owned bank, Halk Bankasi, and at least another 25% with another Turkish bank. After this, tax and social security registration can be completed.

The whole process, including the opening of a bank account, is relatively straightforward and inexpensive. From start to finish, it should take 2-3 weeks. 

Employment Considerations

Contracts are required in writing for employment that will last for one year or more. Contracts need to state the terms of employment, including the duration of employee services. Foreign workers must present a work permit obtained by the local authorities, unless the company has arranged for an exception.

Collective bargaining is allowed in Turkey, but stringent requirements mean it’s unlikely employers will deal with an official union. Employers should instead take the initiative to ensure that their employees’ needs are satisfied at the time of hiring.

Turkey’s standard working week is 45 hours, which can be spread over five or six days, although there is a limit of 11 hours in any one day. Anything over and above these parameters counts as overtime, which is limited to 270 hours per year. Overtime is paid at 150% of regular salary on a weekday, or 200% at the weekend, although time off in lieu can be given instead.

Notice periods are two weeks for employees who have passed probation with less than six months’ service, increasing to four weeks with six months’ service, six weeks after 18 months’ service and eight weeks after three years’ service. Probation periods can vary: although the general standard is two months, collective bargaining can extend this to as much as four months. There is no notice period applicable during probation.

Compensation, Bonuses and Severance

Turkey’s minimum wage has risen dramatically in recent years. As of January 2024, the gross minimum wage is TRY 20002.50 per month (approx. £520; $650; €610), which is four times the rate from the beginning of 2022. The minimum wage is reviewed every six months, and new rates are usually implemented on January 1 and July 1 each year. The combination of high inflation, fluctuating exchange rates, and cost-of-living concerns mean that the minimum wage demands on foreign businesses are changing rapidly, and so developments in this area should be monitored extremely closely.

Pay cycles are determined by employers, and pay slips can be electronic statements. Employees are entitled to rest breaks, the length of which is determined by the number of working hours. 

There are no legal restrictions around the awarding of bonuses in Turkey. Severance pay is one month per year of employment, although a maximum cap on the monthly salary calculation applies. As with the minimum wage, this cap frequently changes, as it’s based on the retirement bonus value of Turkey’s best-paid civil servant. Any partial months and years worked are paid at the same ‘one-month-per-year’ rate on a pro-rata basis. 

Tax and Social Security

Income tax in Turkey is levied on a progressive scale across five bands: 15%, 20%, 27%, 35% and 40%. Due to the high rates of inflation in the country, the thresholds between each band have changed substantially over the last few years, and are therefore liable to change again regularly in the future. The lowest rate of 15% currently applies to the first TRY 70,000 earned each year (approx. £1800; $2300; €2100), and the highest rate of 40% applies to all earnings over TRY 1.9 million (approx. £49,500; $62,000; €58,000).

Corporation tax in Turkey is levied at 25%, or 30% for businesses in the financial sector. VAT is 18%, and is reduced to special rates of 1% or 8% for certain products. 

Social security contributions are made in four different areas:

  • Short-Term Insurance Premium: 2% employer
  • Pension & Disability fund: 11% employer, 9% employee
  • Health insurance: 7.5% employer, 5% employee
  • Unemployment insurance: 2% employer, 1% employee

Taxes are always withheld from paychecks according to payroll regulations. Non-residents are taxed on income made only in Turkey, while residents are taxed on their total income earned worldwide.

Holidays and Leave

Once employees have completed a year of service, they’re entitled to 14 days of paid leave each year, increasing to 20 days after five years of service and 26 days after 15 years. However, employees under 18 or over 50 are entitled to 20 days after one year. Employees are also entitled to paid time off on Turkey’s 14.5 days of public holidays each year (the half-day is part of an extended break at the end of Ramadan).

Fully paid maternity leave entitlement is 16 weeks: eight before the birth and eight after it. In the case of multiple births, or when complications arise, an extra two weeks are granted. Paternity leave entitlement is one week. Both of these are at full pay, covered by social security. 

Mothers also have the right to apply for part-time work for a set period after the birth, depending on the number of children they have: 60 days for the first child, 120 days once the second is born, and 180 days after the birth of the third and any subsequent children.

Sick pay for medically certified absences is covered by social security after the first two days, although employers are required to pay the employee and then claim the money back from the authorities. If an employee has been absent through illness or injury for the length of their notice period plus six weeks, an employer has the right to terminate their contract.

In Summary

Turkey is a great place to do business – as long as you go into the venture with your eyes open. With the Turkish lira continuing to weaken, there is great value to be had for foreign enterprises wanting to get more bang for their buck. However, high inflation and regular instability mean employment and payroll regulations are subject to substantial change, and you’ll have plenty of work to do to stay compliant. Working with a global payroll partner can relieve this burden from you, by giving you access to the latest Turkey-specific expertise.

This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.

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