Definition of Severance Pay
In the simplest and most succinct terms, severance pay, according to the Turkish Labor Law No. 4857, is a compensation that a worker is entitled to, proportionate to the duration of their employment, in cases where they have worked for 1 year or longer at workplaces affiliated with an employer, provided that the legal reasons specified in the laws are present.
The Court of Cassation decisions on severance pay;
"In the case of a worker who has worked for a certain period in one or more workplaces belonging to an employer, losing their job, considering the wear and tear in their job, the difficulties they will face in acquiring a new job, and the contribution they provided to the workplace, the lump sum paid by the employer within the legal framework in return for their past services is referred to as “severance pay”."
has been expressed as such. (Court of Cassation 22nd Civil Chamber, 2015/30425 E., 2018/7733 K. and Decision dated 26.03.2018)
Conditions for Severance Pay
If we are to discuss the conditions for severance pay;
Condition of Being a Worker According to Labor Law No. 4857:
The worker must be a worker subject to the Labor Law. The employment contract can be verbal or written. Some works mentioned in the 4th article of the Labor Law are not within the scope of the Labor Law, thus individuals involved in these works (athletes, apprentices, domestic workers, etc.) cannot qualify for severance pay.
At Least 1 Year of Work Requirement:
The duration of the worker's employment must reach at least 1 year. If work is performed at different workplaces affiliated with the same employer, the durations are aggregated to determine whether the severance pay is earned or not. Also, in the case of the transfer or conveyance of workplaces, or in any way, the transition from one employer to another, or relocation to another place, the worker's seniority is calculated based on the total duration of service at the workplace or workplaces.
Justifiable Termination Requirement:
The employment contract must be terminated by the worker for justifiable reasons as specified in article 24 of the Labor Law, or by the employer for reasons other than those specified in article 25/2 of the Labor Law.
In the presence of health reasons specified in the 24th article of the Labor Law (for example, if the worker's health is jeopardized due to the job) or compelling reasons, the worker qualifies for severance pay. Similarly, in this article, in the presence of breaches of moral and good faith principles and similar cases, the worker can terminate the contract and receive severance pay. For instance, if the contract is terminated by the worker due to insults or intimidation towards the worker or their family by the employer, the worker will qualify for severance pay. The most common reason for termination by the worker in practice is the non-payment of the worker's wage in accordance with the law. Here, the wage does not only refer to the net wage of the worker. Situations like non-payment of Social Security premiums, overtime, or customary travel and meal allowances are also considered as non-payment of wage.
According to Article 25 of the Labor Law, due to health reasons, compelling reasons, or in cases where the worker's absence due to detention or arrest exceeds a certain period, the employer can immediately terminate the employment contract for justifiable reasons, and in such cases, the worker will be entitled to severance pay. The situation where the worker cannot qualify for severance pay is when the contract is terminated due to breaches of moral and good faith principles and similar cases as specified in Article 25/2 of the Labor Law. In these cases, with the termination by the employer, the worker will not be able to earn severance pay. For example, the worker will not be entitled to severance pay in the presence of the situations stipulated in the Law, such as the worker's continuous absenteeism for certain periods, insulting the employer, committing theft, or coming to the workplace intoxicated.
According to Article 26 of the Labor Law, as we just mentioned above, the termination period recognized for the worker or the employer, based on the breaches of moral and good faith principles shown in Articles 24 and 25, is 6 workdays from the date of learning and in any case, one year from the act. However, the one-year period will not be applied if the worker gains material benefit from the incident. In terminations made after these dates, the parties will not be able to rely on justifiable reasons.
On the other hand, regardless of the duration of employment, a resigning worker will not be entitled to severance pay. However, in cases where resignation is made without stating any reason and a lawsuit is filed shortly thereafter, the worker may be entitled to severance pay if there are justifiable reasons present in the petition of the lawsuit. Indeed, according to the Court of Cassation,
"If no specific reason is based upon in the resignation letter, it should be considered possible to assert that the employment contract was terminated for justifiable reasons within a reasonable period."
(Court of Cassation 9th Civil Chamber, 2016/28110 E., 2020/12659 K. and Decision dated 20.10.2020)
Additionally, it should be noted that, in the sole effective article of the Labor Law No. 1475, which is Article 14, in cases such as the death of the worker, male worker going for military service, female worker terminating the employment contract within 1 year of marriage, retirement, or disability, the worker will be entitled to severance pay.
How is Severance Pay Calculated?
The fundamental two criteria in calculating severance pay are the worker's wage and duration of employment.
The gross wage is obtained by adding deductions such as insurance premiums, taxes, union dues to the net wage actually received by the worker. The embellished wage is the wage obtained by including additional social benefits provided by the employer to the worker, besides the gross wage. These benefits include meal, transportation fare, bonus, holiday allowance, New Year's basket, fuel assistance, child support, health insurance, and various other rights. The wage that is the basis in the worker's severance pay calculation is this embellished wage.
The calculation of the worker's employment duration should be done in years, months, and days. For each full year worked, the worker is paid severance pay amounting to 30 days of gross wage. The exceeding periods beyond a year are also proportionally included in the calculation.
Severance Pay Calculation Example: | |
|---|---|
The Duration of the Worker's Employment | 01.07.2017 - 16.09.2023) which is 6 years, 2 months, and 15 days |
Last Salary | Minimum Wage |
Net Minimum Wage | 11.402,00 TL |
Gross Minimum Wage | 13.414,00 TL |
If there are additional social rights such as transportation, meal, and bonus, the embellished wage is determined by adding these to the gross minimum wage. For example, let's assume transportation (Istanbul Card Full Akbil: 1,177.00 TL), meal (3,000.00 TL), with no other additional social rights.
Transportation (Istanbul Card Full Akbil: 1,177.00 TL) | 1.177,00 TL |
Meal | 3.000,00 TL |
Vested | 17.591,00 TL |
For 6 years | 17.591,00 x 6 = 105.546,00 TL |
For 2 Months | 17.591,00 x (2/12) = 2.931,83 TL |
For 15 days | 17.591,00 x (1/12) x (15/30) = 732,95 TL |
Total Severance Pay | 109.210,78 TL |
The calculated severance pay should be deducted at a rate of 0.759% for stamp tax.
Stamp Tax | 109.210,78*(7,59/1000)=828,90 TL |
Total Severance Pay | 108.381,88 TL |
It should also be noted here that from the default date, the highest interest rate applied by banks to a one-year deposit is applied to the severance pay. Therefore, in lawsuits related to severance pay, interest amounts close to or exceeding the amount of severance pay can be seen.
What is the Ceiling for Severance Pay?
The ceiling for severance pay is the upper limit that can be considered regarding the monthly wage while calculating the payment to be made to the worker who has earned the severance pay. This upper limit is the maximum retirement bonus amount a senior civil servant will receive for one service year. For the year 2023, according to the Fiscal and Social Rights Circulars by the Ministry of Treasury and Finance, the ceiling amount for the severance pay to be paid to workers is 19,982.83 TL as of 01.01.2023; 23,489.83 TL as of 01.07.2023.
It is essential to note that the date to be considered regarding the severance pay ceiling is the termination date. As the severance pay ceiling changes every year, one should look at the wage at the termination date and the ceiling at the termination date. In other words, regardless of what the worker's monthly wage is, the highest amount that can be paid to the worker is the severance pay ceiling.
Statute of Limitations Period for Severance Pay
The statute of limitations is a legal institution that allows the debtor to avoid paying the debt due to the non-use of the claim right within the clearly defined periods in the law. In other words, while the creditor side could attain its right through a lawsuit it will file, it may be deprived of this right with the statute of limitations defense put forward by the debtor side. According to the Additional Article 3/1-a of the Labor Law No. 4857, the statute of limitations period for severance pay is 5 years. That is, the worker needs to file a lawsuit within 5 years from the date of termination.
Which Court is Competent and Authorized in Severance Pay Lawsuit?
The competent court in a severance pay lawsuit is the Labor Court. In places where there is no Labor Court, the Civil Court of First Instance will handle the case as a Labor Court.
The authorized court in a severance pay lawsuit is regulated in Article 6 of the Law on Labor Courts. According to this, in lawsuits to be filed in labor courts, the authorized court is the court of the defendant's real or legal person's place of residence at the date the lawsuit is filed, and the court of the place where the work or transaction is performed. Additionally, if there are multiple defendants, the court of one of their places of residence is also authorized.
Mandatory Mediation and Lawsuit Process in Severance Pay
In case the severance pay is not paid to the worker who has earned it, the worker must go through the mandatory mediation process before filing a lawsuit. According to Article 3 of the Labor Courts Law No. 7036, it is a lawsuit requirement to have applied to a mediator in cases filed with claims based on the Law, individual or collective labor contracts, for worker or employer receivables and compensation, and reinstatement to work. Also, in the same article, it has been stated that the plaintiff must attach the original final record or an approved copy of it by the mediator, indicating that no agreement could be reached at the end of the mediation activity to the petition of the lawsuit; otherwise, a definite period of 1 week will be given to the plaintiff to complete the deficiency, and eventually, in case the mediation record is not submitted, the lawsuit will be rejected procedurally.
A lawsuit with labor claim requests should be filed after the mandatory mediation process. After procedural transactions are completed in the lawsuit, the investigation process is carried out, witnesses are heard if any, the file goes to the expert, and after the expert report is finalized, the lawsuit is amended by also paying its fee if necessary. Later, a decision is given by the court, and if applied, the appellate stages are completed, and the court's decision becomes final.
From the above, the process of termination of the employment contract, calculation of the severance pay, mediation meetings, correctly determining the competent and authorized court and filing a lawsuit, carrying out many transactions in the lawsuit (party formation, submission of evidence, hearings, expert report, amendment, decision stage, appellate stage) and the execution of the court decision can be challenging to be carried out correctly and in compliance with the law by the worker and can cause serious loss of rights and financial damages due to irreversible mistakes. Therefore, professional support should be obtained in labor lawsuits, and an expert attorney should be consulted.
Frequently Asked 10 Questions About Severance Pay
1) Can a worker who has worked for many years earn severance pay if he/she resigns?
A resigning worker cannot earn severance pay. Having worked for a long period like 10-15 years does not change this result.
2) Can a worker who retires due to disability earn severance pay?
According to the 14th article of the Labor Law No. 1475, leaving the job for receiving disability pension is among the situations where severance pay is earned.
3) Can a female worker who got married 7 months ago earn severance pay?
According to the 14th article of the Labor Law No. 1475, it is clearly stated that a female worker will earn severance pay if she terminates the employment contract of her own accord within 1 year from the date of marriage.
4) Who is paid severance pay in case of the death of the worker?
According to the 14th paragraph of the 14th article of the Labor Law No. 1475, in case of the death of the worker, severance pay is paid to the legal heirs. Payments to heirs should be made proportionate to the inheritance share.
5) Can a worker earn severance pay in case of the transfer of the workplace?
Cannot earn. The legal status of the employees does not change with the transfer of the workplace. Therefore, the transfer of the workplace does not constitute a valid reason for termination for the worker.
6) What payments are included in the gross wage when calculating severance pay?
In the calculation of severance pay, additional social rights such as road fee, meal provided at the workplace, fuel aid, clothing aid, Ramadan hamper, New Year's basket, child aid, food aid, tickets are taken into consideration.
7) Can a detained worker earn severance pay if the contract is terminated by the employer?
If the worker is detained and the absenteeism exceeds a certain period specified in the Law, the right of immediate termination arises on the part of the employer. However, in this case, the worker will earn severance pay.
8) How is severance pay calculated?
The calculation of severance pay is based on two main issues. First, the wage of the worker is determined. Additional social rights are added to the gross wage of the worker to find the dressed wage. Secondly, the working period of the worker is calculated as year, month, day. A 30-day wage is given to the worker for each year. Surplus periods from one year are included in the calculation by proportioning.
9) Can a worker terminate the contract and receive severance pay if the working conditions change (for example, the workplace is moved to another district)?
The job to be done, the wage, working conditions, and such matters are regulated by the employment contract. In case of changes made in the employment contract later on, the employer must notify the worker in writing and obtain the worker's approval. If these changes, which are not accepted by the worker, can be considered as significant changes, then the worker can terminate the contract and receive severance pay.
10) Can previous periods be combined with the last period when calculating severance pay for a worker with intermittent (intermittent) work?
In intermittent works, for the previous periods to be combined with the last period, the worker's contract must have ended in a way that earns severance pay at the end of each period. Moreover, according to the Supreme Court, the period between two working periods should not exceed the statute of limitations (5 years).
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