Severance pay is the compensation paid to the employee in the amount of 30 days' gross salary for each full year of employment in the workplace and arising due to the termination of the employment contract for certain reasons. The legal basis is Article 14 of the (repealed) Labor Law No. 1475; This article was preserved when the Labor Law No. 4857 came into force.
Eligibility Conditions for Severance Pay
For the worker to be entitled to severance pay, three basic conditions must be met:
In what cases is severance pay paid?
- Termination by the employer for just cause (HR article 18)
- Termination by the employee for just cause (HR article 24)
- The separation of the worker due to military service
- The worker leaves for retirement or old-age pension
- The female worker shall voluntarily leave within 1 year from the date of her marriage
- Death of the worker (paid to legal heirs)
- Change or transfer of workplace (service period continues)
How is severance pay calculated?
The formula is simple: 30-day gross dressed wage × number of years fully worked. Periods exceeding one year are added proportionally (day/month).
Adjusted Gross Wage
It's not just the bare fee; regular and continuous additional payments are also included in the severance pay calculation. According to the established jurisprudence of the Supreme Court of Appeals 9th HD, the fee covers the following items:
- Monthly gross bare wage
- Food cost (cash/in kind — daily × month)
- Road/service assistance
- Regular bonuses and bonuses
- Child allowance, family allowance
- Fuel aid, clothing aid
- Lodging allocation (at market value)
Incidential payments (e.g. one-time holiday bonus, overtime pay) are not included in the adjusted wage.
Sample Calculation
For the worker whose monthly gross wage is 30,000 TL, monthly meal + transportation total is 4,500 TL, annual bonus is 30,000 TL (2,500 TL reflected in the monthly salary) and has worked for 5 years and 6 months:
- Adjusted monthly gross = 30,000 + 4,500 + 2,500 = 37,000 TL
- Daily gross = 37,000 / 30 = 1,233.33 TL
- 5 full years × 30 days = 150 days
- 6 months = (180 days / 365) × 30 = ~14.79 days
- Total = 164.79 days × 1.233,33 TL = ~203.296 TL gross
Only stamp duty is deducted from this amount (7.59 per thousand). Severance pay is exempt from income tax (Income Tax Law no. 193 article 25/7).
Severance Pay Ceiling
One year's severance pay cannot exceed one year's amount of civil servant retirement bonus. The ceiling is re-determined every six months and the ceiling on the date of termination is applied. According to the Supreme Court, severance pay above the ceiling can be decided through an individual contract or a collective bargaining agreement; In this case, the ceiling is not applied.
Interest Type and Starting
The interest to be applied to severance pay is the highest interest applied to deposits (1475 art.14/11). The beginning of interest is the termination date; There is no need for a warning or default. The 9th HD Court of Appeals is stable on this issue: the highest banking interest is applied for severance pay, and legal interest is applied for notice pay (e.g. the principle of the 9th HD Court of Appeals K. 2017/6189).
Timeout
A 5-year statute of limitations applies for severance pay (Additional Article 3 of Law No. 4857). The period begins to run from the date of termination. When a compulsory mediation application is made, the statute of limitations stops; It continues to be processed again after the last report date.
Compulsory Mediation Requirement
As of 01.01.2018, it is a requirement to apply to a mediator before filing a lawsuit in the labor court for severance pay claims (Article 3 of Law No. 7036). The lawsuit filed without fulfilling the lawsuit requirement is rejected due to procedural reasons. For detailed information, you can see our article Compulsory Mediation in Labor Law.
Frequently Asked Questions
Can an employee who resigns voluntarily receive severance pay?
As a rule, no. However, retirement, military service, marriage (female worker, within 1 year) and justified reasons in Turkish Labor Law Article 24 are exceptions. In addition, in accordance with Article 32 of the Labor Code, failure to pay the wage on time gives the employee the right to justified termination.
Does a fixed-term contract give rise to severance pay?
If a fixed-term employment contract ends automatically, severance pay will not arise. However, if the employer terminates before the due date without just cause, both the remaining period wage and - if there is a seniority exceeding 1 year - severance pay will arise.
What should I do if the employer does not pay?
First a written warning is sent. If payment is not made, mediation application is mandatory. If an agreement cannot be reached, a lawsuit will be filed in the labor court with the final report. Conducting the process with a lawyer; Establishing the receivable account correctly is critical for correctly determining the interest type and preventing offset errors.