Severance Pay Calculation

The calculation uses the current 2026 cap, Labor Law No. 4857 and the case law of the 9th Civil Chamber of the Court of Cassation (Yargıtay). The calculator itself is available on the Turkish page: Kıdem Tazminatı Hesaplama. Linked pages are in Turkish.

An accurate calculation depends on three things: the type of employment contract, how the contract was terminated and, for retirement cases, the date the employee first registered with the Social Security Institution (SGK). The calculator covers three separate claims together:

• Severance pay (kıdem tazminatı). The cap applies. No income tax is due, only stamp duty.
• Pay in lieu of notice (ihbar tazminatı). The cap does NOT apply. Income tax IS due, at progressive rates.
• Annual leave pay. This equals unused leave days × daily gross wage.

General rule: one year of service plus a legally recognized ground for termination gives rise to severance pay. Exception: resigning without a valid reason does not give rise to severance pay. Limitation period: five years from the date of termination. Tax: severance pay is exempt from income tax and SGK contributions. Only stamp duty of 0.759% (7.59 per mille) is deducted.

Severance pay is one of the oldest and most debated institutions in Turkish labor law. An employee earns it in return for loyalty and work performed for the employer, once the conditions set by law are met. For the employee, it is a source of future financial security. For the employer, it is a significant financial obligation (a liability on the balance sheet).

Court of Cassation Assembly of Civil Chambers (HGK):

Severance pay is a sui generis form of compensation. It is not strictly a wage, and it is not classic compensation either. It is a hybrid that shares features of both. It compensates the employee for wear and tear and rewards their loyalty.

Severance pay is still governed by Art. 14 of the former Labor Law No. 1475, which applies through the reference in Provisional Art. 6 of Labor Law No. 4857. As a result, Turkish legislation still has a dual structure. Legal scholars disagree on how to classify it. One view treats severance pay as a reward for the employee's past service. Another sees it as a "wage supplement" or a form of "unemployment benefit" that compensates for wear and tear.

An employee is entitled to severance pay only if all the conditions listed in Art. 14 of Labor Law No. 1475 are met cumulatively (together).

2.1. Being an Employee Under Labor Law and Having One Year of Service

First, the person must work as an employee covered by Labor Law No. 4857, Maritime Labor Law No. 854 or Press Labor Law No. 5953. Apprentices, interns and people employed under the Turkish Code of Obligations (TBK), such as domestic workers, do not directly benefit from this right. Second, the employee must have worked at least one full year for the same employer, whether at one workplace or at several. The probationary period counts toward this one year of service.

2.2. Termination of the Contract on a Ground Listed in the Law

A) Termination by the Employer, With or Without Cause

If the employer dismisses the employee for any reason other than the breaches of morality and good faith listed in Art. 25/II of Law No. 4857 (such as theft, unexcused absence or disloyalty), the employee is entitled to severance pay.

B) Termination by the Employee for Just Cause (Art. 24)

As a rule, resignation does not give rise to severance pay. However, the employee does receive severance pay if they terminate the contract for reasons such as health grounds, conduct by the employer that breaches morality and good faith, unpaid wages, or failure to apply the agreed working conditions.

C) Termination for Compulsory Military Service

A male employee who leaves his job to perform compulsory military service is entitled to severance pay.

D) Leaving for Retirement

An employee who leaves in order to receive an old-age, retirement or disability pension, or a lump-sum payment, is entitled to severance pay.

E) Marriage of a Female Employee (Marriage Severance)

A female employee who ends her employment contract of her own accord within one full year of her marriage is entitled to severance pay, provided she has at least one year of service.

F) Death of the Employee

If the employee dies, severance pay is paid to their legal heirs.

A very common question in practice is whether employees who meet every retirement condition except age can leave their jobs and still receive severance pay. Following changes to social security legislation, the conditions fall into three periods depending on when the employee first became insured:

3.1. Insured Before 8 September 1999: 15 Years and 3,600 Days

Employees first insured on or before 8 September 1999 can obtain severance pay after completing 15 years of insurance and 3,600 days of paid premiums. To do so, they get a letter from SGK stating that they are eligible for severance pay (the "Kıdem Tazminatı Alabilir" letter) and then resign voluntarily.

This rule is commonly known as "getting severance with 3,600 days."

3.2. Insured Between 8 September 1999 and 30 April 2008: 4,500 Days / 7,000 Days

Employees first insured during this period have two options:

• Completing 25 years of insurance + 4,500 premium days
• Paying premiums for 7,000 working days, regardless of how long they have been insured

An employee in this group can therefore receive severance pay without waiting for retirement age. They qualify either by reaching 7,000 premium days alone or by completing 4,500 days within a 25-year insurance period.

3.3. Insured After 1 May 2008

Law No. 5510 made these conditions stricter. For people insured after this date, the law provides for a gradual transition. In general, they need 25 years of insurance plus a premium-day requirement that starts at 4,600 days and rises to 5,400 days.

Important note:

Employees who meet the non-age retirement conditions may lose their right to severance pay if they resign before obtaining the SGK letter confirming their eligibility. The rule is: get the letter first, then resign.

In Turkish labor law, termination with notice is the norm. A party that terminates an employment contract without just cause must observe the notice periods set by law. The notice period depends on the employee's length of service:

A Key Distinction

Employees who leave for retirement, military service or marriage, or who terminate immediately for just cause, are entitled to severance pay. However, they cannot claim pay in lieu of notice. Pay in lieu of notice only arises when a contract is terminated unlawfully without the required notice.

Severance Pay = All-In Gross Wage × Years Worked

30 days' gross wage for each full year | Remaining periods are prorated

5.1. What Is the All-In Gross Wage?

Severance pay is not calculated on the bare base salary alone. By law, the calculation must also include money and benefits with a monetary value that are provided to the employee. This is called the all-in gross wage (giydirilmiş brüt ücret).

Included

• Monthly gross salary
• Regularly paid bonuses
• Meal allowance (in cash or as Sodexo/Ticket vouchers)
• Transportation allowance or the cost of a company shuttle
• Regular heating allowances
• Private health insurance premiums

Not Included

• Overtime pay
• Annual leave pay
• Irregular or performance-based bonuses
• Pay for the weekly rest day
• One-off payments

5.2. Minimum Wage and Severance Pay

Even if the employee earned the minimum wage for years, severance pay is calculated on the gross minimum wage in force on the date they left. That amount is then applied to every past year of service. In an inflationary environment, this doctrinal rule gives employees very important protection.

However high the employee's gross salary is, there is a maximum limit set by the state every six months. This is the severance pay cap. It cannot exceed the maximum retirement bonus payable to the highest-ranking civil servant for one year of service.

Wage Below the Cap

The calculation is based on the employee's own actual all-in wage.

Wage Above the Cap

The calculation is based on the cap. No legal claim can be made for the amount above it.

6.1. Deductions

Tax Advantage

Severance pay is exempt from income tax and SGK contributions. The only lawful deduction is stamp duty (0.759%, or 7.59 per mille). Pay in lieu of notice, on the other hand, is subject to both income tax and stamp duty.

A common misconception in practice is that no severance pay is owed when a fixed-term contract ends automatically at the end of its term. This view is incomplete. The Court of Cassation applies clear criteria:

Genuine Fixed-Term Contracts

Some contracts are fixed-term by their nature, for example a contract for the completion of a construction project. As a rule, if such a contract ends at the end of its term and is not renewed, no severance pay arises.

Chain Contracts (Private School Teachers)

According to the Court of Cassation, fixed-term contracts that are renewed back to back without an objective reason are treated as indefinite-term contracts from the start. If the employee has completed one year of service, they are entitled to severance pay.

A 10-year limitation period used to apply. Labor Courts Law No. 7036, which entered into force on 25 October 2017, reduced it to five years. For severance claims arising from employment contracts that ended after that date, the limitation period is five years.

5 YEARS Limitation period (Law No. 7036 / after 12 October 2017)

Highest bank interest rate In case of late payment, the highest interest rate applied by banks to deposits accrues.

If an employee who resigned for just cause does not file a lawsuit to claim the amount within five years of the resignation date, the claim becomes time-barred. Default interest runs from the date of termination.

Labor lawsuits used to drag on for years. To prevent this, the law now requires mandatory mediation before a lawsuit can be filed for severance pay or pay in lieu of notice. To collect their compensation, employees must first apply to the mediation offices at the courthouses.

Steps in the Mediation Process

1. After leaving the job, the employee applies to the mediation office.
2. The mediator invites the employer, and a meeting is held.
3. If the parties reach agreement, a record is drawn up that has the effect of a court judgment.
4. If no agreement is reached, the employee can file a lawsuit in the labor court with the final mediation record.

These calculations are highly technical. Corporate companies therefore rely on payroll and personnel systems and aim for zero errors. In a legal dispute, however, it is essential to have the matter handled by a lawyer who practices employment law, based on an accurate calculation.

Severance pay and pay in lieu of notice arise from the same termination. For that reason, they are often calculated as if the same rules applied to both. In fact, they differ from each other in how they are taxed and in whether the cap applies. The four distinctions below cause the most calculation errors.

Severance pay and pay in lieu of notice are at the center of labor law practice. They are complex, because many factors have to be assessed together, including the all-in gross wage, the cap, termination for just cause and the limitation period.

Our advice at İlme Law Office is the same whether you are an employee or an employer: get an opinion from a lawyer before the employment contract is terminated. An incorrect severance calculation or a flawed termination notice can expose companies to serious costs. It can also cost employees the reward for years of work.

"The law protects employees, but procedural mistakes cost them their rights."

— Mesut İlme, attorney at law

The calculator on the Turkish page gives an estimated result for preliminary information only, based on the most current data entered. For a definitive legal assessment and for representation in litigation or mediation, you can contact our office.

Relevant Legislation

• Labor Law No. 1475, Art. 14 (Severance Pay)
• Labor Law No. 4857, Art. 24 (Termination by the Employee for Just Cause)
• Labor Law No. 4857, Art. 25 (Termination by the Employer for Just Cause)
• Labor Courts Law No. 7036 (Limitation Period / Mediation)
• Social Security Law No. 5510 (Start of Insurance and Premium-Day Requirements)

• Severance Pay Guide
• Pay in Lieu of Notice Calculation
• Termination for Just Cause
• Resignation and Compensation
• Labor Law Guide
• Mediation Fee Calculation
• Employment Lawyer in Yalova

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