Labor and Social Security Law (Week 11 – Severance Pay)

1.

Labor and Social Security Law
(Week 11 – Severance Pay)
LABOR AND SOCIAL SECURİTY LAW
PROFESSOR DOCTOR SEÇKİN NAZLI

2.

Severance Pay
Severance pay means a sum of money payable to the worker at the time when he quits the
workplace. It is of utmost importance for the worker following termination of employment.
This way, a worker leaving his job shall have the chance to support himself and make his
living by spending the severance pay until he nds a new job. For this reason, severance pay
emerged at a time when pension and unemployment insurance were not in place in Turkey,
and it particularly replaced the monetary bene ts from the unemployment insurance.
Accordingly, the severance pay has found its way to Turkish labour law by virtue of the
former LA no 3008 which was enacted in 1936. Severance pay is unique and indigenous to
the Turkish legal system.

3.

Conditions
Not all of the employees covered by an employment contract but those who are subject
to various labour acts (LA, Maritime LA and Press LA) may demand severance pay.
Accordingly, workers subject to the LA as well as seamen and journalists have the right
to demand severance pay. Severance pay is not payable or applicable for employment
contracts subject to the provisions of the TCO. On the other hand, the right to claim
severance pay is a right granted to workers only, and civil servants or contracted
personnel at the public sector are not entitled to demand severance pay. Besides, in
order to demand severance pay, the employment contract needs to be terminated as
de ned in the applicable law. Accordingly, not every termination of the employment
contract shall necessarily entitle a worker to severance pay, which should not be
payable in every case.

4.

Conditions
Termination of the Employment Contract with
Just Cause
Circumstances that grant to the worker to terminate the employment contract with
just cause are listed in Art. 24 LA. Accordingly, in case the worker terminates his
employment contract in reliance on a cause listed in Art. 24 LA, he shall be entitled to
severance pay. Where the employer terminates the employment contract due to
health-related reasons (Art. 25 para. 1 LA) and force majeure events (Art. 25 para. 3/III
LA), the worker may claim a severance pay from the employer. On the other hand, in
case the employment contract is terminated by the employer due to circumstances
that do not comply with rules of ethics and good faith and similar ones (Art. 25 para. 2
LA), then the employer should not necessarily pay severance pay (Art. 14 para. 1/1 LA
no 1475).

5.

Conditions
Termination notice for the Employment Contract
Not in every circumstance that the worker duly gives a termination notice the worker shall be entitled
to the severance pay. As a rule, severance pay is not paid in case that the worker himself gives notice of
termination to the employer, in other terms if the worker resigns.
Accordingly, in order to be entitled to severance pay, rst the worker shall have terminated his
employment contract due to ‘regular military service’.
Another circumstance that the worker who voluntarily quits his work is the termination of the
employment contract ‘in order to collect an old-age, pension or disability monthly wage or a lump sum
payment from funds or institutions created under the applicable law’. In addition, in order not to cause
employees to be aggrieved when the retirement age was raised in Turkey in 1999, those who meet or
ful l other retirement conditions other than the age (15 year registration with Social Security Agency
plus the payment of a sum equal to 3.600 day premium) may be entitled to the severance pay (Art. 14
para. 1/5 LA no 1475).

6.

Conditions
Termination notice for the Employment Contract
Finally, a female worker who shall voluntarily quit her job shall be entitled to severance
pay in case ‘she voluntarily terminates her employment contract within one year from
her marriage”. This way, according to the law, a newly-wed female worker will be
entitled to severance pay in case she applies to her employer within one year forfeiture
term if her husband does not wish her to work.
Legal regulation in this respect (Art. 14 para. 1 LA no 1475) was adjudged by the Court
of Constitution to be in harmony with the Constitution. However, while the said
regulation brings in a positive discrimination that works in favour of the women, it is
obvious that it is also among such encouraging incentive to take women away from
working life. The new Civile Code which was passed in 2002, has omitted the former
article that would entitled the husband to forbid his spouse to work.

7.

Conditions
Termination notice for the Employment Contract
In case a female worker gets married and leaves the work within one year, this will
suf ce for her to get entitled to the severance pay. Accordingly, moreover, an
application to demand severance pay should not necessarily made within one year
because the right to demand it is subject to a five-year time bar.
In practice, the Court of Cassation adopts that in case a female worker gets divorced
from her husband only to re-marry him after a very short while just to demand a
severance pay from the employer, this is the abuse of right, and that the employer may
claim back the paid severance pay. On the other hand, the Court of Cassation does not
call it an abuse of right in case a married female worker nds and works at a new job
after she collects her severance pay. Because it is unconstitutional to restrict the
woman worker’s right to work in this manner. The issue is interpreted in favor of
women workers in doctrine and practice.

8.

Conditions
Termination notice for the Employment Contract
Where it is the employer that gives the termination notice, it is not clear in the
applicable law if the worker shall be entitled to demand his severance pay. However,
the fact that even in this case, the worker may demand his severance pay can be
inferred from the wording in the law (Art. 14 LA no 1475). Accordingly, irrespective of
whether it is duly given, in all circumstances the employer gives a termination notice
for the employment contract or where the right to give termination notice is abuser,
the worker may demand severance pay. In case the employment contract is terminated
upon the worker’s death, a severance pay may be asked. However, in this case, those
who shall be entitled to demand severance pay are only legal heirs of the deceased (Art.
14 para. 15 LA no 1475).

9.

Conditions
Termination notice for the Employment Contract
Where all conditions to collect severance pay are met but the
worker dies before he is paid, the severance pay should be
nevertheless paid to the legal heirs because this is a natural
outcome of the rules applicable in inheritance law. Furthermore,
also in case of the worker’s death due to an occurance arising
from his fault or negligence it is possible to admit that the
employment contract ended because of his death, thus entitling
him to a severance pay.

10.

Conditions
Minimum OneYear Work Requirement
The worker may be entitled to severance pay after he works minimum one year at the same
establishment or other units of the same employer. It will suf ce for the worker to have worked one full
year in order to demand severance pay and he should not necessarily go beyond this term.
The beginning of this minimum one-year waiting term is not the execution date of the employment
contract but the date on which the worker actually starts to work. In case a probation period is agreed
in the employment contract, the beginning of such probation period shall be accepted as the
commencement of work.
For the purpose of calculating the waiting period, weekends, of cial holidays, national public holidays
as well as annual paid-up leaves should also be added because to calculate the waiting period, it would
be better if Art. 55 LA concerning annual leave is applied.

11.

Conditions
Minimum OneYear Work Requirement
A worker who works only two or three days a week may not claim a severance pay that would have
been paid to him if he did work on all workdays of the week. In this sense, the Court of Cassation has
also adopted the notion that initially, two full days a week or four half-days a week that the worker
works should be aggregated only to be divided by 365 so that they shall be converted to a year, which
will be used to calculate the waiting period. Later, the Court of Cassation acknowledged that for
calculating the severance pay of a worker who works three hour in every ve days a week, the entire
time between his recruitment and quit dates should be taken into account.
On the other hand, in case of a strike or lockout, the term spent by a worker whose employment
contract is suspended during the event shall not be taken into account to calculate the severance pay;
any provision that would be breach of this rule may not be agreed in collective labour agreements or
employment contracts (Art. 42 para. 5 UCLAA).

12.

Conditions
Minimum OneYear Work Requirement
A worker’s length of service shall be calculated by taking into account his worktime at the
same establishment or multiple sites of the same employer without regard to if the
employment contract remain in force or is executed again at intervals (Art. 14 para. 2 LA no
1475). Accordingly, a worker shall have work a year in total in one or multiple work sites of
the same employer so that he shall be entitled to severance pay. However, it is not
necessary for him to have worked in the same business line in those workplaces or to have
done the same job there. On the other hand, it is mandatory that the establishment and the
worker should be subject to the LA. Where the worker works at the same or different
workplaces of the same employer at different times, if the worker’s prior employment
contract was terminated for a cause not necessarily requiring the payment of the severance
pay, the time period that the worker was employed under that contract shall not be taken
into account to calculate the length of service.

13.

Conditions
Minimum OneYear Work Requirement
Where severance pay is paid to a worker upon the termination of his previous employment
contract and if his subsequent employment contract is terminated in a manner that would
make him eligible to severance pay again, the term of the rst contract for which severance
pay is paid shall not be taken into account to calculate the length of service, and severance
pay shall be paid only for the work time under the second contract. In this sense, in a Court
of Cassation decree, it is adopted that if a worker who terminates his employment contract
due to regular active military service and collects his severance pay is re-employed at the
same job when he is back from the service, this should be considered a new employment
contract, and to calculate the severance pay upon the termination of that second contract,
his such time should be accepted.
On the other hand, in case a worker becomes retired but continues to work in the same
establishment, the post-retirement work is considered by the Court of Cassation a new and
separate employment contract.

14.

Conditions
Minimum OneYear Work Requirement
A worker may work at different workplaces, which may include both private employers and
public employers. Where public agencies where the employer works reports to the same or
different ministries, this shall not make any difference at all. The term service spent by the
worker in the same or different public agencies shall be, as a rule, combined, and the length
of service shall be calculated on that basis.
Whether the worker spends his worktime in a previous public agency as a civil servant or
worker shall not make any difference. Accordingly, the service time spent as a civil servant
shall be taken into account to calculate the severance pay. In practice, the Court of Cassation
initially did not wish to include the service term spent as a civil servant in the calculation of
length of service, but it later changed its such opinion, and decided that a worker’s
worktime spent as a civil servant should be counted towards the length of service in the
combined form.

15.

Conditions
Minimum OneYear Work Requirement
A worker who works at seasonal works shall work only a few months a year. For this reason,
to calculate the severance pay of a worker who works in seasonal jobs, in case the worker
works a season (for instance three months), each season shall not be taken into account as a
year. In this respect, time periods that should be taken into account for calculation is the
number of days on which the worker works or is deemed to have worked.
In practice, the Court of Cassation takes into consideration those days on which the worker
works or is deemed to have worked in a season to calculate the length of the service of the
seasonal worker.
Where the business is acquired by another employer or is moved to another place due to
transfer or conveyance or any other reason, the worker’s severance pay should be calculated
on the basis of the aggregate of his total employment at the workplace(s) (Art. 14 para. 2 LA
no 1475).

16.

Conditions
Minimum OneYear Work Requirement
Upon the transfer of the workplace, whether the business line conducted
there is change does not matter with respect to the severance pay.
Similarly, in case the business is converted to a limited partnership or an
unlimited liability company while it was previously owned by a natural or
legal person (Art. 203 para. 2 TCO) or is merged with another business
(Art. 203 para. 1 TCO), severance pay shall be calculated in the same way.

17.

Amount
Minimum Amount
The worker may demand a severance pay equal to 30-day
wage for each full year that he spends under the
employment contract from his rst recruitment. For any
remainder that goes beyond one full year, the payment
shall be made pro rata (Art. 14 para. 1 LA no 1475).
Here the 30-day term may be changed in favour of the
worker by virtue of employment contract or collective
labour agreement (Art. 14 para. 12 LA no 1475).

18.

Amount
Maximum Amount
Annual amount of the severance pay agreed by way of collective labour agreement or
individual employment contract may not exceed the maximum pension bonus payable to a
civil servant at the highest rank subject to the State Civil Servants Act for one year of length
of service (Art. 14 para. 13 LA no 1475).
This regulation that limits the amount of severance pay is also applicable to all payments
which may be named after different things but which also operate as a severance pay.
Accordingly, compensations paid under different names in practice, including service pay or
loyalty pay or service bonus or attrition bonus shall also operate as severance pay in practice
and that’s the reason why they are subject to such limitation

19.

Calculation of Severance Pay
Wage To Be Taken as Basis
Wage to be taken as basis to calculate the severance pay
is the wage (remuneration) in the broadest sense of the
word. Accordingly, the said wage shall include, rst of all,
such cash sums paid to the worker in money. Afterwards,
such additional moneys or bene ts that may be quanti ed
as money which should be provided to the worker under
the law or the contract shall be taken into account (Art. 14
para. 11 LA no 1475).

20.

Calculation of Severance Pay
Calculating the Severance Pay
While the severance pay is calculated the worker’s nal wage shall be
taken into account (Art. 14 para. 9 LA no 1475). If the last wage payable
to the worker is less than the minimum wage, then the severance pay
shall be calculated on the basis of the minimum wage.
On the other hand, the wage serving as basis for the severance pay is the
gross amount of the last wage paid to the worker. In this respect, the
Court of Cassation does not take into account the employer’s share in
calculating the social insurance premium to calculate the severance pay

21.

Calculation of Severance Pay
Calculating the Severance Pay
In order to calculate the severance pay, certain additional sums next to the primary (basic)
wage shall be taken into account. However, such sums should meet certain criteria.
Accordingly, wage supplements should be, rst of all, expressed in monetary terms or shall
be quanti able by money. In light of this fact, an obligation that cannot be expressed in
monetary term shall not be taken into account for the purposes of severance pay. Here, the
wage supplements should be payable under the employment contract or the applicable law.
On the other hand, such supplements should be paid on an ongoing basis. For this reason,
only such wage supplements which are recurring ones and are not temporary shall be taken
into account to calculate the severance pay. In addition, the calculation shall exclude the
monetary value of any protective equipment such as work clothes, shoes, shirts, gloves and
goggles that should be provided to the worker pursuant to the occupational health and
safety

22.

Failure to Pay or a Timely Basis and Interest
Late Payment Interest
At the end of a lawsuit to be instituted because severance pay is not paid on a timely basis
or at all, the judge should order that such interest at the highest rate applicable to deposit
accounts should be charged for the overdue period (Art. 14 para. 11 LA no 1475).
The underlying reason is that because the statutory interest rate is so low, workers may
have challenging times due to time-consuming lawsuits and may be aggrieved. Accordingly,
the said late payment interest shall be calculated with effect from the date on which the
employment contract is terminated. However, if a worker consents to the payment of the
severance pay in installments, he may not claim late payment interest subsequently unless
he reserves his such right

23.

Failure to Pay or a Timely Basis and Interest
Time Bar Period
The right to demand severance pay shall be
subject to a five year time-bar period according
to the related legal provisions. Accordingly, the
severance pay that is not demanded within five
years from the termination of the employment
contract shall be subject to a time bar.

24.

Breach of Severance Pay Provisions
A provision that stipulates that severance pay shall be paid by exceeding
the cap or beyond the circumstances set out in Art. 14 LA no 1475 may be
prescribed in collective labour agreement or employment contract
because the regulation governing the severance pay is not strictly
mandatory today as it was in the past. However, this does not grant the
worker who shall resign to demand the payment of the severance pay
without the need for a contractual provision.