Employing or engaging individuals in Turkey requires more than calculating monthly payroll. Companies must correctly determine the individual’s employment status, social security category, contractual relationship and compensation entitlements.
Turkish legislation distinguishes between employees working under an employment contract, independent contractors producing a specific work, and individuals performing services under mandate-type arrangements. The legal classification can affect SGK registration, payroll, taxation, termination rights and employer liability.
Special social security rules also exist for agricultural workers and domestic workers.
At termination, employers must correctly calculate severance compensation, notice compensation, unused annual leave and other employment receivables. Different wage bases and tax treatments can apply depending on the type of payment.
This guide explains important aspects of SGK insurance, employment contracts, domestic workers, severance and notice compensation, employee receivables and limitation periods in Turkey.
Ek-5 Agricultural Insurance in Turkey
Turkey has a specific social security mechanism for certain individuals working intermittently in agriculture and forestry.
This arrangement is commonly referred to as:
Ek-5 Tarım Sigortası.
It allows qualifying agricultural and forestry workers to become insured within the 4/a (SSK) framework under the conditions established by Law No. 5510.
Who Can Apply for Ek-5 Agricultural Insurance?
The framework generally applies to individuals who:
- are at least 18 years old;
- are not already insured under another compulsory social security category;
- are not receiving qualifying income or a pension based on their own insurance status; and
- perform intermittent agricultural or forestry work under an employment relationship.
The individual must also complete the applicable SGK application procedure.
How Does Ek-5 Insurance Begin?
Applicants must use the documentation prescribed by SGK.
The required document must be properly completed and approved by the relevant authority designated under the applicable SGK procedure.
Depending on the circumstances, this can involve relevant:
- local authorities;
- professional organizations or unions;
- agricultural organizations;
- provincial agricultural directorates; or
- district agricultural directorates.
Where the statutory conditions are satisfied, the individual becomes insured under the relevant 4/a framework from the legally applicable application date.
Social Security for Domestic Workers in Turkey
Domestic employment is subject to a special SGK regime under Additional Article 9 of Law No. 5510.
The applicable social security treatment depends significantly on the number of days the individual works in domestic services for the same employer during the month.
A fundamental distinction exists between:
- domestic workers employed for 10 days or more; and
- domestic workers employed for 9 days or fewer.
Domestic Workers Employed for 10 Days or More
Individuals working in domestic services for at least:
10 days during a month
are insured under the applicable 4/a (SSK) framework.
The broader social insurance branches applicable under this regime apply, and the person employing the domestic worker is responsible for the relevant contributions.
Simplified Employer Procedure for Domestic Workers
Natural persons employing domestic workers can benefit from SGK’s simplified employer procedure, commonly referred to as:
kolay işverenlik.
Under this simplified system, individuals employing domestic workers are not necessarily required to operate the same traditional workplace-file and monthly declaration process used by ordinary commercial employers.
This substantially reduces the administrative burden for households employing cleaners, carers and other domestic workers.
Domestic Workers Employed for 9 Days or Fewer
A different social security framework applies where the domestic worker works:
9 days or fewer during the month.
Under this system, limited compulsory protection applies primarily in relation to:
- occupational accidents; and
- occupational diseases.
The statutory contribution is linked to the applicable daily gross minimum wage.
Under the framework described in Additional Article 9, the relevant occupational accident and occupational disease contribution is calculated at:
2% of the applicable daily gross minimum wage.
Registering Short-Term Domestic Workers
Individuals employing domestic workers for nine days or fewer can use simplified registration methods.
Depending on the applicable SGK systems, registration can be completed through mechanisms such as:
- e-Devlet; or
- authorized electronic/mobile procedures.
This allows households to comply with basic social security requirements without operating a conventional corporate payroll process.
When Can an Employer Lose SGK Incentives?
Turkey provides employers with various social security contribution incentives and employment-support mechanisms.
However, employers can lose access to these incentives where serious social security violations are identified.
Two particularly important risks are:
- unregistered employment (kayıt dışı çalışan); and
- fictitious insurance registration (sahte sigortalı).
Unregistered Employees
An unregistered employee is a person who actually works for the employer but is not properly reported as insured to SGK.
This can be identified through:
- court decisions;
- SGK inspections; or
- other authorized controls.
Unregistered employment can lead not only to contributions, interest and administrative fines but also to the loss of employer incentives.
Fictitious Insured Employees
The opposite problem can also create serious liability.
A fictitious insured person is someone reported to SGK as an employee despite not actually working at the workplace.
Artificial insurance registrations can be used improperly to create social security rights and are therefore treated seriously by SGK.
Duration of SGK Incentive Cancellation
Where unregistered or fictitious insured persons are officially identified, the workplace can be excluded from qualifying SGK incentives.
Under the relevant framework:
- following the first determination, the exclusion period can be 1 month; and
- where another qualifying violation is identified within 3 years of the first determination, the exclusion period can be 1 year for each repeated determination.
For employers receiving substantial contribution incentives, the financial consequences can be significant.
Limited Exception for Small-Scale Findings
The incentive-cancellation mechanism contains a limited proportionality exception.
Under the framework described in Additional Article 14, cancellation may not apply where the number of unregistered and/or fictitious insured persons:
- does not exceed 5 individuals; and
- does not exceed 1% of the number of insured employees reported by the workplace during the month of determination.
Both the applicable statutory conditions should be carefully reviewed.
Certain Pensioners Working for Designated Organizations
Special rules apply to certain pensioners who undertake duties for organizations specifically identified by legislation.
Individuals receiving a retirement or old-age pension from a social security institution can, subject to the statutory conditions, continue receiving that pension while performing qualifying duties for organizations including:
- Türkiye Maarif Vakfı;
- Yunus Emre Vakfı;
- Türkiye Kızılay Derneği;
- Yeşilay Cemiyeti; and
- Yeşilay Vakfı.
This is a specific statutory exception and should not be generalized to every pensioner returning to work.
Taxation of Severance Compensation in Turkey
When employment terminates, one of the most important payroll calculations concerns severance compensation (kıdem tazminatı).
Qualifying statutory severance compensation receives specific tax treatment.
As a general rule, qualifying severance compensation is subject to:
stamp tax
while the qualifying statutory amount benefits from the applicable income-tax exemption.
The precise tax treatment should nevertheless be assessed according to the nature and amount of the termination payment.
Taxation of Notice Compensation
Notice compensation (ihbar tazminatı) receives different tax treatment.
Under the general payroll framework, notice compensation is subject to:
- income tax; and
- stamp tax.
This is an important distinction when calculating an employee’s final net termination payment.
Severance and notice compensation should therefore never simply be processed as identical payroll components.
Which Salary Is Used to Calculate Employee Claims?
Turkish employment law distinguishes between different concepts of salary when calculating employee entitlements.
Two particularly important concepts are:
- basic/bare salary (çıplak ücret); and
- grossed-up or extended salary (giydirilmiş ücret).
The appropriate wage base depends on the entitlement being calculated.
Giydirilmiş Ücret
The concept of giydirilmiş ücret generally refers to the employee’s wage together with qualifying regular and measurable monetary or monetary-equivalent benefits.
Depending on the compensation package and legal conditions, this can potentially include regular benefits provided in addition to base salary.
This broader wage concept is particularly important for:
- severance compensation; and
- notice compensation.
Employers should therefore review the employee’s entire regular compensation package before calculating termination entitlements.
Çıplak Ücret
The çıplak ücret, or bare/basic wage, generally refers to the employee’s core wage without adding the broader range of regular fringe benefits included in giydirilmiş ücret.
This wage concept is generally relevant when calculating entitlements such as:
- overtime pay;
- weekly rest pay;
- national and general public holiday pay; and
- annual leave pay.
The distinction can materially affect payroll calculations.
Wage Used for Severance Compensation
Severance compensation is generally calculated using the employee’s last applicable gross wage together with qualifying regular benefits that must legally be included in the severance calculation.
The calculation is therefore not based simply on the employee’s net take-home salary.
Gross Rather Than Net Salary
Turkish Court of Cassation case law has confirmed the importance of using the relevant gross wage when calculating severance compensation.
The calculation is made before ordinary deductions such as:
- social security contributions;
- applicable taxes; and
- qualifying union dues.
In Court of Cassation 7th Civil Chamber, E.2015/6012, K.2016/5580, the Court emphasized the use of the employee’s relevant gross remuneration rather than net take-home pay when determining severance compensation.
What Is an Employment Contract Under Turkish Law?
The Turkish Code of Obligations defines the employment/service contract (hizmet sözleşmesi) as a contractual relationship under which:
- the employee undertakes to perform work for the employer in a dependent relationship; and
- the employer undertakes to pay remuneration based on time worked or the work performed.
The element of dependency or subordination is particularly important.
An employment relationship is therefore not defined solely by whether money is paid.
Part-Time Employment Is Still Employment
An employee does not need to work full-time for an employment contract to exist.
A contractual relationship under which an individual regularly performs services for an employer on a part-time basis can still constitute an employment relationship.
Part-time status does not automatically transform an employee into an independent contractor.
Does an Employment Contract Have to Be Written?
Under the Turkish Code of Obligations, an employment contract is generally not subject to a special form unless legislation provides otherwise.
This means an employment relationship can potentially exist even without a formally signed written contract.
Separate provisions of Turkish employment legislation can nevertheless impose written-form or written-information requirements in particular circumstances.
Employers should therefore use written agreements even where the underlying relationship could legally arise without one.
Implied Employment Relationships
An employment relationship can also arise from the parties’ conduct.
Where an individual performs work that, according to the circumstances, would ordinarily only be performed in return for remuneration, and the employer accepts that work, an employment relationship can be deemed to exist.
The absence of a document titled “employment contract” is therefore not decisive.
What Happens if an Employment Contract Is Later Found Invalid?
Where an employment contract is subsequently determined to be invalid, the relationship does not necessarily disappear retroactively.
Until the employment relationship is terminated, the invalid contract can produce the rights and consequences of a valid employment relationship under the applicable statutory framework.
This protects individuals who have actually performed work in good faith.
Employment Contract vs. Independent Contractor Agreement
Correct classification of workers is particularly important for international companies.
Turkish law distinguishes an employment contract from other contractual arrangements, including:
- work contracts (eser sözleşmesi); and
- mandate agreements (vekâlet sözleşmesi).
The contract’s title alone does not determine its legal nature.
The actual relationship between the parties must be examined.
What Is a Work Contract – Eser Sözleşmesi?
Under Article 470 of the Turkish Code of Obligations, a work contract (eser sözleşmesi) is an agreement under which:
- the contractor undertakes to create or deliver a specific work or result; and
- the client undertakes to pay the agreed consideration.
The emphasis is generally on achieving a particular result rather than working continuously under the client’s authority.
Contractor’s Responsibility for the Work
The contractor is generally responsible for producing the agreed work personally or under their own management.
Where the contractor’s personal characteristics are not essential to the production of the work, the contractor may, subject to the applicable agreement and circumstances, have the work performed by another person.
This differs from an ordinary employment relationship, where personal performance and organizational dependence are generally more significant.
Tools and Equipment Under a Work Contract
Unless otherwise agreed or established by custom, the contractor is generally responsible for providing the tools and equipment required to produce the work.
This can be one factor distinguishing a genuine contractor from an employee, although no single factor is decisive by itself.
Fixed-Price Work Contracts
Where the parties agree on a lump-sum price, the contractor generally undertakes to complete the work for that agreed amount.
The fact that the work later requires more labor or expense does not automatically allow the contractor to increase the agreed price.
This reflects the result-based nature of the contract.
What Is a Mandate Agreement – Vekâlet Sözleşmesi?
A mandate agreement (vekâlet sözleşmesi) is another contractual structure recognized under Turkish law.
Under this arrangement, the mandatary undertakes to perform a task or transaction on behalf of the principal.
Unlike an employment contract, the relationship does not necessarily involve the same degree of organizational and hierarchical subordination.
Is a Mandate Agreement Paid?
A mandatary is entitled to remuneration where:
- the parties have agreed on payment; or
- remuneration follows from established practice or custom.
Not every mandate is therefore necessarily unpaid.
The existence of payment alone does not convert a mandate into employment.
How Can a Mandate Agreement Be Formed?
Where a person is officially authorized to perform the relevant service, performs it as part of their profession, or has publicly indicated that they accept such work, a mandate can potentially arise if the offer is not promptly rejected.
The precise contractual classification depends on the circumstances.
Employee vs. Contractor vs. Mandatary
For companies, the key issue is not simply which contract template was signed.
The actual working relationship should be reviewed.
Relevant factors can include:
- who determines working hours;
- who controls how work is performed;
- whether the person is integrated into the organization;
- whether the person bears commercial risk;
- whether payment is based on time or a defined result;
- who supplies tools and equipment;
- whether the person works for multiple clients;
- whether personal performance is required; and
- the degree of managerial supervision.
A contract described as “consultancy” can potentially be treated as employment where the actual facts establish a dependent employment relationship.
Why Worker Misclassification Matters
Incorrectly treating an employee as an independent contractor can create exposure relating to:
- unpaid SGK contributions;
- administrative fines;
- income and payroll taxes;
- annual leave;
- overtime;
- weekly rest;
- public holiday pay;
- severance compensation;
- notice compensation; and
- other employment rights.
International businesses should therefore review contractor arrangements carefully before implementation.
Limitation Period for Employee Receivables
Employee monetary claims are subject to statutory limitation periods.
Under the general framework applicable to the claims described here, the limitation period is:
5 years.
However, the date on which the five-year period begins depends on the type of entitlement.
Limitation Period for Salary Claims
For remuneration earned during employment, the limitation period generally begins when the relevant payment becomes due.
This includes claims relating to:
- salary;
- bonuses;
- premiums;
- overtime;
- national and general public holiday pay; and
- weekly rest pay.
Each payment period can therefore have its own limitation starting date.
Example of the Limitation Period for Overtime
If an employee claims unpaid overtime relating to several years of employment, the limitation period does not necessarily begin only when employment terminates.
Instead, the relevant limitation period for each qualifying overtime payment generally begins when that remuneration became due.
This can result in older portions of the claim becoming time-barred while more recent portions remain actionable.
Limitation Period for Termination-Related Claims
Different timing applies to certain claims that arise when employment ends.
For claims such as:
- severance compensation;
- notice compensation;
- bad-faith compensation; and
- unused annual leave pay,
the limitation period generally begins from the:
termination date of the employment relationship.
This is because the monetary entitlement arises or becomes payable in connection with termination.
Annual Leave Pay
During active employment, statutory annual leave is principally a right to paid rest rather than a payment that can simply be exchanged for cash.
When employment terminates, unused statutory annual leave is converted into a monetary entitlement.
The limitation period applicable to that termination payment therefore runs according to the rules applicable following termination.
Why Employers Should Retain Payroll Records
Limitation periods make record retention particularly important.
Employers may need historical evidence concerning:
- working hours;
- salary payments;
- overtime;
- bonuses;
- public holiday work;
- weekly rest;
- annual leave;
- benefits; and
- termination payments.
Accurate records can become essential where an employee brings a claim several years after the underlying work was performed.
Payroll and Termination Compliance in Turkey
A compliant Turkish termination payroll should identify each component separately.
This can include:
- final salary;
- overtime;
- unpaid bonuses;
- unused annual leave;
- severance compensation;
- notice compensation;
- commissions;
- expense reimbursements; and
- other outstanding entitlements.
Each component can have different:
- income-tax treatment;
- stamp-tax treatment;
- SGK treatment; and
- calculation basis.
Combining all termination payments into a single generic payroll item can therefore create compliance risks.
Employer of Record and Worker Classification in Turkey
International companies can use an Employer of Record (EOR) in Turkey when they want to employ personnel locally without establishing their own employing entity.
Depending on the structure, EOR services can include:
- Turkish employment contracts;
- employee onboarding;
- SGK registration;
- monthly payroll;
- salary payments;
- employee benefits;
- annual leave;
- overtime administration;
- social security contributions;
- termination calculations; and
- statutory offboarding.
Using an appropriate employment structure can also reduce the risks associated with incorrectly classifying individuals as independent contractors.
Employment Compliance Checklist for Turkey
Companies engaging individuals in Turkey should determine:
- whether the relationship is employment or genuine independent contracting;
- which SGK category applies;
- whether special domestic-worker rules apply;
- whether agricultural insurance rules are relevant;
- whether SGK incentives are being used;
- whether employees are genuinely working and correctly registered;
- which salary basis applies to each employee entitlement;
- whether severance compensation is payable;
- whether notice compensation is payable;
- the correct tax treatment of termination payments; and
- the applicable limitation period for potential employee claims.
Classification should be reviewed according to the actual working relationship rather than merely the wording of the agreement.
Turkish employment and social security law contains several specialized rules concerning agricultural workers, domestic employees, SGK incentives, employment contracts and employee compensation.
Qualifying agricultural workers can obtain coverage through the Ek-5 agricultural insurance framework, while domestic workers are subject to different SGK rules depending on whether they work at least ten days or nine days or fewer during a month.
Employers must also take unregistered and fictitious employment seriously. Official findings can result not only in SGK contributions and administrative penalties but also in temporary loss of valuable social security incentives.
At termination, severance and notice compensation require different payroll and tax treatment, and the correct wage basis must be identified. Severance and notice calculations generally use the broader applicable remuneration basis, while overtime, weekly rest, public holiday and annual leave calculations follow their respective wage rules.
Finally, companies must distinguish genuine employment from work contracts and mandate agreements. Calling an individual a consultant or contractor does not necessarily prevent the relationship from being legally classified as employment.
For international employers, integrating worker classification, Turkish employment contracts, SGK registration, payroll, termination calculations and Employer of Record services can significantly reduce employment and social security compliance risks in Turkey.