Expanding into Turkey is an attractive opportunity for many international businesses. The country’s young workforce, strategic location, and growing tech ecosystem make it a prime destination for both startups and established enterprises. However, one of the first challenges companies face is how to hire and manage talent while staying compliant with Turkish labor laws.
Two of the most effective solutions are partnering with an umbrella company or an Employer of Record (EOR) in Turkey. While both provide compliance and payroll management, they are designed for different business needs. This guide explains the differences, advantages, and limitations of each model to help you decide which is best for your business.
Understanding the Basics
What Is an Umbrella Company in Turkey?
An umbrella company acts as the legal employer for freelancers and contractors. Instead of registering as self-employed, professionals can sign a contract with the umbrella company, which then:
- Invoices the client for the work.
- Processes payments and deducts taxes.
- Registers the professional with the Turkish Social Security Institution (SGK).
- Provides payslips, healthcare access, and retirement contributions.
Umbrella companies are best suited for freelancers, consultants, or project-based professionals who need a legal structure without starting their own company.
What Is an Employer of Record (EOR) in Turkey?
An Employer of Record Turkey is a third-party service provider that legally employs workers on behalf of a client company. The EOR takes care of:
- Drafting compliant employment contracts.
- Running payroll and managing social security contributions.
- Handling taxes and benefits.
- Ensuring compliance with Turkish labor regulations.
Unlike umbrella companies, EOR services are designed for businesses that want to hire employees in Turkey without setting up a subsidiary or branch office.
Key Differences Between Umbrella Companies and EOR in Turkey
Although both models simplify employment, there are important distinctions:
| Feature | Umbrella Company | Employer of Record (EOR) Turkey |
|---|---|---|
| Target Users | Freelancers, independent contractors, consultants | Foreign companies hiring full-time staff |
| Legal Employer | Umbrella company (for freelancer) | EOR provider (for company’s employees) |
| Scope of Services | Payroll, tax deductions, invoicing, SGK registration | Full HR outsourcing, payroll, compliance, onboarding, benefits |
| Ideal Duration | Short-term or project-based work | Long-term employment and business expansion |
| Who Controls Daily Work? | Freelancer manages client relationship | Client company manages employee tasks |
When to Use an Umbrella Company in Turkey
Umbrella companies are the right choice if:
- You are a freelancer or consultant working with Turkish or foreign clients.
- You want legal employment status without creating a business.
- You are a foreign professional in need of work permit sponsorship.
- You work on short-term or project-based contracts.
Example:
A Turkish software developer works with a UK-based gaming company on a six-month project. Instead of managing self-employment taxes, the developer signs with an umbrella company, which invoices the UK client, deducts taxes, and pays the developer a net salary.
When to Use an Employer of Record in Turkey
EOR services are ideal if:
- You are a foreign company wanting to hire Turkish employees without setting up a subsidiary.
- You need long-term employees in Turkey.
- You want to test the Turkish market before making a larger investment.
- You need comprehensive HR and compliance support.
Example:
A U.S. fintech company wants to hire five Turkish developers for ongoing work. Instead of opening a branch office, they partner with an Employer of Record Turkey. The EOR employs the developers, manages payroll, and ensures compliance, while the U.S. company directs the developers’ daily tasks.
Benefits of Umbrella Companies in Turkey
- Simplified Taxation: Income tax and SGK contributions are deducted at source.
- Flexibility: Freelancers can work with multiple clients.
- Legal Compliance: Contracts and payroll are handled according to Turkish law.
- Social Benefits: Access to healthcare, pensions, and paid leave.
- Credibility: Clients trust freelancers who work through a legal structure.
Benefits of Employer of Record (EOR) in Turkey
- Entity-Free Hiring: No need to establish a local subsidiary.
- Comprehensive HR Support: Recruitment, onboarding, payroll, and compliance included.
- Scalability: Quickly add or reduce headcount as needed.
- Risk Reduction: The EOR assumes legal employer responsibilities.
- Market Entry: Companies can test operations in Turkey without long-term commitments.
Limitations to Consider
While both solutions are effective, they have some limitations:
- Umbrella Companies:
- Service fees reduce freelancers’ net income.
- Not suitable for businesses hiring teams.
- EOR Services:
- More expensive than umbrella companies (fees typically 10–15% of payroll).
- Less independence for freelancers who prefer direct contracts.
How to Choose Between Umbrella Company and EOR in Turkey
Ask yourself these questions:
- Am I an individual freelancer or a company hiring staff?
- Freelancer → Umbrella Company
- Company → Employer of Record Turkey
- Is this a short-term project or a long-term expansion?
- Short-term → Umbrella Company
- Long-term → EOR
- Do I need flexibility or a stable team?
- Flexibility → Umbrella Company
- Stable Team → EOR
- Am I hiring one contractor or building a team?
- One contractor → Umbrella Company
- Multiple employees → EOR
Cost Considerations
- Umbrella Companies: Usually charge 5–10% of income or a fixed monthly fee.
- EOR Providers: Typically charge 10–15% of payroll, but include comprehensive HR services.
While umbrella companies are cheaper for individuals, EOR providers are more efficient for companies managing larger teams.
The Future of Flexible Employment in Turkey
As Turkey continues to attract foreign investment and skilled professionals, both umbrella companies and EOR services will play a growing role.
- Umbrella companies will remain essential for freelancers, especially in IT, engineering, and creative industries.
- Employer of Record Turkey services will expand as more multinational businesses seek to hire teams without establishing subsidiaries.
Both models support Turkey’s shift toward a more flexible, globalized labor market.
Choosing between an umbrella company and an Employer of Record in Turkey depends on your business needs.
- If you are a freelancer or consultant, an umbrella company provides the flexibility and compliance you need.
- If you are a foreign business hiring staff, an Employer of Record Turkey ensures full compliance, scalability, and simplified HR management.
By understanding the differences and evaluating your goals, you can select the right model for your business expansion in Turkey. Both solutions offer reliable pathways to access Turkey’s skilled workforce while avoiding legal risks and administrative burdens. Looking for an Umbrella Company in Turkey ? Don’t hesitate to contact our team for more information.
