Understanding Payroll in Turkey: What Global Companies Need to Know About Turkey Payroll System
Oct 31, 2017
Home to the world’s oldest known temple structures, no less than 13 World Heritage Sites, and one of the oldest and largest malls in existence, Turkey is a dynamic nation that has played many significant roles throughout human history. With a population of 79.5 million and a GDP around $858 billion, Turkey’s participation in the future of international culture and business is assured.
Despite some unrest in the country, its economy has been on the rise for the better part of two decades. Spanning Europe and Asia, Turkey sits between the Mediterranean and Black Seas, making it a popular location for industries of all kinds. When it comes to global payroll, Turkey has a fairly standard monthly taxation system and payment structure, making paying employees a routine affair.
Companies who want to register in Turkey should visit the website of MERSIS, where they can submit their articles of association and memorandum. All documents must be notarized before being submitted. MERSIS is also the place to start the process of obtaining a tax identification number. Turkey requires foreign organizations to deposit a portion of their capital in the state-owned bank of Halk Bankasi and a further 25% of their capital with another Turkish bank. Luckily, it's easy to set up a bank account and only takes a few hours once the company’s registration documents are obtained. Businesses can then register at the Commercial Registry before following up with the Tax Office to finalize tax information.
Employment Laws & Employee Rights
The Turkish people operate on a 45-hour work week, with the hours evenly distributed among days worked (typically Monday through Friday.) Overtime is generally paid at 150% of the regular wage, although employees may be paid at 125% in exchange for additional time off at a later period. Additional time off should be negotiated between employee and employer prior to work completion.
Contracts are required in writing for employment that will last for one year or more. Contracts need to state the terms of employment, including the duration of employee services. Probationary periods are allowed but cannot last longer than two months. Foreign workers must present a work permit obtained by the local authorities, unless the company has arranged for an exception.
Collective bargaining is allowed in Turkey, but stringent requirements mean it's unlikely employers will deal with an official union. Employers should instead take the initiative to ensure that their employees’ needs are satisfied at the time of hiring.
Compensation & Services
Turkey’s currency is the Turkish lira (TRY), and the minimum wage for 2017 is 1,777.50 lira (~$468, £357, €403) per month, an amount that was recently increased and is expected to increase again in response to public demand. Pay-cycles are determined by employers, and payslips can be electronic statements. Employees are entitled to rest breaks, the length of which is determined by the number of working hours.
If an employee is terminated on the basis of downsizing (as opposed to incompetence or illegal activity), they're generally entitled to notice and potential severance. Employees are entitled to at least two weeks’ notice if they have worked with the company for six months or less, four weeks if they’ve been with the company for up to 18 months, six weeks for up to three years, and eight weeks for any employment longer than three years. Severance is paid to employees with a year or more of service and is calculated by multiplying the monthly salary by the number of years of employment.
Tax Requirements & Withholding
Income is taxed on a progressive scale according to earnings. For the tax year 2017, income from employment earnings and other sources is taxed according to the following brackets:
Annual Employment Income
|Up to 13,000||15 %|
|13,001 - 30,000||20 %|
|30,001 - 110,000||27 %|
|110,001 and above||35 %|
|Other Income (in Lira)||Tax Rate|
|Up to 13,000||15 %|
|13,001 - 30,000||20 %|
|30,0001 - 70,000||27 %|
|70,001 and above||35 %|
The corporate tax rate is 20%, with an additional withholdings tax of 15% due when dividends are paid to shareholders. Employees are expected to contribute 15% of their income to social security, while employers contribute 21.5% to social programs. Taxes are always withheld from paychecks according to payroll regulations. Non-residents are taxed on income made only in Turkey, while residents are taxed on their total income earned worldwide.
Time Off & Paid Leave
Employees are entitled to paid leave after a minimum of one year of employment. They can expect 14 days off after working with a company for between one and five years, and 20 days off for employment between five and 15 years. Turkey also has 16 national holidays, which are an important boost for the economy in that they encourage intra-country tourism.
Employees may take up to six weeks of sick leave with a written doctor’s report. After six weeks, employers may terminate the employee by paying the appropriate severance. Employers are not obligated to pay the employee’s salary during this time, but the state will generally take care of the ill. New mothers can expect paid leave of up to eight weeks before giving birth and eight weeks after. New fathers receive five days of paternity leave, although employers are not expected to compensate them during this time.
|Date||Turkey's Public Holiday Schedule|
|January 1st||New Year's Day|
|April 23rd||National Sovereignty and Children's Day|
|May 1st||Labor Day|
|May 19th||Commemoration of Ataturk, Youth and Sports Day|
|June (Dates vary depending on lunar cycle)||Ramazan|
|July 15th||Democracy and National Solidarity Day|
|August 30th||Victory Day/Armed Forces Day|
|September (Dates vary depending on lunar cycle)||Kurban Bayrami|
|October 29th||Republic Day|
A Simple Way to Pay
Turkey has a number of advantages for larger companies who want to extend their reach in both Europe and Asia. The location alone can be key for companies seeking a larger international presence. Such a diverse and dynamic country naturally brings with it a range of payroll and tax regulations that can be tricky to satisfy. Going in with a speciality international payroll solution could help ensure organizations fulfill their responsibilities in Turkey.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.