This is the English version of an article originally published in Turkish: Kıdem Tazminatı Hesaplama: Giydirilmiş Ücret, Tavan ve Faiz.
In short: Severance pay (kıdem tazminatı) is calculated on the basis of 30 days’ gross wage, including regular benefits, for each full year of service. Additional months and days are added pro rata. If the wage exceeds the statutory ceiling, the ceiling applies. Only stamp duty is deducted. If the employer pays late, interest at the highest rate applied to bank deposits accrues.
When an employment relationship ends, the first question is usually how much the employee will actually receive. The calculation may look like simple multiplication, but which payments are added to the wage, how the ceiling is applied and how part years are counted can change the result considerably. The calculation rests on three figures: the uninterrupted length of service, the gross wage including benefits, and the ceiling in force on the termination date. An error in any one of them can shift the result by thousands of lira.
Legal basis
Severance pay is not regulated in the current Labour Law (No. 4857). It is governed by Article 14 of the former Labour Law (No. 1475), which was deliberately kept in force when the new law was adopted. All calculations are still made under that provision. Its core rule is that, for each full year of service from the start of employment, the employer pays the employee severance pay equal to 30 days’ wages, and periods exceeding a full year are paid at the same rate.
The 30 days is a minimum. An individual employment contract or a collective agreement may increase it in the employee’s favour. However, the annual amount can never exceed the ceiling explained below.
When is severance pay due?
Two conditions must be met. First, the employee must have worked for the same employer for at least one year. Second, the contract must have ended in one of the ways set out in the law.
- Termination by the employer without just cause: due.
- Termination by the employer for just cause on grounds of conduct contrary to morality and good faith: not due.
- Termination by the employee for just cause (for example, unpaid wages): due.
- Leaving for compulsory military service: due.
- Leaving to receive a retirement or old-age pension: due.
- A female employee leaving within one year of marriage: due.
- Death of the employee: due (paid to the heirs).
- Resignation by the employee without just cause: not due.
A resignation without a reason generally means no severance pay. The position is entirely different if the employee leaves because the employer breached its obligations: legally, that is not a resignation but a termination by the employee for just cause. For this reason, the grounds should be stated clearly in the termination notice.
How is the length of service determined?
Length of service runs from the start date to the date the contract ends. Periods spent in one or more workplaces of the same employer are aggregated, even if the contract ended and was later renewed. The probationary period and annual leave taken are included, since the contract continues during them.
If the workplace is transferred to another employer, the employee’s service is not reset. The transferor and transferee are jointly liable for severance pay for the period before the transfer, but the transferor’s liability is limited to the period it employed the employee and to the wage at the date of transfer. A period for which severance pay has already been paid is not counted again.
The wage used: gross wage including benefits
The calculation is not based on net take-home pay. The law requires that money and benefits measurable in money, provided in addition to the basic wage, are taken into account. In practice this total is called the “dressed” gross wage (giydirilmiş brüt ücret). It usually includes:
- regularly paid meal and transport allowances;
- the monthly share of bonuses paid a set number of times per year;
- regular benefits in kind such as fuel or clothing;
- regular premiums provided for in the contract or by workplace practice.
Irregular payments, such as a one-off award or an occasional premium, are excluded. Overtime pay, even if paid regularly, is not added in practice.
Variable wages
For employees paid by the piece, by task or by percentage, the wage changes from month to month. The law then uses the average of the last year: the total wages paid in the last year are divided by the number of days worked in that year. If a pay rise was granted during the last year, the calculation is based on the period after the rise.
The severance pay ceiling for 2026
The annual amount is capped at the maximum retirement bonus payable to the highest-ranking civil servant. The figure is announced twice a year by circular of the Ministry of Treasury and Finance.
For contracts ending between 1 July 2026 and 31 December 2026, the ceiling is TRY 73,729.87. The termination date determines which ceiling applies. If the employee’s gross wage including benefits is below this amount, the actual wage is used; if it is higher, the ceiling is used. The ceiling cannot be exceeded by a collective agreement or an individual contract.
A worked example
The following example is entirely hypothetical. An employee has worked for 6 years, 4 months and 10 days. In August 2026, the employer terminates the contract without just cause. The gross monthly wage is TRY 50,000, plus a monthly meal allowance of TRY 6,000 and a transport allowance of TRY 4,000.
- Wage including benefits: 50,000 + 6,000 + 4,000 = TRY 60,000.00
- Full years: 6 × 60,000 = TRY 360,000.00
- Additional months: 60,000 × 4 / 12 = TRY 20,000.00
- Additional days: 60,000 × 10 / 365 = TRY 1,643.84
- Gross severance pay: TRY 381,643.84
- Stamp duty: 381,643.84 × 0.759% = TRY 2,896.68
- Net severance pay: TRY 378,747.16
Here the wage is below the ceiling, so the employee’s own wage is used. Severance pay is exempt from income tax, so only stamp duty is deducted.
Where the wage exceeds the ceiling
If the same employee’s wage including benefits were TRY 90,000, the ceiling of TRY 73,729.87 would be used for each year instead:
- Full years: 6 × 73,729.87 = TRY 442,379.22
- Additional months: 73,729.87 × 4 / 12 = TRY 24,576.62
- Additional days: 73,729.87 × 10 / 365 = TRY 2,020.00
- Gross severance pay: TRY 468,975.84
An employee earning above the ceiling therefore does not receive the full amount that their own wage would produce. The employer may voluntarily pay the excess, but that part is taxed as wages rather than treated as severance pay.
Documents needed for the calculation
- payslips for the last year;
- statements of the bank account into which the salary was paid;
- the social security (SGK) service record, available through e-Devlet;
- the employment contract and any collective agreement;
- the termination notice or resignation letter.
If payslips and bank records differ, establishing the real wage becomes a central issue. Where part of the salary was paid in cash, the calculation is based on the actual wage that can be proven, not on the payslip figure. The start and end dates in the SGK records are the first source for determining length of service.
Payment, interest and limitation
Severance pay falls due as soon as the contract ends. If the employer fails to pay on time, Article 14 of Law No. 1475 provides that, in a lawsuit brought for late payment, the judge awards interest for the period of delay at the highest rate applied to deposits.
The limitation period is five years, as expressly provided in Additional Article 3 of Labour Law No. 4857. It runs from the date the contract ends and is suspended from the application to mediation until the final mediation report. Applying to a mediator before filing a lawsuit is mandatory; a lawsuit filed without mediation is dismissed for lack of a procedural precondition.
Three common mistakes
Calculating on net pay. The law is based on the gross wage. A net-based calculation understates the entitlement from the outset.
Forgetting benefits. If meal, transport or bonus payments are left out, the result will be too low. Each separate payslip item should be checked for regularity.
Relying on a release. Employers sometimes ask employees to sign a release (ibraname) before paying the full amount. A release is valid only if certain conditions are met.
The approach of the courts
Settled case law of the Court of Cassation (Yargıtay) applies a test of regularity: a payment made regularly and continuously is added to the wage, while occasional and one-off payments are not. For bonuses paid several times a year, the total paid in the last year is divided by twelve and the monthly share is added, so the month of termination does not affect the entitlement.
The content of the termination notice is also decisive. An employer cannot later rely on a different ground; the reason stated in the notice largely determines whether severance pay is due. On allegations of payment, courts examine payslips together with bank records, so a signed payslip alone is not conclusive evidence.
Final remarks
The calculation depends on three inputs: length of service, the gross wage including benefits and the ceiling on the termination date. If one is wrong, the result is wrong. Payslips, bank records and the termination notice should therefore be reviewed together. Where part of the wage was paid in cash, proving the real wage matters as much as the arithmetic. In such disputes, it is advisable to obtain legal advice from a lawyer.
Frequently asked questions
Can an employee who resigns receive severance pay?
Not after a resignation without reason. However, if the employee leaves for just cause, such as unpaid wages or not being registered for social security, the entitlement is preserved because the departure is legally a termination for just cause.
What is deducted from severance pay?
To the extent it is calculated in accordance with the law, severance pay is exempt from income tax, and only stamp duty at 0.759% is deducted. No social security contributions are deducted. Payments above the ceiling or above the statutory calculation are taxed as wages.
More information for foreign clients: English-speaking lawyer in Ankara.
This article provides general information on Turkish law and is not legal advice. Outcomes depend on the facts of each case.
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