Calculating severance pay looks at first sight like a single formula: an employee whose contract ends on certain conditions is paid 30 days of gross remuneration including benefits for each full year worked. The formula looks simple; in practice most errors are made in the “remuneration including benefits” item and in applying the ceiling.
Who is entitled to severance pay? #
Two conditions must be met together: at least one year of service and termination of the contract for a reason that gives rise to the entitlement. The main qualifying situations are these:
- Termination by the employer for a reason other than article 25/II of the Labour Act (breach of morality and good-faith rules)
- Termination by the employee for just cause: wages unpaid or underpaid, social security contributions declared below the real wage, overtime not paid, mobbing, occupational health measures not taken
- Leaving because of compulsory military service
- Retirement, or completing the conditions for retirement other than age (depending on the date first insured, e.g. 15 years and 3,600 premium days, or 25 years and 4,500 days)
- A woman employee leaving within one year of the date of her marriage
- Death of the employee (paid to the heirs)
An employee who resigns of their own accord is as a rule not entitled to severance pay. But the position changes if the resignation letter states a just cause; the wording of the letter should therefore be drafted with care.
For the calculation of notice pay, which is often confused with severance pay, the notice periods and payment in lieu, see our article on how notice pay is calculated.
What is gross remuneration including benefits? #
The calculation uses not the bare gross wage but gross remuneration including benefits. This is found by adding to the monthly gross wage those side payments that are continuous in nature:
- Travel and meal allowances (their monetary equivalent where provided in kind)
- Fuel, clothing, education and housing allowances
- The monthly share of regularly paid bonuses and premiums
- Social benefits of a continuing character
What is left out are payments of an occasional nature: overtime pay, annual leave pay, weekly rest pay, one-off bonuses and travel expenses.
Example #
For an employee on a monthly gross wage of 40,000 TL who receives a meal allowance of 150 TL and a travel allowance of 100 TL on 26 days a month, the gross remuneration including benefits is: 40,000 + (26 × 150) + (26 × 100) = 46,500 TL. Severance pay is calculated on this figure.
The formula #
Severance pay = gross remuneration including benefits × total years of service
Periods beyond a full year are apportioned. For an employee with six years, four months and twelve days of service, for example, the four months and twelve days are calculated on a daily basis and added to the full years. If you want to do the calculation yourself, you can use our severance and notice pay calculator.
The severance ceiling #
The amount payable for each year cannot exceed the severance pay ceiling fixed by law. The ceiling is updated every January and July, and the one in force on the date of termination applies. For employees whose remuneration including benefits exceeds the ceiling, the calculation is made on the ceiling figure. For higher-paid employees, therefore, which period the termination date falls into can make a difference.
Tax and deductions #
Only stamp duty is deducted from severance pay; no income tax and no social security contribution are withheld. Payment in lieu of notice, by contrast, is subject to income tax — the two items are frequently confused.
Limitation period #
The limitation period for a severance pay claim is five years from the date of termination. A claim not made within that period continues to exist but can no longer be recovered through the courts.
Three common mistakes #
- Leaving out side payments: Calculating on the bare wage alone reduces the award by 10–20 % in most files.
- Signing the release immediately: A release drawn up before one month has passed since the date of termination, which does not itemise each element of the claim and whose payment is not made through a bank, is invalid. But proving that a signed document is invalid always adds a burden.
- Cash payments: If the real figure behind a wage shown as low on the payslip cannot be proved, the award is calculated on the low wage. Bank receipts and correspondence are decisive at this point.
Before bringing a claim for severance, notice and overtime, it is compulsory to go through the mediation stage. Attending that stage with a correctly calculated schedule of claims directly affects the outcome.
A worked severance calculation from start to finish #
Let us take a concrete example. Consider an employee who started work on 1 March 2018 and was dismissed by the employer on valid grounds on 1 September 2026. Their monthly gross wage is 70,000 TL; they also receive 4,500 TL in meal allowance and 3,000 TL in travel allowance each month, and a bonus of 18,000 TL is paid once a year.
- Gross remuneration including benefits: 70,000 + 4,500 + 3,000 + (18,000 ÷ 12) = 79,000 TL
- Length of service: 3,106 days between 1 March 2018 and 1 September 2026, that is roughly 8 years and 6 months
- Comparison with the ceiling: Where remuneration including benefits exceeds the severance ceiling on the date of termination, the calculation is made on the ceiling. In this example the ceiling (for the period 1 July – 31 December 2026) is 73,729.87 TL.
- Severance pay: 73,729.87 × 8.51 = 627,441 TL (gross)
- Stamp duty: 627,441 × 0.00759 = 4,762 TL
- Payment in lieu of notice: Eight weeks of pay, as service exceeds three years: (79,000 ÷ 30) × 7 × 8 = 147,467 TL
To run the same calculation on your own figures, use our severance and notice pay calculator. Any overtime and weekly rest claims are a separate item; the employee claims calculator works those out separately.
How is length of service aggregated? #
Where work has been done at different workplaces of the same employer, or in separate spells, the periods are as a rule aggregated. A break in between does not by itself extinguish the entitlement. But if severance pay was paid for the earlier period and a valid release was obtained, that period is not counted again.
Where subcontractors change, the period is treated as unbroken so long as the principal employer stays the same. This rule is decisive for employees who work for years in public institutions under a succession of different subcontractors.
What if it is not paid? #
Severance pay falls due on termination; if it is not paid, the highest interest rate applied to deposits runs on it. That rate is higher than the statutory rate and the claim grows as the delay lengthens.
To recover it, the compulsory mediation stage comes first. If no agreement is reached, a claim is brought in the labour court; once final, the judgment is put into enforcement. To see step by step how the process works and which documents are needed, you can use the legal roadmap tool, and for the subject as a whole have a look at our employment law page.
Which claims besides severance pay can be sought — notice pay, overtime, annual leave, the minimum living allowance and unemployment benefit — are listed together in our article on employee rights on dismissal.
Retirement: 15 years – 3,600 days and 25 years – 4,500 days #
Employees who have completed the conditions for retirement other than age may leave work with a letter obtained from the social security institution and become entitled to severance pay (Labour Law No. 1475, art. 14/1-5). The conditions depend on when the person was first insured: for those insured before 8 September 1999, 15 years of insured status and 3,600 premium days (Law No. 506, provisional art. 81); for those first insured between 8 September 1999 and 30 April 2008, 25 years of insured status and 4,500 premium days or 7,000 premium days (Law No. 5510, provisional art. 9). For those insured later, which condition applies should be confirmed by a letter from the social security institution. The letter must be served on the employer and the ground must be stated expressly in the notice of termination.
If the termination is invalid: reinstatement #
If you are within the scope of job security, receiving severance pay does not mean the termination was valid. If you meet the thirty-employee and six-month service conditions, you can apply to a mediator within one month of being served with the notice of termination and argue that the termination was invalid. For the conditions and time limits of that route see our guide to reinstatement claims. If the termination followed an occupational accident or an occupational disease, claims for occupational accident compensation also come into play.
