Calculating severance and notice pay
Both depend on termination of the employment contract, but their conditions, ceilings and taxation differ. Confusing them creates both underpayment and penalty risk.
Severance pay
Severance pay is due to an employee with at least one year of service when the contract ends in the circumstances set out in law. It is calculated at thirty days of all-inclusive gross pay for each full year of service, pro-rated for part years.
All-inclusive pay covers benefits of a continuing nature in addition to bare gross pay: transport and meal allowances, regular bonuses, fuel and clothing allowances. Occasional payments and overtime are excluded.
| Period | Ceiling (TRY) |
|---|---|
| 01.01.2026 – 30.06.2026 | 64,948.00 |
| 01.07.2026 – 31.12.2026 | 73,729.87 |
The ceiling is the maximum payable for one year of service. Where all-inclusive gross pay exceeds it, the calculation is made on the ceiling. It is updated twice a year in line with civil servant coefficients; the date the contract ends determines which period's ceiling applies.
Notice pay
Notice pay is what the terminating party owes when the statutory notice period is not observed. No minimum service is required, and either employer or employee may be liable. Periods vary with length of service.
| Length of service | Notice period | Equivalent payment |
|---|---|---|
| Less than 6 months | 2 weeks | 2 weeks' all-inclusive gross pay |
| 6 months – 1.5 years | 4 weeks | 4 weeks' all-inclusive gross pay |
| 1.5 – 3 years | 6 weeks | 6 weeks' all-inclusive gross pay |
| More than 3 years | 8 weeks | 8 weeks' all-inclusive gross pay |
The difference in taxation
| Item | Severance pay | Notice pay |
|---|---|---|
| Income tax | None up to the ceiling | Yes — added to the cumulative base |
| Stamp duty | Yes — 0.759% | Yes — 0.759% |
| Social security premium | None | None |
| Ceiling | Yes | No |
This is where mistakes most often occur. Notice pay is added to the employee's cumulative income tax base for the year; where the amount is large it pushes the employee into a higher bracket and produces a lower net payment than expected. The timing of termination is therefore a financial decision as much as a legal one.
Items commonly overlooked
- Payment for unused annual leave is not compensation; it is pay, and subject to income tax.
- Length of service covers time spent at different workplaces of the same employer.
- On a transfer of business, service continues uninterrupted with the acquiring employer.
- In part-time work, service counts in full years while pay reflects actual working time.
- On death, severance pay is made to the legal heirs.
Legal basis
- Labour Law No. 1475, Article 14 (severance)
- Labour Law No. 4857, Article 17 (notice periods)
- Income Tax Law No. 193, Article 25
- Stamp Duty Law No. 488
This article is general information and does not replace professional assessment of a specific matter. Amounts and rates relate to the stated year; please verify the current provisions before acting.
