Expanding your business into Turkey brings great opportunities—but also legal and administrative complexities. Payroll processing, tax compliance, and social security regulations can be difficult to navigate, especially for foreign companies unfamiliar with Turkish labor laws. That’s where an Employer of Record (EOR) becomes an essential partner.
Whether you’re hiring one remote employee or building an entire team in Istanbul, an EOR helps you manage payroll and tax compliance in Turkey, ensuring you stay legal, efficient, and stress-free.
In this article, we explore the ins and outs of Turkish payroll and tax obligations and explain how an EOR ensures full compliance—so you can focus on business growth, not bureaucracy.
What Is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party service provider that legally employs workers on behalf of a foreign company. While the client company manages the employee’s daily tasks, the EOR assumes all local employer responsibilities, including:
- Employment contracts
- Payroll processing
- Income tax withholding
- Social security (SGK) payments
- Employee benefits
- Compliance with labor and tax laws
In Turkey, an EOR is the legal employer, making it responsible for reporting, payments, and legal obligations on your behalf.
Why Payroll and Tax Compliance Is Critical in Turkey
Turkey has a complex and strictly regulated employment environment. Mistakes in payroll or tax reporting can lead to:
- Government fines and penalties
- Legal disputes with employees
- Damage to your brand’s reputation
As an international employer, it’s essential to comply with local regulations related to salary payments, income tax, and social security. Even seemingly small errors—such as a late declaration or incorrect deduction—can result in substantial consequences.
Partnering with an EOR in Turkey gives your business the peace of mind that all payroll and tax matters are handled accurately, on time, and in full compliance with Turkish law.
How Payroll Works in Turkey
Let’s break down the key elements of payroll processing in Turkey:
1. Gross Salary vs. Net Salary
- Gross salary includes base salary + all applicable allowances (e.g., meal, transport).
- Net salary is what the employee takes home after deductions.
Deductions from gross salary include:
- Income tax
- Social security premiums (SGK)
- Unemployment insurance
- Stamp tax
An EOR ensures all these deductions are calculated correctly and pays the net salary to employees on the agreed payday.
2. Mandatory Employer Contributions
In addition to employee deductions, employers in Turkey must contribute to:
- Social Security (SGK): Covers healthcare, pensions, maternity, etc.
- Unemployment Insurance: Mandatory for all employers
- Short-term insurance premiums: For work-related injury and illness
Contribution Rates (approximate, 2025):
Contribution | Employer Share | Employee Share |
---|---|---|
Social Security (SGK) | ~20.5% | 14% |
Unemployment Insurance | 2% | 1% |
Stamp Tax | N/A | ~0.759% |
Income Tax | Withheld by employer | Progressive rates (15–40%) |
The EOR calculates and submits both employer and employee contributions to Turkish authorities on your behalf.
3. Income Tax Withholding in Turkey
Turkey uses a progressive income tax system, meaning the more an employee earns, the higher the rate they pay.
2025 Income Tax Brackets (estimated):
Annual Income (TRY) | Tax Rate |
---|---|
Up to 110,000 | 15% |
110,001 – 230,000 | 20% |
230,001 – 580,000 | 27% |
580,001 – 3,000,000 | 35% |
Over 3,000,000 | 40% |
The employer is responsible for:
- Withholding the correct income tax each month
- Submitting it to the Turkish Revenue Administration (GİB)
- Issuing payslips and annual tax reports to employees
EORs ensure these steps are done legally and on schedule, avoiding penalties or miscalculations.
How an EOR Handles Payroll and Tax Compliance in Turkey
1. Local Payroll Expertise
An EOR has local payroll specialists who understand:
- Turkish employment law
- Tax and SGK requirements
- Industry-specific payroll practices
They stay updated on legislative changes (like mid-year minimum wage adjustments) and apply them in real-time to your payroll processes.
2. Accurate Payroll Processing
Every month, the EOR:
- Calculates gross-to-net salary
- Applies tax deductions and employer contributions
- Issues compliant payslips
- Transfers salary payments to employees
- Manages reimbursements and bonuses
This removes the burden from your HR team and guarantees legal compliance.
3. On-Time Tax and SGK Declarations
Turkish law requires monthly declarations and payments to:
- Social Security Institution (SGK)
- Tax Office (GİB)
The EOR submits these declarations accurately and on time, avoiding delays or fines. These include:
- Social security premium declarations
- Income tax filings
- Stamp tax filings
- Unemployment insurance reports
4. Employment Contracts and Onboarding
The EOR prepares Turkish-language employment contracts that:
- Reflect Turkish Labor Code (Law No. 4857)
- Define gross salary, benefits, and job scope
- Include working hours, notice periods, and termination clauses
They also register the employee with:
- The Social Security Institution (SGK)
- Tax authorities
This ensures the employee is legally employed from day one.
5. Benefit Management
EORs handle statutory and optional employee benefits, including:
- Paid leave and national holidays
- Health and maternity coverage via SGK
- Additional benefits (meal cards, transport allowances, private insurance if requested)
These benefits are included in the payroll calculations and properly documented.
6. Handling Payroll Changes and Terminations
An EOR manages payroll adjustments related to:
- Sick leave
- Bonuses or commissions
- Salary increases
- Terminations and severance pay
They ensure all changes are reflected in payroll and comply with Turkish labor law. In case of termination, they:
- Calculate notice pay and severance
- Report contract termination to authorities
- Provide legal support if needed
Advantages of Using an EOR for Payroll and Tax Compliance
Benefit | Description |
---|---|
Risk Reduction | Avoid fines, lawsuits, and back payments through proper compliance |
Time Savings | Free up your HR and finance teams from handling local tax and payroll complexities |
Legal Assurance | EOR takes on employer liability and ensures employment contracts are enforceable |
Accuracy | Local experts calculate deductions, benefits, and taxes correctly every month |
Data Security | Payroll data is managed securely and confidentially under Turkish law |
Common Compliance Pitfalls (Avoided by EORs)
- Misclassifying employees vs. independent contractors
- Failing to declare bonuses or commissions
- Underreporting salaries to reduce tax burden (illegal)
- Late SGK or tax filings
- Mismanaging severance pay during termination
EORs prevent these risks by adhering to Turkish regulations and international compliance standards.
Managing payroll and taxes in Turkey isn’t just about crunching numbers—it’s about ensuring full legal compliance, protecting your employees, and reducing risk. An Employer of Record takes on the complex task of navigating Turkish labor laws and tax systems, giving foreign companies the ability to hire locally without the headache.
By trusting an EOR to handle payroll and tax compliance, your business gains:
✅ Accuracy
✅ Legal compliance
✅ Time and cost savings
✅ Peace of mind
Ready to hire in Turkey with confidence?
We offer trusted EOR services that simplify payroll and tax compliance—so you can focus on scaling your business.
📞 Contact us today for a free consultation or to request a custom EOR quote for your Turkish operations.