Turkey is a strategic hub between Europe and Asia, offering a skilled workforce, competitive labor costs, and access to diverse markets. For many international businesses, expanding into Turkey or hiring local talent is an attractive opportunity. However, the process can be complex due to strict labor laws, tax regulations, and work permit requirements.
One of the most effective solutions is to hire through an umbrella company in Turkey. This model allows a foreign company Turkey to access local talent legally without establishing a subsidiary. In this guide, we’ll explain how the umbrella company model works, why it’s beneficial for foreign employers, and what steps are involved.
Why Hiring in Turkey Can Be Challenging for Foreign Companies
Before exploring umbrella companies, it’s important to understand the obstacles international businesses face when hiring in Turkey:
- Legal entity requirement: Normally, a foreign company must establish a local branch or subsidiary to hire employees directly.
- Complex labor laws: Turkey has detailed regulations on employment contracts, severance, working hours, and benefits.
- Work permits: Hiring foreign nationals in Turkey requires government approval, with quotas and salary thresholds.
- Tax compliance: Employers must handle payroll taxes, income tax, and social security contributions.
For many businesses, these barriers make it impractical to set up operations solely to hire a few employees. This is where umbrella companies provide a cost-effective alternative.
What Is an Umbrella Company in Turkey?
An umbrella company is a third-party organization that employs workers on behalf of client companies. It acts as the legal employer while the worker performs tasks for the client.
In practice:
- The foreign company selects and manages the worker.
- The umbrella company becomes the official employer in Turkey.
- The worker signs an employment contract with the umbrella company.
- The umbrella company handles payroll, taxes, and compliance.
This structure ensures that both the worker and the foreign company remain compliant with Turkish laws.
How an Umbrella Company Helps Foreign Companies in Turkey
For a foreign company Turkey, the umbrella model provides several advantages:
- No Need for a Legal Entity
Hiring through an umbrella company eliminates the need to open a local office or subsidiary. This saves time, legal fees, and administrative costs. - Compliance with Labor Laws
The umbrella company ensures employment contracts meet Turkish labor standards, covering minimum wage, paid leave, severance, and working hours. - Simplified Payroll
The umbrella company manages monthly payroll, deducts income tax, and pays social security contributions to the Turkish authorities. - Risk Reduction
The umbrella company assumes legal responsibility for employment, reducing compliance risks for the foreign business. - Faster Market Entry
Foreign companies can quickly hire local talent, test the market, and scale operations without long bureaucratic delays.
Step-by-Step: Hiring in Turkey Through an Umbrella Company
Here’s how the process typically works:
Step 1: Identify Talent
The foreign company selects a candidate, either a Turkish national or a foreign professional already based in Turkey.
Step 2: Sign Agreement with the Umbrella Company
The foreign business partners with a Turkish umbrella company that will act as the employer of record.
Step 3: Employment Contract
The umbrella company signs an employment contract with the worker, in compliance with Turkish labor laws.
Step 4: Payroll & Benefits
The umbrella company invoices the foreign client for the employee’s salary, taxes, social security, and service fees. After receiving payment, it pays the worker and files all contributions.
Step 5: Ongoing Compliance
The umbrella company ensures continued compliance with Turkish tax and labor law, providing payslips, social security registration, and HR support.
Benefits of Hiring Through an Umbrella Company in Turkey
For a foreign company Turkey, the umbrella model offers several clear benefits:
1. Cost Efficiency
Setting up a subsidiary in Turkey can be expensive and time-consuming. An umbrella company provides an immediate solution at a fraction of the cost.
2. Flexibility
Umbrella companies allow businesses to hire employees for short-term projects, long-term roles, or trial expansions before committing to a full legal entity.
3. Local Expertise
Umbrella companies have in-depth knowledge of Turkish labor laws and tax systems, ensuring smooth operations.
4. Employee Security
Employees hired through an umbrella company enjoy full legal protections, including healthcare, pensions, and leave entitlements, which helps with retention.
5. Reduced Administrative Burden
The umbrella company handles HR tasks such as onboarding, contracts, payroll, and terminations, freeing up the foreign business to focus on operations.
Foreign Companies vs. Independent Freelancers in Turkey
Sometimes, foreign businesses consider hiring freelancers directly. However, this carries risks:
- Misclassification of workers can lead to fines.
- Independent contractors may not meet compliance standards.
- Work permits for foreign freelancers are harder to secure.
Hiring through an umbrella company ensures workers are legally employed, reducing risk for the foreign company Turkey.
Umbrella Company vs. Employer of Record (EOR)
Umbrella companies and Employers of Record (EOR) are often compared. While similar, there are distinctions:
- Umbrella Company: Best for freelancers, contractors, and short-term employees.
- EOR: More comprehensive HR solution for businesses building larger teams in Turkey.
A foreign company can choose between the two depending on the scale and duration of their hiring needs.
Real-Life Example
Imagine a German IT firm that wants to hire two software developers in Istanbul for a six-month project. Setting up a Turkish subsidiary would take months and cost thousands in legal and accounting fees. Instead, the company partners with an umbrella company. Within weeks, the developers are legally employed, receiving monthly salaries and social security, while the German firm maintains full operational control.
Key Considerations When Choosing an Umbrella Company
Not all umbrella companies in Turkey offer the same services. A foreign business should evaluate:
- Experience with international clients.
- Transparency in fees (percentage-based or fixed).
- Support with work permits for foreign hires.
- Strong compliance record with Turkish authorities.
- Availability of English-speaking support staff.
For international businesses, hiring in Turkey can be a strategic move but also a legal challenge. Partnering with an umbrella company allows a foreign company Turkey to employ workers legally, reduce administrative burdens, and test the market without committing to a full legal entity.
Whether hiring one contractor or building a small local team, umbrella companies provide an efficient, compliant, and cost-effective pathway to access Turkey’s growing talent pool.
If your business is considering expansion into Turkey, exploring the umbrella company model could be the smartest first step.