Expanding into new markets can unlock growth opportunities, increase revenue, and provide access to skilled talent. For many international companies, Turkey has emerged as a strategic destination. With its young workforce, competitive labor costs, and location bridging Europe and Asia, Turkey offers unique advantages for businesses seeking global expansion.
However, entering the Turkish market is not without challenges. Setting up a subsidiary, navigating tax laws, and ensuring compliance with labor regulations can be costly and time-consuming. One alternative that more companies are exploring is hiring through an umbrella company. But is this the right path for your Business Turkey Turkey expansion strategy?
In this article, we’ll explore how umbrella companies work, their benefits and limitations, and whether they are suitable for your business growth in Turkey.
Why Expand to Turkey?
Before diving into umbrella companies, let’s look at why businesses consider Turkey as a destination for expansion:
- Strategic location: Positioned between Europe and Asia, Turkey is a gateway to multiple markets.
- Skilled workforce: Thousands of engineers, IT specialists, and business graduates join the labor market every year.
- Competitive costs: Wages and operational expenses are generally lower than in Western Europe.
- Growing digital economy: E-commerce, fintech, and IT sectors are booming.
- Government incentives: Turkey offers investment support in certain industries.
These advantages make Turkey attractive, but compliance barriers often slow down business entry.
The Challenges of Business Expansion in Turkey
International businesses face several hurdles when entering Turkey:
- Legal entity requirement: To hire employees directly, most companies must register a local branch or subsidiary.
- Complex taxation: Employers must manage payroll, income tax, and social security contributions (SGK).
- Labor law compliance: Contracts, termination procedures, and severance rules are strictly regulated.
- Work permits for foreign staff: Hiring non-Turkish nationals requires government approval.
- Time and cost: Incorporating a subsidiary can take months and require significant financial investment.
For companies wanting a faster, leaner market entry, umbrella companies provide a practical solution.
What Is an Umbrella Company in Turkey?
An umbrella company is a third-party organization that employs workers on behalf of client companies. While the umbrella company becomes the official employer in Turkey, the client business retains day-to-day control of the employee’s tasks.
The umbrella company handles:
- Employment contracts.
- Payroll processing and payslips.
- Taxation and SGK contributions.
- Invoicing the client company.
- Compliance with Turkish labor laws.
This model allows businesses to access Turkish talent quickly and legally without creating a local entity.
Benefits of Using an Umbrella Company for Business Expansion
For international companies evaluating Business Turkey Turkey strategies, umbrella companies offer several clear benefits:
1. Faster Market Entry
Instead of waiting months to establish a subsidiary, businesses can hire talent in Turkey within weeks through an umbrella company.
2. Reduced Costs
Legal incorporation, accounting, and compliance management in Turkey can be expensive. Umbrella companies charge service fees, but they are significantly lower than the cost of setting up and running a local entity.
3. Compliance and Risk Reduction
The umbrella company assumes legal responsibility for labor law compliance, reducing risks of fines or disputes.
4. Payroll and Tax Management
Umbrella companies handle tax withholding, SGK contributions, and payslip issuance, ensuring smooth payroll operations.
5. Flexibility
Umbrella companies are ideal for hiring:
- Short-term project teams.
- Pilot staff before full expansion.
- Contractors and freelancers.
6. Support for Foreign Workers
If your expansion requires relocating staff to Turkey, umbrella companies can sponsor work permits and residence applications.
Limitations of the Umbrella Company Model
While umbrella companies offer many benefits, they are not always the best choice for every business.
- Service Fees: Umbrella companies typically charge a percentage of payroll (5–10%) or a fixed monthly fee.
- Limited Scalability: For large teams or permanent market presence, opening a subsidiary may be more cost-effective.
- Less Direct Control: The umbrella company is the official employer, which may feel restrictive for some businesses.
- Not Suitable for All Industries: Certain regulated sectors may require direct licensing or incorporation.
For companies planning a long-term or large-scale operation, establishing a legal entity in Turkey might still be necessary.
Comparing Umbrella Companies with Other Options
When expanding into Turkey, businesses typically consider three options:
1. Setting Up a Subsidiary
- Pros: Full control, long-term presence, brand establishment.
- Cons: High cost, lengthy setup, complex compliance.
2. Employer of Record (EOR)
- Pros: Comprehensive HR outsourcing solution.
- Cons: Usually more expensive than umbrella companies.
3. Umbrella Company
- Pros: Quick, flexible, cost-effective for small teams.
- Cons: Less suitable for large-scale, permanent expansions.
For many businesses testing the Turkish market, umbrella companies strike the right balance.
Step-by-Step: How Businesses Work with an Umbrella Company in Turkey
- Select a Provider: Choose an umbrella company experienced with international clients.
- Sign Agreement: The foreign company contracts with the umbrella provider.
- Hire Talent: The umbrella company employs the worker under Turkish law.
- Payroll Processing: The umbrella invoices the client, deducts taxes, and pays the worker.
- Compliance Monitoring: The umbrella ensures all labor, tax, and immigration laws are followed.
This streamlined process makes expansion faster and more efficient.
Example Scenario
A U.S.-based software company wants to hire three developers in Istanbul for a 12-month project. Instead of creating a subsidiary, the company partners with an umbrella provider.
- The umbrella company employs the developers.
- Payroll, SGK, and tax compliance are managed by the umbrella.
- The U.S. company pays a single monthly invoice.
The company gains immediate access to Turkish IT talent while reducing risk and cost — an effective Business Turkey Turkey expansion strategy.
When an Umbrella Company Is the Right Choice
An umbrella company is ideal if your business wants to:
- Test the Turkish market before full investment.
- Hire a small team for a project.
- Work with freelancers and contractors legally.
- Reduce compliance risks while maintaining operational focus.
- Expand quickly without the delays of incorporation.
If your company plans long-term, large-scale expansion with significant operations, setting up a subsidiary may eventually be the better choice.
Conclusion
Expanding into Turkey presents immense opportunities, but also regulatory and administrative challenges. Umbrella companies provide an efficient, cost-effective pathway for international businesses to access Turkish talent without the complexity of setting up a local entity.
For companies evaluating Business Turkey Turkey strategies, umbrella companies can be the right choice for flexible, compliant, and fast market entry. While not suitable for every scenario, they are particularly valuable for short-term projects, pilot expansions, and businesses looking to explore opportunities before making a long-term commitment.
By choosing the right umbrella company partner, your business can confidently expand into Turkey, reduce risks, and unlock growth in one of the world’s most dynamic markets. Please contact our team for more information.