When an employee leaves a company in Turkey, the employer must prepare a final payroll covering all outstanding employment-related payments.
The calculation can involve much more than simply paying the employee’s salary up to their last working day.
Depending on the circumstances, final payroll in Turkey may include outstanding salary, unused annual leave, bonuses, commissions, notice compensation, severance pay and other amounts owed to the employee.
Each component must be identified separately because the applicable income tax and social security treatment can differ.
For foreign employers, correctly preparing the final payroll is therefore one of the most important steps in an employee termination.
What Is Final Payroll in Turkey?
Final payroll is the last payroll calculation prepared when an employee’s employment relationship ends.
The objective is to determine all outstanding amounts owed between the employer and employee as of the termination date.
A final payroll may include:
- salary up to the termination date;
- overtime;
- outstanding bonuses;
- sales commissions;
- unused annual leave;
- notice compensation;
- severance pay;
- expense reimbursements;
- other contractual entitlements; and
- applicable deductions.
Not every employee will be entitled to all of these payments.
The termination reason, seniority, employment agreement and individual circumstances must be reviewed first.
Step 1 – Determine the Termination Date
The first element required for a final payroll calculation is the employee’s official termination date.
This date affects several calculations, including:
- final salary;
- length of service;
- annual leave balance;
- notice period;
- severance eligibility;
- SGK reporting; and
- other employment entitlements.
HR and payroll records should use the same termination date.
Any discrepancy can lead to incorrect salary, social security or termination calculations.
Step 2 – Calculate Outstanding Salary
The employee must receive any salary earned up to the termination date.
If the employee leaves during the month, the employer must determine the remuneration applicable to the period worked.
For example, if an employee leaves during September, the final payroll must include the salary corresponding to the employee’s employment during September according to the applicable payroll rules.
Additional amounts may also need to be included, such as:
- overtime;
- commissions;
- allowances;
- bonuses; and
- other earned remuneration.
Step 3 – Check Unused Annual Leave
Unused annual leave is one of the most important elements of Turkish final payroll.
When an employment contract ends, annual leave that the employee has earned but not used must be paid.
This applies regardless of whether the employment ends through resignation, dismissal or another termination mechanism, provided the employee has an outstanding accrued entitlement.
The payment is based on the employee’s salary applicable at the termination date.
Example of Unused Annual Leave
Consider an employee leaving with:
Monthly Gross Salary: TRY 120,000
Unused Annual Leave: 12 days
Using a simplified daily calculation:
TRY 120,000 ÷ 30 = TRY 4,000 per day
The gross unused leave payment would therefore be:
TRY 4,000 × 12 = TRY 48,000 gross
The TRY 48,000 is a gross amount.
The applicable payroll deductions must then be determined.
Unused Leave and Payroll Deductions
Unused annual leave payments are employment-related remuneration and must be processed accordingly.
They can therefore affect the employee’s:
- taxable employment income;
- cumulative income tax calculation; and
- SGK contribution base according to the applicable rules and ceiling.
For SGK purposes, unused annual leave paid following termination is generally associated with the earnings of the termination month, subject to the applicable maximum contribution base.
The employee’s unused leave balance should therefore be confirmed before final payroll is calculated.
Step 4 – Determine Whether Notice Compensation Is Due
Notice compensation – ihbar tazminatı – may become payable when an indefinite-term employment agreement is terminated without observing the applicable statutory notice period.
Under Turkish Labour Law, statutory notice periods generally depend on the employee’s length of service.
Less Than 6 Months
2 weeks
6 Months to 1.5 Years
4 weeks
1.5 Years to 3 Years
6 weeks
More Than 3 Years
8 weeks
These are statutory minimum notice periods.
The employment agreement may need to be reviewed for additional contractual provisions.
When Does the Employer Pay Notice Compensation?
If an employer terminates an indefinite-term employment agreement in circumstances requiring notice but does not allow the employee to work through the applicable notice period, the employer may instead pay compensation corresponding to that notice period.
For example, an employee with two years of service is generally subject to a:
6-week notice period
If the employer terminates the employment immediately rather than allowing the employee to work during the notice period, notice compensation may become payable.
However, notice compensation does not apply to every termination.
The legal reason for termination must be reviewed.
Can an Employee Owe Notice Compensation?
Yes.
Notice obligations can also apply to employees.
An employee resigning from an indefinite-term employment agreement without a valid immediate termination ground is generally expected to comply with the applicable notice period.
If the employee leaves without observing the required notice period, the employer may potentially claim notice compensation from the employee.
This means that final payroll should not automatically assume that notice compensation is always payable to the employee.
The direction of the potential liability depends on the circumstances of termination.
Notice Compensation and Tax
Notice compensation should be distinguished from severance pay for tax purposes.
Notice compensation does not benefit from the same income tax exemption applicable to qualifying severance payments.
Employers should therefore ensure that notice compensation is correctly identified in payroll rather than combining all termination payments under a generic “termination compensation” heading.
Notice Compensation and SGK
Notice compensation is also treated differently from ordinary salary for SGK purposes.
Where the employment relationship has ended and an amount is paid as compensation instead of the employee working the notice period, the payment does not represent salary for actual employment during that period.
The payroll and SGK treatment must therefore distinguish between:
Salary paid while the employee actually works during notice
and
Notice compensation paid instead of the notice period.
This distinction is important when calculating final payroll.
Step 5 – Determine Whether Severance Pay Is Due
Severance pay – kıdem tazminatı – is another major component of termination calculations in Turkey.
However, not every employee leaving a company is entitled to severance pay.
Eligibility depends on factors including:
- length of service;
- reason for termination;
- employee resignation circumstances;
- retirement-related conditions;
- military service in applicable cases;
- marriage-related termination for eligible female employees under the statutory conditions; and
- other legally recognised termination grounds.
As a general rule, at least one year of service is required for statutory severance entitlement under the applicable framework.
The termination reason must always be reviewed before severance is calculated.
How Is Severance Pay Calculated?
Where the employee qualifies, statutory severance pay is generally calculated by reference to 30 days of eligible gross remuneration for each completed year of service.
Proportionate periods beyond completed years are also taken into account.
A simplified formula is:
Eligible Gross Monthly Remuneration × Years of Service = Gross Severance Pay
However, this calculation is subject to the statutory severance pay ceiling applicable at the termination date.
The remuneration base may also include certain regular monetary and measurable benefits provided to the employee.
Which Benefits Can Affect Severance Pay?
Severance calculations are not necessarily based only on the employee’s basic salary.
Regular benefits can potentially form part of the relevant remuneration base.
Depending on the circumstances, this may include regularly provided items such as:
- meal benefits;
- transportation benefits;
- regular bonuses;
- family benefits;
- housing-related benefits; and
- other regular monetary or measurable benefits.
By contrast, certain occasional or non-continuous payments are generally excluded.
The employee’s compensation structure should therefore be reviewed before calculating severance.
Severance Pay Ceiling
Statutory severance pay is subject to a maximum amount per year of service.
This ceiling is updated periodically.
For highly paid employees, the employee’s actual monthly salary may therefore exceed the amount that can be used for the statutory severance calculation.
For example, if an employee earns substantially more than the applicable severance ceiling, the statutory calculation is generally limited to the ceiling for each eligible year of service.
Employers should use the ceiling applicable on the termination date.
Severance Pay and Income Tax
Qualifying statutory severance pay receives specific income tax treatment.
Within the applicable statutory exemption limits, severance pay can be exempt from income tax.
However, amounts exceeding the applicable exemption or certain additional termination payments may receive different tax treatment.
Employers should therefore avoid treating every payment labelled “severance” as automatically tax-free.
The legal nature and amount of the payment must be reviewed.
Severance Pay and Stamp Tax
Qualifying severance pay is generally subject to stamp tax, even where it benefits from the applicable income tax exemption.
This distinction is important when estimating the employee’s final net termination payment.
The Ministry of Labour specifically confirms that statutory severance pay is subject to stamp tax rather than ordinary income tax deductions within the applicable framework.
Step 6 – Review Bonuses and Commissions
An employee may have earned a bonus or commission before leaving the company.
For example:
Sales Commission Earned Before Termination
or
Performance Bonus Already Vested
may still need to be paid after the employee’s departure.
The employment agreement, bonus plan and commission policy should therefore be reviewed.
Where a bonus or commission constitutes employment remuneration, it may need to be processed through the employee’s final payroll with the applicable tax and SGK treatment.
Step 7 – Review Expense Reimbursements
Outstanding legitimate business expenses should also be settled.
These may include:
- business travel;
- accommodation;
- client expenses;
- transportation;
- professional purchases; and
- other documented business costs.
Genuine expense reimbursements should be distinguished from salary or termination compensation.
The employee should ideally submit all outstanding expenses before the final payroll is closed.
Example of a Final Payroll
Consider an employee whose employment ends with the following amounts:
Outstanding Gross Salary: TRY 60,000
Unused Annual Leave: TRY 40,000
Outstanding Commission: TRY 20,000
Notice Compensation: TRY 120,000
Severance Pay: TRY 200,000
The total gross amounts associated with the employee’s departure would be:
TRY 440,000
However, the employer should not simply apply the same deductions to the entire TRY 440,000.
Each component must be classified separately.
For example:
- salary receives ordinary payroll treatment;
- unused leave receives its applicable income tax and SGK treatment;
- commission is generally employment remuneration;
- notice compensation has its specific tax and SGK treatment; and
- qualifying severance pay benefits from its specific statutory treatment.
This classification is one of the most important aspects of final payroll.
Final Payroll and Cumulative Income Tax
Turkey applies progressive income taxation to employment income on a cumulative basis.
This can significantly affect final payroll.
An employee leaving later in the calendar year may already have accumulated a substantial taxable income base.
Additional taxable amounts paid at termination can therefore fall partly or entirely within a higher marginal income tax bracket.
As a result, the net final payment may be lower than the employee expects when looking only at the gross amounts.
Employers should avoid communicating a net termination amount before payroll calculations have been completed.
Resignation
When an employee resigns, final payroll may still include:
- outstanding salary;
- unused annual leave;
- earned bonuses;
- commissions;
- expenses; and
- other contractual amounts.
Ordinary resignation does not automatically create a severance entitlement.
It also does not normally create a right for the employee to receive notice compensation.
If the employee leaves without respecting the applicable notice period and without a legally valid immediate termination ground, the employer may potentially have a notice compensation claim.
Employer-Initiated Termination
When the employer terminates employment, additional payments may become relevant.
Depending on the termination reason and circumstances, these can include:
- outstanding salary;
- unused annual leave;
- notice compensation;
- severance pay;
- bonuses;
- commissions; and
- other contractual entitlements.
The legal basis for termination should therefore be established before payroll is calculated.
Fixed-Term Contracts
Fixed-term employment contracts require a different analysis.
The statutory notice periods under Article 17 of Turkish Labour Law are primarily applicable to indefinite-term employment contracts.
Where a valid fixed-term agreement simply reaches its agreed expiry date, ordinary notice compensation principles do not apply in the same way.
However, outstanding salary, unused annual leave and other acquired employee rights still need to be reviewed.
Early termination of a fixed-term agreement requires separate legal analysis.
Employee Death
If employment ends because of the employee’s death, outstanding employment rights may become payable to the employee’s legal beneficiaries according to the applicable rules.
The employer should therefore review:
- outstanding salary;
- unused annual leave;
- applicable severance rights;
- other employee receivables; and
- statutory beneficiary requirements.
These situations should be handled separately from an ordinary resignation or dismissal.
SGK Termination Reporting
Ending the employment relationship also creates an SGK reporting obligation.
The employee’s departure must be reported using the appropriate termination code corresponding to the actual reason for leaving.
Selecting the correct termination code is important because it can affect:
- the employee’s social security records;
- unemployment benefit eligibility;
- employer records; and
- subsequent employment disputes.
The termination code should therefore match the legal and factual reason for termination.
Why the Termination Code Matters
Foreign employers sometimes view the SGK termination code as an administrative formality.
It is not.
For example, resignation, employer termination, expiry of a fixed-term agreement, retirement and other departure reasons have different termination codes.
Using an incorrect code can create inconsistencies between:
Termination Letter
Employment Records
Final Payroll
and
SGK Reporting
HR, legal and payroll teams should therefore agree on the termination reason before the SGK exit notification is submitted.
Gross vs Net Termination Packages
Employers sometimes negotiate a termination package with an employee.
The agreement should clearly specify whether amounts are expressed as:
Gross
or
Net
A promise to pay:
TRY 500,000 gross
is fundamentally different from a promise to guarantee:
TRY 500,000 net
With a net agreement, the employer may have to gross up taxable components to ensure that the employee receives the agreed amount after statutory deductions.
This can significantly increase employer cost.
Mutual Termination Agreements
Employers and employees may sometimes agree to terminate employment through a mutual termination arrangement.
Additional compensation may be negotiated as part of the agreement.
The tax treatment of such additional compensation requires particular attention.
Turkish tax legislation contains specific rules concerning payments made under mutual termination agreements and similar arrangements.
Employers should therefore distinguish between:
- statutory severance;
- notice compensation;
- unused annual leave;
- ordinary salary;
- bonus payments; and
- additional mutual termination compensation.
Combining all amounts under one heading can create incorrect tax treatment.
Documents Required for Final Payroll
Before preparing final payroll, the payroll team should ideally receive:
- employee name and identification information;
- employment start date;
- termination date;
- termination reason;
- current salary;
- unused annual leave balance;
- notice information;
- severance eligibility;
- outstanding bonuses;
- commissions;
- expenses;
- additional compensation agreements; and
- applicable termination documentation.
Providing complete information reduces the risk of having to recalculate payroll after the employee has left.
Final Payroll Checklist
Before finalising an employee’s departure, employers should confirm:
1. Final working date
Confirm the official termination date.
2. Outstanding salary
Calculate salary earned up to termination.
3. Annual leave
Confirm the final unused leave balance.
4. Notice period
Determine whether notice was worked or compensation is due.
5. Severance pay
Check eligibility and calculate the applicable amount.
6. Bonuses and commissions
Identify all amounts already earned.
7. Expenses
Settle outstanding documented business expenses.
8. Tax treatment
Classify each payment correctly.
9. SGK treatment
Determine which payments enter the contribution base.
10. Termination reporting
Use the appropriate SGK termination code and complete the required reporting.
Common Final Payroll Mistakes
Foreign employers should avoid common errors such as:
- calculating only the employee’s final salary;
- forgetting unused annual leave;
- assuming resignation eliminates annual leave rights;
- paying severance without checking eligibility;
- using the employee’s base salary alone without reviewing regular benefits for severance calculations;
- ignoring the severance ceiling;
- treating notice compensation like severance pay;
- applying identical tax and SGK deductions to every termination payment;
- forgetting outstanding bonuses or commissions;
- agreeing a net termination package without calculating the gross-up;
- using an incorrect SGK termination code; and
- processing termination before HR, legal and payroll records are aligned.
Why Foreign Employers Should Request a Termination Calculation
Before confirming an employee’s exit package, foreign employers should request a detailed termination simulation.
The calculation should separately identify:
Outstanding Salary
Unused Annual Leave
Notice Compensation
Severance Pay
Bonus / Commission
Other Compensation
Employee Deductions
Estimated Net Payment
Employer Cost
This provides the employer with a clear understanding of both the employee’s entitlement and the financial cost of termination.
Preparing final payroll in Turkey requires much more than paying an employee’s last monthly salary.
Employers must review all outstanding employment rights and determine whether the employee is entitled to unused annual leave, notice compensation, severance pay, bonuses, commissions and other payments.
The most important principle is that each termination payment must be classified separately.
Salary, unused annual leave, notice compensation and severance pay do not necessarily receive the same income tax or SGK treatment.
The reason for termination must also be correctly reflected in the company’s employment documentation and SGK reporting.
For foreign employers, a detailed termination calculation should therefore be prepared before communicating a final net amount or termination package to the employee.
Set Idari Destek supports international companies with final payroll and termination calculations in Turkey, including unused annual leave, notice compensation, severance pay, gross-to-net calculations and SGK termination processes.