Termination of Employment Contract and Right to Severance Pay

The termination of an employment contract is a process that yields significant legal consequences for both the employee and the employer. Labor Law No. 4857 protects the rights of the parties by tying this process to specific rules. For employees, the most curious aspect of this process is undoubtedly the right to “severance pay” (kıdem tazminatı). Knowing the required conditions to receive severance pay, which is the reward for years of labor, and how the termination should be executed is of great importance. In this article, we discuss the types of employment contract termination and all details of the right to severance pay.

Types of Termination of Employment Contract

1. Termination with Notice (Süreli Fesih) In indefinite-term employment contracts, it is essential to perform the termination by complying with the notification periods (notice periods) specified in the law. These periods are determined according to the employee’s seniority:

• For employees working less than 6 months: 2 weeks

• For employees working between 6 months and 1.5 years: 4 weeks

• For employees working between 1.5 years and 3 years: 6 weeks

• For employees working more than 3 years: 8 weeks

The party (employer or employee) who does not comply with these periods is obliged to pay the other party a notice pay (ihbar tazminatı) in the amount of the wage corresponding to this period.

2. Immediate Termination for Just Cause (Haklı Nedenle Derhal Fesih) In the presence of “just causes” listed in Articles 24 (for the employee) and 25 (for the employer) of the Labor Law, the parties can terminate the employment contract immediately without complying with the notification periods.

• Just Causes for Employee: Non-payment of wages on time, employer’s behavior contrary to ethics and good will, existence of a situation endangering health in the workplace.

• Just Causes for Employer: Employee’s absenteeism, employee engaging in behavior damaging the honor and dignity of the employer or their family, endangering occupational safety.

What is Severance Pay and What are its Conditions? Severance pay is a lump-sum payment received by an employee who has worked for at least one year from the employer in proportion to the duration of service if the employment contract is terminated for certain reasons specified in the law. This right is constitutionally guaranteed.

Conditions for Entitlement to Severance Pay:

1. Having Worked for At Least 1 Year: Having worked for at least one full year for the same employer is a prerequisite.

2. Termination of Employment Contract for Reasons Specified in Law:

   • Being dismissed by the employer for reasons other than “behavior contrary to ethics and good will” specified in Labor Law Article 25/II.

   • Leaving the job (resigning) by the employee for just causes listed in Labor Law Article 24.

   • Leaving the job due to military service (for male employees).

   • Leaving the job for retirement (old age, disability, lump-sum payment).

   • Female employee leaving the job within one year from the date of marriage.

   • Death of the employee (compensation is paid to legal heirs).

In Which Cases Can Severance Pay Not Be Claimed?

• If the employee leaves the job voluntarily without a just cause (normal resignation).

• If the employer terminates the contract for just cause due to the employee’s behavior contrary to ethics and good will (theft, insult, absenteeism, etc.).

How is Severance Pay Calculated? Severance pay is paid in the amount of 30 days’ gross wage for each full year of service of the employee. Periods exceeding one year are also included in the calculation proportionally.

• Dressed Gross Wage: It is the wage found by adding all financial benefits provided regularly, such as transportation, food, bonuses, and premiums, to the gross salary last received by the employee.

• Ceiling Limit: There is a “severance pay ceiling” determined by the government every six months. Even if the employee’s dressed gross wage is above this ceiling, the calculation is made over this ceiling wage.

Conclusion Termination of employment contract and subsequent compensation rights are among the most technical and disputed areas of Labor Law. Managing the process correctly is critical to avoid loss of rights, whether being dismissed or resigning for a just cause. Getting consultancy from a labor law lawyer before signing documents like termination notices or release forms (ibraname), or when you think your compensations are paid incompletely, will ensure that you protect your rights fully.