Companies typically use an Employer of Record for fast entry, payroll management for existing entities, and entity setup for durable presence. Turkey's kıdem tazminatı (severance pay) liability and its inflation-driven salary adjustment cycles are the two features requiring the most careful planning.

Employer of Record in Turkey

An EOR removes the need to register with the Social Security Institution (SGK) and manage Turkey's severance pay (kıdem tazminatı) obligations. It suits early hires and market testing, and is particularly valuable in Turkey given the complexity of inflation-driven salary adjustments and the need for specialist local expertise to keep payroll compliant in a fast-changing macroeconomic environment. It is less suited to established entities.

How payroll works in Turkey

Turkish payroll withholds income tax at progressive rates and both employer and employee contribute to SGK, covering health, pension, and unemployment insurance. Payroll is monthly, and severance pay accrual (kıdem tazminatı), payable on qualifying termination or resignation after specific tenure and cause conditions, is calculated based on final salary and years of service and needs ongoing accrual tracking. High inflation has historically driven frequent minimum wage and salary adjustment cycles, requiring payroll systems to be updated more often than in low-inflation markets.

Payroll frequency and reporting obligations

Monthly payroll is standard, with SGK contributions remitted monthly. Income tax withholding is also remitted monthly. High inflation has required frequent adjustment of minimum wage and payroll figures in recent years — Turkey's minimum wage is reviewed and typically increased at least annually, and in high-inflation periods has been adjusted mid-year. Employers must register with SGK before the first employee starts work, and each new employment relationship must be notified to SGK before the employee starts.

Key payroll nuances

Severance pay (kıdem tazminatı) is a substantial statutory liability that accrues from the start of employment and is payable on termination without cause or resignation after a minimum tenure, calculated on final gross salary — this needs specialist calculation and should be provisioned as an ongoing liability from day one. Notice pay (ihbar tazminatı) is a separate statutory obligation tied to tenure. High inflation has required frequent adjustment of minimum wage and payroll figures in recent years, and collective agreements in some sectors mandate additional periodic increases on top of the statutory minimum wage adjustments.

Pay components and employer costs

Typical pay components include base salary. Employer SGK contributions commonly add around 20 percent on top of gross salary. Severance and notice pay add significant contingent termination-related cost that should be modelled into total workforce planning — for long-tenured employees, the severance liability can be substantial. In high-inflation periods, the real cost of salary also needs to be modelled dynamically rather than as a fixed annual budget.

Benefits and leave entitlements

Statutory annual leave starts at 14 days after one year of service, rising with tenure to a maximum of 26 days for employees with 15 or more years of service. Sick leave is covered by SGK after the first two days, which are employer-funded. Maternity leave is 16 weeks (8 weeks before and 8 weeks after birth). Paternity leave is a separate statutory entitlement. Public holidays number around 14 to 15 per year, including religious holidays that shift by lunar calendar.

Hiring and employment contracts

Written contracts are standard practice and required for certain contract types. Probation periods are capped at two months (extendable to four months by collective agreement). Fixed-term contracts are permitted for genuinely temporary work. Termination without just cause triggers notice pay and, above minimum tenure (one year), severance pay obligations. The severance calculation and the applicable notice period rules need specialist local advice.

Entity setup in Turkey

The Limited Şirket (Ltd Şti) is the standard vehicle for foreign employers, with a minimum capital of TRY 10,000. Registration is completed through the Trade Registry, followed by SGK registration and tax registration before hiring. End-to-end setup typically takes four to six weeks.

EOR vs Payroll Management vs Entity Setup — Turkey

Frequently asked questions