SEVERANCE PAYMENT DUE TO RETIREMENT (MARCH 2018)

Severance payment is a type of compensation paid by the employer to the employee employed under Labor Law provided that such employee must work at least for one-year period at the work place of the employer and employment contract must be terminated due to reasons specified in the Law. Though the Labor Law numbered 1475 was annulled by the Labor Law numbered 4857 (“Law”), Article 14 of the annulled law, which regulates the severance payment, is still in force and applicable.

The main principle is on severance payment that, the employee cannot be entitled to severance payment in case of resignation voluntarily without any justified reason. An exception to the mentioned principle is resignation of the employee due to retirement. An employee shall be entitled to severance payment due to resignation voluntarily, even if he/she is not entitled to retirement due to age condition, in case such employee has completed the insurance period and the number of premium payment days. The conditions to be entitled to severance payment due to retirement are as follows:

  • 15-year social insurance period must be fulfilled, 
  • The total number of premium days must be at least 3,600 days,
  • The date of first social insurance must be on and before 08/09/1999

As it is understood, all insured employees are not within the mentioned scope. The employees who employed under social insurance for the first time after 08/09/1999 and fulfilled the above-mentioned conditions, with exception of the age condition, shall not be entitled to severance payment due to retirement.

Employers shall be obliged to make severance payment to the employees exercising termination right due to retirement up on submission of the document provided by Provincial Directorate of Social Security Institution certifying fulfilment of the above-mentioned conditions. 

An employee who resigned due to retirement up on fulfilment of above detailed conditions except the age condition and who entitled to severance payment, can work again at a different work place even in a short period after his/her retirement. Supreme Court agrees that such preference of the employee is within the scope of freedom of work under Turkish Constitutional Law and does not constitutes abuse of right under Article 2 of Turkish Civil Code. Hence, such employee shall be entitled to severance payment at his/her new work place after one-year period for the same reason.

However, the point to be taken into consideration and to be evaluated for each case separately is; whether the employee exercised his/her termination right fairly or not. Because Supreme Court may render decision in favor of the employer in case the employee exercises his/her termination right unfairly. In other words, Supreme Court rejects the demand of severance payment against the employee in case of abuse of termination right by the employee.

Besides, if the employee starts to work again after being entitled to severance payment due to retirement, the pension fund must be cut off and the employee must be subject to all insurance branches. Otherwise, such employee working at a new work place with "retired status", shall not be entitled to claim severance payment up on resignation due to retirement.

Consequently; it is statutory for the employers to make severance payment to the employee terminating his/her employment contract due to retirement up on submission of the document provided by Provincial Directorate of Social Security Institution certifying fulfillment of the above-mentioned conditions to be entitled to severance payment. However, it is critical that the law does not protect abuse of termination right by the employee.