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A. Reduction in Workforce
1. Is there a concept of redundancy – based on a shortage of work or other economic reasons – as a justified reason to dismiss employees in your jurisdiction? If so, how is it defined?
Yes, the concept of redundancy is regulated under Article 18 of the Turkish Labour Code No. 4857 (TLC). As per Article 18, in workplaces employing 30 or more workers (international headcount is taken into account when calculating the number of employees), an employer that terminates the indefinite-term employment contract of an employee with at least six months of seniority must rely on a valid reason arising from the employee’s competence or behaviour, or the requirements of the enterprise, workplace, or business (valid reasons). The seniority requirement is not required for workers working in underground works. The above rules are collectively referred to as “job security provisions”.
Accordingly, terminations based on redundancy may be made in the presence of a valid reason (absent the presence of justified grounds), and in writing. The burden of proof lies with the employer in proving that there were, indeed, valid reasons for the redundancy.
2. In brief, what is the required process for making someone redundant?
The employer may terminate the employment contract based on either: (i) a valid reason; or (ii) a just cause. Redundancies fall under the valid reason category.
If job security provisions apply to the employee in question, as explained in question 1, the employee’s employment contract must be terminated in writing and based on a valid reason.
Accordingly, the employer must clearly inform the employee, in writing, of the valid reason for why their employment is terminated (ie, redundancy, which may be categorised as a decrease in the workforce, operational decisions, or restructuring).
The employer should ideally be in a position to prove that such grounds exist and may choose to attach any probative documents to the written notice it will serve to the impacted employee.
Termination based on redundancy should also be made “as a last resort”. If there are alternative or similar positions that may be offered to the employee, then these should be considered before proceeding with the termination.
The employer must also comply with the notice periods specified in the TLC in cases of termination for valid reason, and is not entitled to immediately terminate the employee’s contract.
Notice periods are determined according to the duration of the employee’s employment under Turkish employment law.
As per the TLC, the notice periods are as follows:
However, under the TLC, if the employer opts to dismiss the employee before the employee’s notice period expires, the employer will have to pay the corresponding notice pay in lieu of a notice period. The employment commencement date must be taken as a basis when calculating the notice period of the employee.
Please note that if: (i) the employer terminates the employment contract based on justified grounds regulated under the TLC; (ii) the employment contract is a fixed-term employment contract; or (iii) the employment contract is terminated due to retirement, military service, marriage, or the death of the employee, it is not obligatory to comply with the notice period.
3. Does this process change where there is a “collective redundancy”? If so, what is the employee number threshold that triggers a collective redundancy?
Pursuant to Article 29 of the TLC, collective redundancies may be made by the employer due to economic, technological, structural, and similar business, workplace, or work-related requirements.
If the following number of employees are dismissed within a period of one month, it shall be considered a “collective redundancy”:
In such cases, employers must notify the workplace union representatives, the relevant regional directorate, and the Turkish Employment Agency at least 30 days before the collective redundancy. This notification must include information on the reasons for the redundancy, the number and groups of employees who will be affected, and the timeframe in which the termination of employment will take place. Termination notices shall take effect 30 days after the employer notifies the regional directorate of the collective redundancy request.
4. Do employers need to consult with unions or employee representatives at any stage of the redundancy process? If there is a requirement to consult, does agreement need to be reached with the union/employee representatives at the end of the consultation?
Yes, as explained in detail in question 3, if the thresholds relating to the number of employees in the workplace and the number of impacted workers are reached, then employers must notify this in writing at least 30 days in advance to the workplace union representatives (if any), the relevant regional directorate, and the Turkish Employment Agency.
If the workplace permanently ends its activities, the employer will not have to notify the workplace union representatives. The employer will only be obliged to notify the relevant regional directorate and the Turkish Employment Agency at least 30 days in advance, and announce the situation at the workplace.
Moreover, no agreement needs to be reached with the union representative at the end of the notification. However, after the notification, a meeting must be held between the union representatives and the employer. During the meeting, issues such as preventing collective dismissal, reducing the number of employees to be dismissed, or minimising the negative effects of the redundancy for the employees must be discussed. At the end of these negotiations, a document must be issued to indicate that the meeting has taken place.
5. If agreement is not reached, can the restructure be delayed or prevented? If so, by whom?
No, the restructure cannot be delayed, nor prevented. However, as stated in question 17, trade unions are authorised to file a lawsuit on behalf of their members (employees) for their rights arising from their employment contract, the labour relationship, and social security rights.
6. What does any required consultation process involve (ie, when should it commence, how long should it last, what needs to be covered)? If an employer fails to comply with its consultation obligations, what remedies are available?
As stated in question 4, after the employer notifies the union representatives about the collective redundancy, a meeting shall be held between the union representatives and the employer. During the meeting, the issues of preventing collective dismissal, reducing the number of employees to be dismissed, or minimising the negative effects of the redundancy for the employees shall be discussed. At the end of the negotiations, a document shall be issued to indicate that the meeting has taken place.
An administrative fine of 3,475 liras is imposed on employers who violate the collective redundancy provisions regulated under the TLC.
7. Do employers need to present an economic business rationale as part of the consultation with unions/employee representatives? If so, can this be challenged and how would such a challenge normally be made?
In the event of collective redundancy, pursuant to Article 29 of the TLC, the employer is required to indicate the reasons for the dismissal in the notification to the workplace union representatives, but the workplace union representatives will not be able to prevent this without filing a lawsuit. However, as stated in detail in question 17, unions will be able to file a lawsuit on behalf of their members, at their own discretion.
8. Is there a requirement or is it best practice to consult employees individually (whether or not the employer is also legally required to collectively consult employees)?
There is no such requirement. That said, if it is deemed to be strategically favourable, employers may choose to do so before proceeding with the termination, with a view to perhaps conclude a “mutual termination agreement”[1] to reduce the risk of litigation (reinstatement and employment receivables).
9. Are there rules on the selection of individual employees for redundancy?
The TLC embodies the principle of equal treatment and obliges employers to treat their employees in an equal manner. Accordingly, no discrimination based on language, race, colour, gender, disability, political opinion, philosophical belief, religion, sect, and similar reasons may be made in relation to the employment relationship.
That said, the Court of Appeals has ruled that certain social selection criteria and objective criteria should be taken into account in the termination of employment contracts. Social selection is the employer’s obligation to select the employees to be dismissed through certain criteria to protect the socially disadvantaged in terminations arising from business necessities. Court precedents exemplify the criteria for social selection as follows: “productivity, absenteeism due to illness, lack of diligence in fulfilling the obligation to perform work, seniority, entitlement to retirement, being married and having children or being young”. Accordingly, it is deemed acceptable by the courts to select employees who will stay in the team, according to objective criteria such as capabilities and performance, as long as the employer ensures that employees in similar circumstances are not discriminated against and as long as objective criteria such as the ones listed above are used in making the selection. Additionally, the employer should be in a position to document that the above-mentioned process is observed, for probative purposes in possible subsequent litigation. Case law requires substantial documentation for this purpose.
10. Are there any specific categories of employees who an employer is prohibited from making redundant?
Even though no strict prohibition to this extent is regulated under the TLC, as per the Law No. 6356 on Trade Unions and Collective Bargaining Agreements (Law No. 6356), workplace union representatives benefit from an additional layer of protection. This protection stems from the fact that the employer cannot terminate the employment contracts of workplace union representatives unless there is a just cause, and the employer clearly and precisely states the reason in writing.
11. Are there categories of employees with enhanced protection (eg, union officials, employees on sick leave or maternity/parental leave)?
As stated in question 10, as per Law No. 6356, workplace union representatives benefit from an additional layer of protection.
The Court of Appeals has stated that when a notice of termination is given to an employee who is on leave, the termination shall be regarded as invalid. The employee must be notified of the termination of their employment contract before they go on leave, or after they return from leave.
12. What payments are employees entitled to when made redundant? Do these payments need to be made within a specified period? Are there any other requirements, such as giving contractual notice, payments into a central fund, etc.
In cases of termination for valid reason, the employer must pay severance pay and notice pay (if notice periods are not observed) in addition to the employee’s unpaid wages, overtime,[2] and annual leave-related payments. These payments should be made on the date of the termination of the agreement, and if they are delayed, interest will accrue on these amounts.
Additionally, in the event that the employee files a lawsuit due to the termination of their employment contract, and if the court concludes that the employer was not able to demonstrate a valid reason, and decides that the termination is invalid, the employer is obliged to reinstate the employee within one month. If the employer does not reinstate the employee within one month upon the employee’s application, the employer must pay additional compensation and payment for the idle time (up to four months’ salary).
13. If employees are entitled to redundancy/severance payments, are there eligibility criteria and how is the payment calculated? If this is formula based, please set out the formula.
Statutory severance payment is a type of compensation that employees who have worked in the same workplace for at least one year are entitled to receive in return for their labour. The continuous or intermittent work performed by the employee in the same or different workplaces of the same employer is calculated together, while determining the minimum working period of one year. Situations such as the transfer of the workplace to another employer, merger of workplaces, or confiscation by the state do not affect the severance of the employee. The calculation of one year is based on the date the employee actually starts to work, not the date of the employment contract.
Statutory severance pay equals 30 days of gross wages for each year of employment. The 30-day wage consists of the normal wage and other benefits received by the employee.
Accordingly, to calculate severance payment, the number of years worked is multiplied by the last gross wage. Fractions of years are also taken into account in the multiplication process. In other words, the months remaining from a full year are converted into days, and the last gross wage is divided by 365 to find the daily wage, and this daily wage is multiplied by the excess working duration converted into days. All calculated figures are then added together. Accordingly, the calculation formula is as follows:
([Years of Employment] x [Last Gross Wage]) + ([Number of Days in Excess of One-Year Period] x [Gross Wage Amount Corresponding to One Day]) = Severance Pay Amount
Please note that there is a severance pay ceiling of 23,489.83 lira for the second half of 2023.
If the 30 days of gross wages of the employee exceeds this ceiling, then the ceiling amount should be considered when calculating the severance pay.
14. Do employers need to notify local/regional/national government and/or regulators before making redundancies? If so, by when, and what information needs to be provided?
No, employers do not need to notify any authority before making redundancies. However, pursuant to Law No. 5510 on Social Security and General Health Insurance, in the event of termination of the employment contract of the insured employee, the termination of the employment contract shall be notified to the Social Security Institution within ten days starting from the day following the date of termination, with the code prescribed for the termination reason. For example, “termination of an indefinite-term employment contract by the employer without just cause” has the code number 4.
15. Is there any obligation on employers to consider alternatives to redundancy, including suitable alternative employment?
Under Turkish law, redundancies or terminations should be the last resort. This means that the employer should initially offer the employee an alternative position (even if this is a lower or less senior position) and wait for the employee to decline before proceeding with the termination. So yes, employers are obliged to consider alternatives to redundancy.
16. Do employers need to notify local/regional/national government and/or regulators after making redundancies, eg, immigration department, labour department, pension authority, inland revenue, social security department? If so, by when, and what information needs to be provided?
Yes, the Social Security Institution needs to be notified. Please see question 14 for further information.
17. If an employee is not satisfied with the decision to make them redundant, do they have any potential claims against the employer? If so, what are they and in what forum should they be brought, eg, tribunal, arbitration, court? Could a union or employee representative bring a claim on behalf of an employee/employees and if so, what claim/s and where should they be brought?
Firstly, if the employee is not satisfied with the employer’s decision, they must go to a mediator before filing a lawsuit. If they file a lawsuit without going to a mediator, the lawsuit will be rejected procedurally. If the employee and the employer cannot reach an agreement through the mediator, the employee may file a lawsuit. In the lawsuit, the employee may demand reinstatement and employment receivables (eg, severance pay, notice pay, holiday pay, and overtime pay).
Law No. 6356 regulates the right of existing trade unions to file “individual lawsuits” on behalf of their members. Pursuant to Law No. 6356, trade unions are authorised, upon their written application, to file a lawsuit on behalf of their members for their rights arising from the employment contract and labour relationship, and social security rights. In other words, trade unions can claim all kinds of rights arising from the employment contract, just like the employees themselves.
18. Is it common to use settlement agreements when making employees redundant?
Yes. In Türkiye, it is relatively common, especially for employers, to use settlement agreements, also known as “mutual termination agreements” or “severance agreements” to alleviate the risk of facing litigation. These agreements can be a practical way to handle the termination process, especially in cases where both parties agree to the terms and conditions of the separation.
Such mutual settlement agreements are not listed among the types of termination regulated under the TLC. Rather, the legal basis for such settlement agreements is based on Article 26 of the Turkish Code of Obligations, titled “Freedom of Contract”.
Settlement agreements are typically voluntary arrangements. Both the employer and the employee must agree to the terms of the agreement voluntarily and without coercion. According to the case law of the Court of Cassation of Türkiye, in order for the termination agreement to be valid, the reasonable benefit of the employee must be met and the employee must sign the agreement by their free will, without being under any pressure. Settlement agreements can include various terms and conditions, such as severance pay, notice periods, the return of company property, confidentiality clauses, non-disparagement clauses, and non-compete clauses. The specific terms will depend on the negotiations between the parties.
The TLC provides for severance pay to employees in case of redundancy or termination without just cause. The amount of severance pay is typically outlined in the law based on the employee’s length of service, and this may be negotiated in the settlement agreement.
Settlement agreements are usually documented in writing and signed by both parties. It is essential to keep a clear record of the agreement to avoid disputes in the future. Once a settlement agreement is signed and executed, it often signifies the final resolution of the employment relationship. The employee typically agrees not to pursue further legal action related to their termination.
While settlement agreements are common, it’s crucial to ensure that they are drafted in compliance with TLC and that the terms are fair and equitable. Additionally, it’s important to note that in some cases, Turkish labour courts may scrutinise the terms of settlement agreements to ensure that they do not violate the rights of employees or attempt to circumvent legal requirements. Therefore, both employers and employees should exercise caution when considering or drafting settlement agreements in redundancy situations.
19. In your experience, how long does it normally take to complete an individual or collective redundancy process?
For individual redundancies, as per Article 17, employment contracts will be deemed to be terminated within the following periods:
Please note that these periods are minimum and can be increased by contracts. Subsequently, a notification may be made on the day the notice period expires.
When the employer wants to lay off workers collectively as a result of economic, technological, structural, and similar business, workplace, or work requirements, it is obligatory to notify the workplace union representatives, the relevant regional directorate, and the Turkish Labour Institution with a letter at least 30 days in advance.
This notification must include information on the reasons for the layoff, the number and groups of workers who will be affected, and the time period in which the layoff will take place. If there is a trade union, it is necessary to first meet with the trade union representatives, hold an information and consultation meeting, and issue a document showing that these meetings have been held.
The termination notifications to be made after these notifications and meetings shall become effective 30 days after the employer notifies the regional directorate of the collective dismissal request. Accordingly, the notification periods stipulated in Article 17 of the Labour Law will start to run 30 days after the notification to the Regional Directorate.
For mutual terminations, in practice, employers prepare a mutual settlement agreement (MSA) (to be signed by employer and the employee) to be presented to the employee along with an MSA offer letter. The employee will need to be provided with adequate time to evaluate and consider the offer. In practice, this period is usually a whole week.
If the employee accepts the offer letter, upon acceptance, all relevant payments should be made on the date of termination indicated in the MSA, and the Social Security Institution must be notified about such termination on the same date.
20. Are there any limitations on operating a business for a period following a redundancy, like a prohibition on hiring or priority for rehire being given to previous employees?
Yes. Such a limitation exists for collective redundancies. If the employer needs to hire a worker with the same qualifications within six months after the finalisation of the collective dismissal, the employer must call upon the dismissed workers. In this case, since the burden of proof is on the employer to prove that such workers have been called to work, the call must be made in writing and documented.
On the other hand, for individual redundancies, there is no specific rule in this regard; yet, it can be argued before the court in case of a dispute. As per court precedents, in cases where an employee is made redundant as per an operational decision or a decision stemming from the business, workplace, or work requirements, but subsequently another employee is hired for the same position, this would entitle the first employee to file a lawsuit for reinstatement. That said, the TLC does not include an express provision in this regard.ü
B. Restructuring/Re-organisation of the business
21. Is employee consultation or consent required for major transactions (such as business transfer, mergers, acquisitions, disposals, or joint ventures)?
Yes.
In the TLC, substantial change in working conditions is regulated under Article 22, entitled “Change in Working Conditions and Termination of the Employment Contract”.
Pursuant to Article 22:
Therefore, the written consent of the employee should be procured. Otherwise, employees may claim that the changes will not bind them or even terminate their contract for cause.
The offer made by the employer to the employee in the above sense must be clear and specific. If it is not clear and unambiguous, it cannot be said that there is a valid change proposal, and consequently, the offer in question will not bind the employee. The parties may change the working conditions any time by mutual agreement. Changes in working conditions cannot be put into effect retroactively.
22. What are the remedies that are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?
If the employee does not accept the proposed change within six business days, they will be entitled to continue to work under the old working conditions and the employment contract will continue under the same conditions.
In such a case, the employer can only dismiss the employee by paying severance pay if a “valid reason” exists. Such an employee, if they are covered by job security provisions, may also go through mediation and litigation for reinstatement. In this case, it will be examined whether this offer of change in working conditions is based on an objective reason and whether it was necessary.
If the employer makes a unilateral change despite the employee’s refusal, this change will not be binding on the employee and the employee can make a termination with just cause.
23. Is there any statutory protection of employees on a business transfer? Are employees automatically transferred with the business? Are employees protected against dismissal (before or after the transfer of employment)?
Yes. As per Article 6 of the TLC, transfer of the workplace can in no way be interpreted or accepted as a termination of the employment contract of the existing employees. There is an absolute prohibition of termination in this regard. In the event of a workplace transfer, the first thing to be known is that the employment contracts of the existing employees will continue in the same way. In other words, employment contracts of the employees will remain the same, and the previously established employment relationship continues to exist in the same way. Only the party to employment relationship will change in such circumstances. The party to the existing employment relationship is no longer the employer who transferred the workplace, but the transferee employer. The seniority, rights, and entitlements of employees will not be affected by the transfer.
The transferor employer is not immediately relieved from liability after the transfer of the workplace. The fact that the employment contracts will be transferred to the new employer with all its rights and obligations should not be interpreted as the transferor employer is relieved of all liability. The transferor employer is jointly liable with the transferee employer for the debts that arose before the transfer and that must be paid on the date of transfer.
In other words, workers who have receivables can apply to both employers. The liability of the transferor employer is limited to two years from the date of transfer in terms of receivables other than severance pay.
Provisions on joint liability shall not apply in the event of termination of a legal entity through a merger or change of its type.
On a final note, the provisions of Article 6 of the TLC do not apply to liquidation of assets due to bankruptcy.
24. What is the procedure for a transfer of employment (upon a business transfer or within group companies)?
Under the TLC, the procedure for a transfer of employment, whether it’s due to a business transfer or within group companies, is outlined to protect the rights of employees involved, a general overview of which is as follows:
It is essential for employers to adhere to these procedures meticulously to avoid legal complications, safeguard the rights of employees, and ensure a smooth transition during employment transfers under the TLC.
25. Are there any statutory rules on harmonising the transferring employees’ terms of employment with the existing employees’ terms of employment?
Yes.
When employees are transferred due to a business transfer, merger, or similar circumstances, the law states that the terms of employment for transferring employees should be harmonised with those of existing employees. The key principle is the principle of equality to ensure that transferring employees are not placed in a less favourable position compared to existing employees in terms of their employment conditions.
In summary, the TLC mandates that transferred employees must not be placed in a less favourable position compared to existing employees in terms of their employment conditions. These rules are in place to protect the rights of transferring employees and ensure fairness in employment transitions.
C. Changing Terms and Conditions
26. Can an employer reduce the hours, pay and/or benefits of an employee?
Under the TLC, employers can reduce the hours, pay, or benefits of an employee, but such changes must be made in accordance with specific legal requirements and subject to certain limitations.
Under the TLC, employers can reduce the hours, pay, or benefits of an employee, but such changes must be made in accordance with specific legal requirements and subject to certain limitations.
[1] Please see questions 22 and 23 for further information.
27. Can an employer rely on an express contractual provision to vary an employment term?
Even in the case where there is a contractual provision allowing changes in the employment term of the employee, if the change constitutes a substantial change in the working conditions set forth under Article 22 of the TLC, the provision will not be deemed valid, and the employee will not be bound by such change.
28. Can an employment term be varied by implied conduct?
Yes. This is possible if a workplace practice exists.
A workplace practice is the unilateral and continuous provision of a benefit by the employer, on its own volition, to the employee, without any relevant legal or contractual obligation relating to the said benefit at the outset.
For the benefit to become a workplace practice, the employer’s will to continue this practice is not required. If there is a justified expectation among the employees that this practice will continue, and if the employees accept this practice, even implicitly, it becomes a workplace practice and a provision of the employment contract. As a result of becoming a provision of the employment contract, the workplace practice becomes binding, becomes one of the employer’s obligations arising from the employment relationship, and is subject to the same sanctions.
Examples of workplace practices include bonuses, food and fuel allowances, and payments made when a worker gets married or has a child.
The requirements for an employer’s practices to be typically determined as workplace practices are as follows:
It’s important to note that workplace practices can vary from one employer to another and can evolve over time. Employees often have a reasonable expectation that established practices within the workplace will be consistently followed. Any deviation from these practices may require proper communication and, in some cases, consent from the employees affected.
In cases of disputes or legal issues related to workplace practices, Turkish labour courts may consider customary practices, written policies, collective agreements, and compliance with legal requirements when determining the validity and applicability of these practices.
29. If agreement is required to vary an employment term, what are the company’s options if employees refuse to agree to the proposed change?
Varying employment terms will most likely constitute a substantial change in working conditions. Accordingly, the procedure envisaged for such changes, as described in question 26, will be applicable.
30. What are the potential legal consequences if an employer varies an employment term unilaterally?
As explained above in detail, in the event that an employer changes an employment term without getting the consent of employees, or despite the refusal of the employees, the relevant changes will not bind the employee and will give them the right to terminate their employment contract on valid grounds.
D. Areas to Watch
Please provide an outline of any upcoming legislative developments or other issues of particular concern or importance that may change the answers above and are not already covered in this questionnaire. Please limit responses to the jurisdictional level rather than descriptions of wider global trends. Please limit your response to around 200 words.
Severance pay has started to become a significant burden for SMEs due to increasing years of service, wages, and collective agreements, and may even cause bankruptcy. To prevent this, the “Severance Pay Fund” has come to be discussed by lawmakers with the aim of securing the ability of workers to receive severance pay, and of preventing employers from making sudden and large severance payments, thereby protecting their financial stability. According to this system, employers periodically make payments for severance. This way, the severance pay that the employee is entitled to is also secured during the term of the employment, and employers spread large payments for severance pay over a period instead of making it all at once when the contract is terminated.
In the Severance Pay Fund system, state support is provided for the amounts accumulated in the fund, and the funds are also operated in the bank. If this system is adopted, the obligation to work for a certain period for the employee to be entitled to severance pay will be abolished, and even if the insured works for one day, they will be entitled to severance pay. At the same time, employees will be able to see the amounts allocated to them in severance pay funds during their employment. The Severance Pay Fund system had the target of entering into force on 1 January 2022, but although this issue is on the agenda today, no legal regulation has been issued yet.
