Employers

Employers must set up a legal entity if they wish to employ staff. This could be either a branch company or a subsidiary company established in Turkey.

Setting up Bank Accounts

Necessary documents for bank account set up:

• Official Publication including company registration details (Articles of Association)

• Tax number

• Signature Circulars of the authorized executives or shareholders

• Notary stamped copies of ID’s of authorized person.

Social Security Registration

Companies need to register only upon hiring staff. The appropriate social security authorities are notified as and when a new member of staff starts working for the company. Upon registration companies will receive a social security registration number.

Tax Registration

Tax registration process is completed during legal set up of the company. Tax number is given by tax office - it is both same for corporation tax and employee tax

Union Membership / Worker Councils / Collective Labour Agreements

Workers unions exist only in the industry sector. Membership rights, arising from the legal relationship between the union and the member, include the following:

• Every member is entitled to participate in union meetings

• Every member has the right to vote on the issues under consideration

• In addition to its regular meetings, the general congress must convene upon the written request of at least one-fifth of its members

• Members also have the rights to criticise, file complaints and resort to court litigation against the actions or decisions taken by the unions

• The right to withdraw or resign from the union

• The right to equal treatment

• The right to benefit from the services activities of unions

There is no worker councils system in Turkey.

Collective agreements are negotiated and agreed by union representatives and employers. An employer who is not a member of a union is however authorized to apply a collective agreement for the company.

Collective agreements determine terms and conditions of employment such as:

• Wages

• Restrictions on the employer’s right to terminate the employment contract

• Length of terms of notice for the termination of an employment contract

• Payment of severance pay following the termination of a contract

• Fringe benefits such as bonus and premiums

• Working conditions

• Length of vacation and other forms of leave.

Nothing in a contract of employment may be in conflict with a collective agreement unless stated otherwise in the collective agreement.

Hours of Work / Work Permits

The working week for employees is 45 hours. This total is spread over a six-day week so as not to exceed seven and a half hours per day.

Minimum Wage

The minimum wage as of 1^st January 2011 to 30^th June 2011 is;

For employees over 16:

TL Gross: 796,50 TL Net: 629,95 (Including basic Minimum Subsistence Allowance)

For employees under 16:

TL Gross: 679,50 TL Net: 546,20 (Including basic Minimum Subsistence Allowance)

Right to Holiday

Employees who have completed at least one year of service, including the trial period, are entitled to paid annual leave. Annual leave may be taken at any time during the following year.

Annual leave entitlement is based on length of service

1-5 years (including 5 years) 14 days

5-15 years 20 days

More than 15 years 26 days

However, employees aged 18 and younger and aged 50 and older are entitled to a minimum 20 days. Increased annual leave entitlement can be granted through employers and collective agreements.

Benefits In Kind

These include items such as meal allowance, travel allowance, petrol, company car (provided to executives only), house rental (top executives), and company products.

Share Options

Share schemes are not common practice.

New Employees

The employer must notify the authorities of new starters immediately by submitting a notice of employment. The declaration shall be submitted online to the authorities at latest one day before the start date. New employees already registered with the Social Security authorities, will inform the authorities themselves that they start work, and within 30 days from the start of their employment.

Information required:

• Copy of identity card

• Proof of Residence (not mandatory)

• Photos (standard passport size)

• Copy of SSK identity card

• Health report (not mandatory)

• Letter of good conduct from police (not mandatory)

• Academic Credential (Not Mandatory)

Forms to complete and registration with authorities: the new employee starter form is filled online in the website of SGK (Social Security). If the employee releases, SGK is informed by filling the form online in it’s website in 10 days.

Leavers

Legal requirements: Both parties can terminate the employment by mutual agreement. Employee or employer can terminate a permanent employment contract, as long as the required notice period is taken into account. The notice period will depend on the number of months worked as shown below:

Less then 6 months 2 weeks

6 month to 1.5 years 4 weeks

1.5 years to 3 years 6 weeks

More than 3 years 8 weeks

These are minimum periods of notice and may be increased by the collective agreement. The day on which the notice is given is included in the calculation.

Notice periods can be substituted by payment in lieu. Under certain circumstances, employer and employee can terminate the employment agreement without notice.

Forms and returns / de-registration: the employer must inform the local authorities of any leavers by sending a leavers document to the Regional Employment Office and to the SGK (Social Security authority).

Maternity Leave / Child Care Leave

Statutory: the benefits indicated below are provided to expectant mothers who are insured through employment and to the wives of male employees:

• Doctor visits The provision of benefits in kind required for confinement

• Nursing allowance

• Pay during maternity leave

• Travel cost to another hospital location if necessary

Providing that social security contributions have been paid for at least 120 days in the year prior to the birth, maternity pay is paid eight weeks prior and after the birth. In cases of multiple pregnancies, two weeks are added to the eight-week period prior to the birth. If the expectant mother only stops working three weeks prior to delivery, and obtains doctor’s approval, the period she worked is added after the birth.

Maternity pay is paid out directly by the Social Security authorities.

In order to be entitled to maternity benefits in kind or nursing allowance, or to a lump sum payment for pregnancy and confinement, the employee must have made insurance contributions and these must have been made at least 90 days in the year preceding confinement. Insurance contributions must have been made for at least 120 days in the course of the year preceding the confinement in the case of a male employee’s wife (and they must be legally married before the birth).

Sickness

Statutory: in order to qualify for sickness benefits, the claimant must be either in insured employment, be a dependant of the insured person, or a pensioner.

The benefits indicated below shall be provided for the insured persons not covered by insurance against work accidents and occupational diseases:

• Health care

• To provide, fit, repair and replace of prosthesis tools and materials (20% of these materials are to be paid by the insured person)

• Payment of daily cash benefit during incapacity for work

• To send the patient, if necessary, elsewhere in the country for examination and treatment

• Under certain circumstances, insured persons may be sent abroad for treatment, and the insurance company will pay for the cost of the treatment and the round trip expenses as well as the essential expenses of the insured person and person escorting.

Medical treatment will be provided until the insured person is cured. However such benefits must not exceed six months from the date on which the insured person started receiving treatment.

If, however, medical reports issued by the board of the hospital underpinning the claim that if treatment of a sick person were to be stopped or reduced, the patient may die or become permanently disabled, this period may be extended.

While employers are not obliged to pay sick leave, absences are paid for up to 10 days by most companies.

Occupational: Employees involved in accidents at work or suffering from occupational diseases will be entitled to the following benefits:

• Healthcare

• Daily cash amounts payable during temporary disability

• Payment of a pension in the case of permanent disability

• Supply, fit, repair, and replace of prosthesis tools and materials

• Organise transfer to another location in order to ensure that the injured person can benefit from all of the above

• Cost of travel abroad for treatment, travel cost and living expenses for patient and accompanying person

• Funeral costs

• Survivor pension in the case of their death.

The employer is obliged to provide initial healthcare for victims of a work accident, until the Health Insurance is informed and takes the appropriate action. The expenses incurred by the employer can be claimed back from the Social Security authorities. If, due to negligence by the employer, the treatment lasts longer or the patient becomes permanently disabled, the employer will be bound to refund all expenses incurred by the Health Insurance.

Collection through Payroll

Tax is withheld from pay and calculated as per table below.

Gross income includes all kinds of income giving rise to savings and expenditure in a calendar year. Amounts arising from an employment whether in cash or in kind. Gross earnings in 2009 is taxed at the following rates:

Employee Returns

There is no application in Turkey

Payments to the Tax Authority

Monthly tax declarations are submitted to the tax authorities by the 20^th of the following month and should be paid on the 26^th of the same month.

Monthly / Quarterly / Annual Employer Returns

Income Tax and Stamp Tax (0,0066) applied on the gross salary amount. Taxes withheld from salaries are to be declared and paid on a monthly basis.

However, if the company employs less than 10 employees, a quarterly withholding tax return may be filed by submitting a request to tax office to file quarterly tax returns.

Electronic Payment Systems

TIC-RTGS (Turkish Interbank Clearing – Electronic Funds Transfer System), which is the real-time gross settlement system of Turkey. TIC-RTGS transfers and settles domestic payments in Turkish liras between banks.

Also, TIC-ESTS, which stands for Turkish Interbank Clearing – Electronic Security Transfer and Settlement System, works in an integrated manner with the TIC-RTGS to electronically transfer and settle Turkish government securities with the “Delivery versus Payment” (DvP) principle.

Bank Accounts and Paying Salaries

In general monthly payments are made via bank transfers.

13th Month and Bonus Payments

Bonus payments are not compulsory.

In some companies employees receive quarterly, bi-annually and annual bonuses.

Legal Obligations to Provide a Private Pension Scheme

The voluntary Turkish private pension system is a defined contribution system, intended to be complementary to the mandatory state social security scheme, which provides retirement earnings to participants on a PAYE basis.

The participants are entitled to retirement benefit if both of the following two conditions are met –by women having reached the age of 58 and men 60 and having made contributions to the pension scheme for a minimum of 7200 working days.

Contributions to private pension schemes reduce income tax liabilities.

Employer contributions are deductible as a business expense from company tax (limited to 10% gross annual salary total).

State Pension Deductions

Employee and employer contributions to both pension and medical insurance are deductible from personal income tax liability up to 10% of salary subject to an annual limit of approximately TL 9.558,00

Accruals from pension fund investments are free of capital gains, withholding and income tax. This constitutes a considerable benefit compared with the current retirement funds where investment profit is taxable as personal income.

Employees’ & Employers’ Contributions

All employees must be registered with the Social Security for healthcare benefits, work-related accident and illness, sickness, pregnancy, disability, old age and death.

Employee and employer contributions are calculated as a percentage of gross salary.

Employee deductions reduce the taxable income.

Currently, office-based employees pay 14% and employers pay 14,5% (Normally Employers contribution is 19,5%. Government incentive of %5 is given to Companies due to recession) up to an upper earnings level of TL 5.177,40 per month.

The portion of salary above the upper limit is not subject to social security contributions.

Unemployment insurance premiums will be imposed on the employee and the employer at 1% and 2% respectively with an upper limit of TL 5.177,40.

Additionally, the government will also be required to contribute 1% on behalf of the employee.

Monthly / Quarterly / Annual Returns

No record.

Payments to Authorities

Employee and employer contributions must be paid over to the authorities before the end of the month following the submission of the monthly social security contributions report.

Employee Return

No record.

Timetable

Tax year runs from 1^st January to 31^st December.

There are no annual reporting requirements by the employer, although the employer sends leaver’s earnings statements to the tax office by the 20^th January of the following year and an employee’s earnings report to the tax office by 20^th February of the following year.

Submission Methods

Social security contributions and reports can be submitted electronically for the time being.

Public Holidays 2011

01 January New Year's Day

23 April National Sovereignty and Children's Day

01 May May Day Public Holiday (Istanbul only)

19 May Commemoration of Atatürk and Youth and Sports Day

30 August Victory Day

30 Aug -01 Sept Ramazan Bayrami ( Feast of Ramadan)

28-29 October Republic Day

06-09 November Kurban Bayrami (Feast of the Sacrifice)

Summer/Winter Working

Most companies do not close for annual holidays, only some manufacturing companies close.

Local office working hours and Time Zone

Working Hours: 09.00-17.00

Standard time zone: UTC/GMT +2 hours

Time zone abbreviation: EET - Eastern European Time

Useful Web Links

www.calisma.gov.tr

www.ssk.gov.tr

www.iskur.gov.tr

www.iskanunu.com