How severance and notice pay are calculated in Türkiye

Every small business eventually faces the same moment: a long-serving employee is leaving, and whoever runs payroll stares at a single question — "how much do we actually owe?" Two separate concepts land at once, severance pay (kıdem tazminatı) and notice pay (ihbar tazminatı), and in practice they get mixed up constantly. A miscalculated payout rarely stays quiet; it turns into a dispute that runs all the way to mandatory mediation, or a labor court. Yet the logic underneath the math is remarkably stable, even though the figures change every year.

This piece walks through what severance and notice pay are, who qualifies, the logic and steps behind each calculation, how the tax side works, and how the two differ. We give no amounts on purpose: the severance ceiling, the minimum wage, and tax rates all change on a schedule, so the right approach is to understand the formula and its components, then confirm the current figure with your accountant (mali müşavir) or an official source such as the Revenue Administration (GİB).

1At least 1 year2Gross wage per year3Legal cap4Severance pay

What severance pay is, and who qualifies

Severance pay is an amount owed to an employee in return for the length of service they built up with the same employer, paid when the contract ends under specific conditions. The first condition is seniority itself: the worker must have completed at least one full year with that employer. Below a year, no severance entitlement arises at all.

The second condition is that the contract must end for a reason that "earns" severance. As a rule, an employee who simply resigns is not owed severance, but that rule has important exceptions. If the employer fails to pay wages or keeps the person off the books, the employee can resign for just cause and still keep the entitlement. A woman resigning within one year of marriage, a man leaving for compulsory military service, and departures tied to qualifying for retirement (or meeting the premium-and-day conditions short of the age requirement) also trigger the right. If the worker dies, severance is paid to their legal heirs.

Severance is likewise owed when the employer terminates without just cause. By contrast, when the employer has a valid reason to dismiss — such as conduct that breaches good-faith rules — no severance is due. These distinctions are the source of most severance lawsuits, which is why classifying the reason for termination correctly often matters more than the arithmetic that follows.

The logic behind the severance calculation

The severance calculation fits in one sentence: for every full year of service, the employee receives roughly one month's (30 days') gross wage. Partial years are counted proportionally, on a per-day basis: three years and four months earns the three full years plus the pro-rated share of the extra months.

The critical point is which wage feeds the formula. The calculation runs on the worker's last gross wage at the moment of leaving — and not the bare wage, but the "dressed" gross wage. That means regularly provided benefits, such as recurring meal and transport allowances or a standing bonus, are added onto the gross to set the calculation base. You always start from gross, never net. Keeping payroll and social security records clean is vital here: if what belongs in the dressed wage is left open to argument, the whole calculation is open to argument.

The severance ceiling: why an upper limit exists

Even though severance is based on one month's gross wage per full year, the payment for a single year cannot exceed a legal ceiling (tavan). That ceiling is tied to the maximum retirement bonus paid to the highest-ranking civil servant for one year of service, and it is revalued twice a year, in January and July.

The practical effect: if a wage sits above the ceiling, severance is computed from the ceiling rather than the real wage; below it, the real dressed gross wage applies. Because the ceiling changes every six months, we deliberately print no figure here — confirm the ceiling in force on your calculation date with an official source or your accountant. Employers who want the full budget impact of a departure should treat severance like the employer cost of the minimum wage: a planned line item, not a surprise.

What notice pay is, and how notice periods scale

Notice pay works on entirely different logic. The party that wants to end an open-ended employment contract — whether employer or employee — must give advance warning, meaning it must honor a statutory notice period. If the contract is ended abruptly without granting that period, the party that failed to give notice owes the other notice pay. The notice period lengthens in steps according to the worker's seniority:

• Less than 6 months: 2 weeks' notice.
• 6 months to 1.5 years: 4 weeks.
• 1.5 to 3 years: 6 weeks.
• More than 3 years: 8 weeks.

These are minimums; a contract can lengthen them but never shorten them. Notice pay is calculated on the gross wage for the number of notice weeks, and unlike severance it is subject to no upper ceiling. Crucially, this obligation is not the employer's alone: an employee who walks off without proper notice can, in theory, owe notice pay to the employer too.

Severance versus notice pay: the difference

The two are constantly confused, but their purposes point in opposite directions. Severance looks backward: it rewards the service the employee accumulated over the years. Notice pay looks forward: it compensates the other side for not being able to prepare for the abrupt end of the arrangement.

Severance pays for years already given; notice pay pays for time never granted. One settles loyalty, the other settles courtesy.

The headline differences: severance requires at least one year of service and a qualifying reason for termination; notice pay has no one-year condition and can fall on either party. Severance has a legal ceiling; notice pay has none. They part ways on tax, too, which is the next section.

The tax side: how each is taxed

The last layer that sets the net figure is tax, and severance and notice pay diverge sharply here. We leave out rates and brackets on purpose, since those are updated periodically, but the mechanism works like this:

• Severance pay: the portion up to the legal ceiling is exempt from income tax and subject only to stamp duty. Any part above the ceiling is taxed as ordinary wage income. Severance is also excluded from the social-security premium base.
• Notice pay: because it counts as wage, it is subject to both income tax and stamp duty; there is no income-tax exemption here.

So even at an identical gross amount, the net severance differs from the net notice pay. For current rates and exemption limits, the only reliable source is the regulation in force on your calculation date, read with your accountant's guidance.

Who calculates, who pays, and the common disputes

The employer pays; the calculation is usually done by whoever runs payroll or handles pre-accounting and HR records, often alongside an accountant. Simple as it looks, it jams at a few predictable points, and most disputes come from exactly there: the wage base (which benefits belong in the dressed gross wage), how length of service is counted (interrupted spells, transfers, successions), and the reason for termination (resignation, just-cause exit, or employer dismissal) — the last of which directly decides whether severance is owed at all.

In Türkiye, disputes between worker and employer over these payments generally require mediation before a lawsuit can be filed. That makes a documented calculation — payroll records, start and end dates, wage components — the strongest defense you can hold in a disagreement.

Practical steps for getting it right

For the next departure, the route can be reduced to a few steps:

• Pin down the reason for termination: decide first whether severance and notice rights arise at all; everything follows from this.
• Fix the length of service and the dressed gross wage: establish full years, leftover days, and the recurring benefits that join the wage, with documentation.
• Apply the current ceiling and the tax mechanism: respect the ceiling on severance and the severance-versus-notice split on tax, and confirm the current values.
• Put everything in writing: keep the calculation breakdown, the release, and the payment records.

The last and most important step never changes: confirm the current severance ceiling and the stamp-duty and income-tax treatment with your accountant or an official source on the date you run the numbers. The rules are updated several times a year; a calculation built on last year's figure can be well-intentioned and still wrong.

Frequently asked questions

In the end, calculating severance and notice pay is not mysterious; once you know the components, it becomes a concrete, repeatable process. The hard part is not the arithmetic but being able to document the right wage base, the right length of service, and the right reason for termination. As teams build that discipline, a CRM like Rocketly can help by keeping pre-accounting and HR records — start and end dates, wage components — tidy enough to make the calculation defensible; the final figure, always, is one to settle with your accountant.