Who is entitled, what is dressed salary and which deductions apply? The steps of calculating severance and notice pay.
Severance pay is a statutory entitlement an employee earns on leaving for certain reasons after at least one year with the same employer. Once the calculation method is understood, both employer and employee can estimate the amount largely in advance.
Who is entitled to severance pay?
Under Article 14 of Labour Act No. 1475, which remains in force, an employee with at least one year of service receives severance pay in the following cases:
- Dismissal by the employer without a justified reason
- The employee terminating the contract for justified reasons such as unpaid wages or health and safety risks
- Becoming entitled to retirement or old-age pension
- A male employee leaving for military service
- A female employee leaving within one year after marriage
- The employee's death (the right passes to heirs)
How is it calculated?
For each full year of service, severance equal to 30 days of gross pay is paid. Remaining months and days are calculated pro rata. In short: dressed gross monthly salary × total length of service (in years).
The dressed salary includes, in addition to base pay, regular and continuing benefits such as meals, travel and bonuses. However, severance cannot exceed the severance ceiling of the period. The ceiling is updated each January and July in line with the civil servant pension coefficient.
Deductions
Only stamp duty at 0.759 per cent is deducted from severance pay; no income tax or social security contribution is withheld. From notice pay, income tax is deducted in addition to stamp duty.
How it differs from notice pay
An employer who dismisses an employee without observing the notice periods must pay notice pay. The periods depend on length of service: two weeks for under six months, four weeks for six months to 1.5 years, six weeks for 1.5 to three years, and eight weeks for more than three years.
Litigation and limitation
The limitation period for severance and notice pay claims is five years. Under the Labour Courts Act No. 7036, applying to a mediator is mandatory before suing for these claims. If mediation fails, suit is filed in the labour court together with the final minutes.
The severance and notice pay calculator on our site uses these rules to produce an estimate. The result is for information only and may vary with workplace practice, collective agreements and court decisions.