Draft bill suggests big shift in severance rule

ISTANBUL – Hürriyet Daily News

Female employees will have no right to claim severance pay if they want to leave their jobs when they get married, according to a draft law, media reports say. The same goes for male employees who quit their jobs because of military service.

Workers will not be eligible to demand their severance benefits until they have worked for 15 years, whether they are laid off or leave voluntarily, under a draft law regarding the establishment of a severance benefit fund. 

According to the draft, the only way to obtain some severance pay before 15 years of employment will be to purchase a house. Workers will then be able to demand half of their severance benefit if they have purchased a home.

Cost to employers

A severance benefit fund will be set up if the draft law is approved. Employers will put 4 percent of the gross salary in a severance premium into the new benefit system every month, according to the draft. But half of this cost will be covered by the unemployment fund, according to daily Habertürk. Workers and the government will make no contribution to the system.

Employers currently pay 2 percent of gross salary to the unemployment fund. The draft envisages decreasing this to 0.5 percent, resulting in an effective severance fund cost of 2.5 percent of gross salary for employers. This will hinder the revenues of the unemployment fund significantly, according to analysts.

The new system will allow workers to quit their jobs without worrying about losing severance benefits. Workers are not eligible to demand severance pay under the current system if they quit their jobs by choice.

Those who have worked for 15 years and have 3,600 days of insurance premiums paid in their names can withdraw half the amount saved in the severance benefit fund. The full severance payment will be made to those who retire or retire due to disability.

The accumulated savings will be paid to the heirs in the event of a worker’s death.

Severance benefits will be paid to pension companies, according to the planned system. Employers will choose the pension company while workers will be allowed to choose the type of fund that the premiums will be deposited into.

The interest yielded on the severance pay withdrawn by a worker is subject to a tax, while the premium employers will pay is not. The rate of tax on the interest yielded on the severance pay is 25 percent, according to the income tax law.