Ministry offers 25 pct state contribution to severance pay

Zeyhep Gürcanlı / Aysel Alp ISTANBUL - Hürriyet

The ministry’s draft model reportedly calculates the remuneration of severance payments on the equivalent of between 11 and 22 working days, but workers’ unions are maintain the figure to be 30 days. DAILY NEWS photo

The Turkish Labor and Social Security Ministry has proposed to restructure the payments of severance packages, whereby the state will make a 25 percent contribution to the financing of the severance payments, akin to the current pension system.

Severance money paid to workers will directly go to a severance fund, a point of contention that has been under question by the government in the last two years and strongly opposed by workers’ unions.

The Labor Minister Faruk Çelik held three-way consultation meetings with the heads of the confederations of the workers’ and the employers’ unions last week. The workers’ unions are strongly against the reduction of the equivalent number of working days that an employee’s severance package would be paid out on. 

The ministry’s restructure of the severance pay system aims to introduce a formula based on the needs of both workers and employers. The ministry’s draft model reportedly calculates the remuneration of severance payments on the equivalent of between 11 and 22 working days, but workers’ unions are maintain the figure to be 30 days.

Severance pay to be equivalent of 30 days

According to the new formula, severance pay will be the equivalent of 30 days, with 25 percent of the payment to be financed by the government, easing the burden on employers. Similarly, the private pension system that came into force in Jan.1 , 2014 also receives government support by way of a 25-percent state contribution to scheme participants every month.

Furthermore, unemployment fund cuts will have a portion of monies allocated to severance payment funds, enabling contributions made by workers and employers in the current system to be shifted to the severance pay.

The new system will see an 8.3 percent cut in gross salaries in light of new 30-day severance pay packages. 25 percent of the severance pay, that is 2 points, will be financed by the government, with 2 points to be financed by the unemployment insurance fund and 4 points to be serviced by employers as a severance premium.

Deputy Prime Minister Ali Babacan reportedly gave the green light to state contributions to severance funds, including transferal of a portion of cuts in the unemployment insurance fund to the severance.
 
Some bureaucrats have addressed concerns surrounding the new system’s possible negative effect on the unemployment insurance fund by stating that the fund already has pre-existing funds totaling 68.5 billion Turkish Liras ($34.2 billion), which will ensure its ability to keep the fund safely afloat. For this reason, transferring employers’ share to the severance pay won’t seriously weaken the fund.