Turkey examines Brazil, Austria models in bid to update severance pay system

Hacer Boyacıoğlu - ANKARA

Turkey’s Labor and Social Security Ministry has been examining a number of models, including those in Brazil and Austria, in a bid to update the severance pay system, according to officials.

While some 8 percent of monthly salary of each worker is put into an account in the name of the worker by the employer in Brazil, some 1.53 percent of the employees’ monthly wage is put into a severance pay account by their employers in Austria.

Labor and Social Security Minister Süleyman Soylu said in a press meeting that officials were exchanging views upon the issue with local and global academics and examining different models.

A meeting with academics was already held in February and another is expected later in March.

Severance pay refers to compensation employers are required to provide employees whose job contract is ended due to reasons listed under Turkish Labor Law. Severance pay approximately amounts to a month of gross salary for every year that the employee was with the company.


The Brazilian model

Employers in Brazil have to put some 8 percent of the monthly wage of each employee into an account in the name of their employees in the Federal Saving Bank. This money has been evaluated through a number of investment instruments. The money can be withdrawn only if the job contract between the employer and the employee is terminated, the employer or the employee dies, the employee acquires a property or retires or the employee or a close family member has cancer or becomes HIV positive. 

If the employer annuls the job contract upon unfair conditions, they have to pay some 40 percent of the severance pay amount to the employee and 10 percent to the state in addition to the whole amount to the employee. If the employer is found right about terminating the contract by the court, the employee cannot take the money in the account.


What the Austrian model offers

The severance pay system was updated in Austria in 2003. In the updated system, the current employees were offered to continue with the older system or to make a transition to the new one. Some 1.53 percent of the employees’ monthly brut wage is put into a severance pay account by their employers in Austria. The system puts two conditions under which the employee can withdraw the money in the account: The premium needs to be put into the account for the name of the employee for at least three years and the job contract needs to be terminated without the consent of the employee. 

The money is paid to the employee during retirement if they do not work anymore or is kept to be paid by new employers. If the employee comes out of the labor market, goes abroad, launches their own company or quits working for child care reasons, they can then withdraw the money five years after they quit working.