Social Security Premium Declaration for Annual Leave Payment

Annual Leave Pay at Termination of Employment Contract

Per Article 59 of the Labor Law, "In case the employment contract is terminated for any reason, the rights of the employee and annual leave payments should be paid to the employee or the right holders." Also; According to Article 80 of Law No. 5510; "Wages shall subject to premium by attributing to the month they are deserved."

However; on the SSI Employer Regulation Communiqué In the section "7.2 - Issues Regarding Premiums of Wages", the below statements are included:

"If there is any remaining annual leave balance on the termination date and the related annual payments are paid after termination, the related annual leave payments should be subject to SSI premium by attributing to the month that the job contract is terminated."

According to all these statements, it is understood that the earned but not used annual leave payments should be paid on the date of termination of the employment contract, and premium notifications should be paid in the relevant month. At this point, it is understood that if the employee does not have a workday on the date of termination, the premium earnings must be reported as zero to the SSI.

However, per Social Security Circular No. 2020/20; the heading of 1.1; if there is no workday on the month that the contract is terminated, the premium earnings should be submitted via the last withholding and SSI premium declaration retrospectively.

So, per the above statements, in case the employee does not have a workday (social security premium day) on the month that the contract is terminated, annual leave payments should be reported retrospectively by adding the earnings to the latest withholding tax and premium declaration file.

At this point, the below results will be seen;

1. If a retrospective amendment for more than 3 months is made, the SSI will start an automatic inspection/audit for the company.
2. Per the SSI Circular numbered 2020/08; an administrative fine of one-fifth of the monthly minimum wage will be applied per number of employees.

If It Is Realized That There Has Been No Declaration Regarding the Annual Leave Payment During the Social Security Inspection/Audit

If the social security authorities determine that no declaration is made for the annual leave payment on the month of termination (if there is no workday), all benefited minimum wage supports would be canceled and requested from the company with interest.

Based on this, it can be said that making a retrospective declaration would be the correct way according to Circular No. 2020/20.

In Case That There Are Workdays on the Month of Termination

If there is a working day (even 1 day) on the month of termination, social security premium day will be notified per Article 80 of Law No. 5510, and the premiums related to the annual leave payment will be paid.

In the light of the above, retrospective declaration is required if there is no working day on the month of termination of the employment contract. And it is understood that if a retrospective declaration is made for more than 3 months, an inspection/audit will be initiated, and an administrative fine will be paid.

If it is determined that this declaration has not been made retrospectively, there will also be a risk of requesting all the minimum wage supports with interest.

In addition, it is also worth mentioning that the above rules would also be applied to all wages and benefits per Article 61 of the Income Tax Law.

Should you have any queries or need further details, please contact your customer representative.