6552 enumerated ‘Law regarding the restructuring of certain receivables with the changes in the labor law and other laws and enactments’ has been published in the Reiterated Official Gazette and entered into force on the date of publishing. With the Bill Omnibus, which includes 146 articles, many regulations have been subject to important changes. This article consists of briefing regarding the imposed regulations on Labor Legislation.

I- Gross Salary:

Under Turkish Labor Law, gross salary is defined as the salary earned by employees. However, this is not the take-home amount for employees since gross salary is subject to mandatory government deductions and tax liabilities. Such deductions are made from the gross salary and paid to the related authorities by employers on employees' behalf. As a rule, employees are responsible for paying these deductions; however, to simplify the payment and collection process, employers act as intermediaries by making deductions at the source. These deductions consist of income and stamp taxes, employee contribution of social security premiums and unemployment insurance.

• Gross Salary = Net Salary + Social Security Premium (Employee Contribution) + Unemployment Insurance (Employee Contribution) + Income Tax + Stamp Tax

II- Net Salary:

Net salary is the gross salary after deductions, and it represents the total sum that an employee takes home.

• Net Salary = Gross Salary - Social Security Premium (Employee Contribution) - Income Tax - Stamp Tax - Unemployment Insurance (Employee Contribution)

Total employer cost is higher than the gross salary since the employer is obliged to apply deductions for the SSI employer premium and unemployment insurance items. Shortly, this difference is due to the employer contribution of the specified deductions.

III- Total Employer Cost:

• Total Employer Cost = Gross Salary + Social Security Premium (Employer Contribution) + Unemployment Insurance (Employer Contribution)

IV-Social Security Premium:

In deducting the social security premiums gross salary is used as the base and both the employer and employee contributions are considered as the total social security premiums, which correspond to 34,5% of employee's gross salary. Employer and employee contributions are calculated as respectively 20,5% and 14% of the gross salary, and both amounts are paid by the employer until the end of the following month. In addition, employers are able to benefit from a discount offered by the Treasury, which is applied at 5% on the employer contribution of social security premiums, provided that the employer makes its SSI premium payments on time and that all of its employees are insured. When determining the variable applicable for the calculation of premiums, the minimum and maximum amounts declared by the government are compared with the employee's gross salary. In the event that the gross salary level is below the declared minimum, the minimum amount should be considered instead of the gross salary, and conversely, if the gross salary is above the maximum, the latter must be considered in calculating the premium.

• Social Security Premium (Employee Contribution) = 14 % of Gross Salary

• Social Security Premium (Employer Contribution) = 20,5 % of Gross Salary

• Social Security Premium (Total) = 34,5 % of Gross Salary

IV- Unemployment Insurance:

Unemployment insurance is calculated based on the gross salary. Employee and employer contributions correspond to respectively 1% and 2% of the gross salary, and consist of the total of 3 % unemployment insurance amount. The employer is liable to pay the unemployment insurance deduction along with the above stated social security premiums no later than the end of the following month. Unemployment insurance premiums are calculated as the same way as social security premiums.

• Unemployment Insurance (Employee Contribution) = 1% of Gross Salary

• Unemployment Insurance (Employer Contribution) = 2% of Gross Salary

• Unemployment Insurance (Total) = 3% of Gross Salary

V- Income Tax:

Income tax is imposed by the government on financial income generated by businesses and individuals. In the case of employees, income is defined as wages earned (gross salary). Therefore, employers need to deduct income tax from the remainder of the gross salary after the employee contribution of social security premiums and unemployment insurance are deducted (since these are exempt from income tax), and to pay the amount to the tax office on behalf of the employee no later than the 20th of following month. The payment period can be reduced to quarterly periods, allowing employers to make payments every 3 months provided that the employer has 10 employees or less.

• Income Tax Base = Gross Salary - Social Security Premium (Employee Contribution) - Unemployment Insurance (Employee Contribution)

According to the tax table of the Revenue Administration, the income tax rates vary in respect to the cumulative salary brackets. Hereunder, income tax is applied at the rate of 15% for cumulative salaries up to 11.000 TL.

As the cumulative salary enters into next bracket, the standard tax rate is applied for the upper limit of the previous income bracket and a different tax rate is applied for the exceeding part of salary. The highest applicable income tax rate is 35%.

• Income Tax = Income Tax Base Amount * Income Tax Rate (%) VI- Stamp Tax:

Stamp tax, calculated at the rate of 0,759%, is deducted from employee's gross salary. Stamp tax payments along with a declaration can be made at the same time as income tax payments, subject to the same deadlines.

• Stamp Tax = Gross Salary * Stamp Tax Rate (0,759 %)

Question: Is Severance Pay Exempt From Income Tax?

Answer: According to Article 61 titled "Wage Description" of the Income Tax Law No. 193, wages are benefits that are provided with money and monthly payments for service, subject to the employer and affiliated with a specific workplace, and that can be represented with money. The fact that the salary has been paid as an allowance, indemnity, cash indemnity (financial liability indemnity) allowance, raise, advance, dues, attendance fee, premium, bonus, expense provision or under other names or is assigned as a certain percentage of the earnings, provided that it is not a partnership, does not change its nature.

In the subparagraph (1) of the article 94 titled "Tax Withholding" of the same Law, it was stipulated that the wages paid to the service providers and the payments that are written in article 61 and that the income tax withholding will be made according to the 103th and 104th articles.

Again, in Article 25 of the same Law titled "Compensation and Aids";

"The total amount of severance pay pursuant to Laws No. 1475 and 854 and the amount of severance payments paid pursuant to Law No. 5953 not exceeding 24 months of employee (wages paid without performing service are not considered as compensation);

Again, in Article 14 of Labor Law No. 1475 with the title "Severance Pay";

1. Except for the reasons indicated by the employer in the clause II of Article 17 of this Law,
2. By the worker in accordance with Article 16 of this Law,
3. Due to active-duty military service,
4. Termination in order to receive old age, retirement or invalidity pension or lump sum payments from the institutions or funds established by the law to which they are affiliated

In the event that a woman terminates voluntarily within one year from the date of marriage or terminates due to the death of the worker, the employer shall pay the employee a 30-day salary for each full year from the date of employment, during the continuation of the service contract. There is a provision that payments are made at the same rate for periods remaining from one year.

In the 16th article of the Labor Law numbered 1475, there are provisions regarding the conditions in which the employee can terminate the employment contract, and the article 17 of the same Law, there are provisions regarding the conditions in which the employer can terminate the employment contract.

On the other hand, in the 4th Article titled "Determining the Coefficients and Increasing the Wages" of the Public Servants Arbitration Board Decision dated 29/05/2012 and numbered 2012/1

(1) To be valid in the period of 1/01 / 2012-30 / 6/2012;

1. Regarding to Article 154 of the Civil Servants Law dated 14/7/1965 and numbered 657, the monthly coefficient to be applied in converting the figures in the monthly dashboard and additional indicator figures into monthly amounts is applied as (0.068835). The base monthly coefficient to be applied to the civil service base salary indicator (0.92105) is applied as (0.021287) the fringe benefit to be applied in the conversion of labor difficulties, job risks, difficulties in obtaining and financial liability increases into monthly amounts.
2. Those who are employed on a contractual basis in accordance with Article 3 (c) of the Decree Law No. 399. The wage ceiling of the employee was increased to 3,611.50 TL

... "is included.

Accordingly, the difference in severance pay paid to the personnel who left their job between 01/01/2012-31/05/2012 on the coefficients increased by the Decision of the Arbitral Board of Public Officials dated 29/05/2012 and numbered 2012/1; It will be considered within the scope of the exception according to section 7 of Article 25 of the Income Tax Law.