The ceiling used for severance pay under the Labour Law will be TRY 64,948.77 for each year of service in the period 01.01.2026 – 30.06.2026.

1. How the ceiling is set

Under Article 14 of Labour Law No. 1475, which remains in force, the severance pay for one year of service cannot exceed the maximum retirement bonus payable for one year of service under Law No. 5434 to the highest-ranking civil servant subject to the Civil Servants Law. This amount is calculated using the civil servant salary coefficient (1.387871) set by the Ministry of Treasury and Finance's circular of 06.01.2026.

2. Application

• For employees whose employment contract ends between 01.01.2026 and 30.06.2026 and who are entitled to severance pay, no more than this amount is paid for each full year of service, even if their last gross pay exceeds TRY 64,948.77.
• For periods beyond full years, payment is prorated on the same ceiling.
• The ceiling is the amount in force on the date the contract ends; the payment date is not relevant.

3. Calculation example

For an employee with a gross monthly pay (including benefits) of TRY 80,000 whose employment contract ends in March 2026 after 5 years and 6 months of service, the calculation is made on the ceiling because the pay exceeds it:

4. Tax aspects

Severance pay within the legal limits is exempt from income tax under Article 25/7 of the Income Tax Law and is not subject to SGK premiums. However, severance payments are subject to stamp duty. Payments above the ceiling do not qualify as severance pay and are taxed as wages.

5. Assessment

We recommend that employers planning terminations in the first half of the year update their severance pay provisions using the new ceiling. The ceiling applicable from 01.07.2026 will be reset according to the civil servant salary coefficient to be announced in July.

This circular is for general information only. Please contact us about your specific situation. The Turkish original is available here.

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