Data Used by the Calculation Tool
Four items of data are required before a calculation can be made: the date of commencement of employment, the date of termination and the salary details. The salary may be entered either as a gross or as a net figure.
The function of a severance and notice pay calculator is not confined to calculating severance pay on the gross salary; working from the data entered by the user, it also makes it possible to calculate severance pay on the net salary.
The basic figure taken as the basis for both payments is the gross wage. Most employees, however, know their net salary without being familiar with the detail of the gross amount. In such a case the net wage must first be converted into a gross figure, and only then can the calculation of the payment proceed. The method described above offers the user a practical solution through an integrated approach that allows the calculation to be performed on either the gross or the net salary. The aim is to enable the employee to arrive, starting from the net wage, at a figure as close as possible to the payment to which they will be entitled.
How Is Severance Pay Calculated?
When a severance pay calculation is made using the figures updated for 2026, each completed year of service counts as 30 days, and that figure is multiplied by the daily gross wage in force at the date of termination. To make this concrete: an employee who has worked for five years at the same workplace and whose final gross monthly wage is TRY 39,000 becomes entitled to severance pay of TRY 195,000 (5 x 30 x 1,300 = 195,000).
The point to be emphasised here is this: the measure used in the calculation is the gross wage including fringe benefits. If the employee is also provided with ancillary payments such as meal and travel allowances, those items are reflected in the calculation.
Calculation Based on the Net Salary
Several variables play a part in determining severance and notice pay; foremost among them are the period worked, the gross or net wage and the line of business. The reason the calculation is built on the gross wage is that tax and insurance deductions bear directly on the net salary. Employees generally know their net salary but may not know the gross figure, since in many cases payslips are presented on the basis of the net amount. Many employees who do not wish to grapple with complex calculation steps prefer to work from the net salary. It is at this point that programs which calculate severance and notice pay from the net salary come into play. These tools assist in determining the amount payable by assessing the period of service, the net wage received and a number of additional variables.
The Ceiling on Severance Pay
Act No. 5434 sets an upper limit on the payment due, known as the severance pay ceiling. That limit may not exceed the highest retirement bonus paid to the most senior civil servant in respect of one year of service.
The severance pay ceiling, which is updated twice a year in January and July, has been set at TRY 63,949 as of January 2026. The same figure stood at TRY 53,919.68 in July 2025.
2026 Severance Pay Ceiling: TRY 63,949
Even where the employee’s gross salary exceeds that limit, the ceiling figure is taken as the basis both in the calculation and in the payment. The parties may nevertheless agree that the employer will pay a higher amount without being bound by that limit.
Tax and Social Security Deductions on Severance Pay
Severance pay is a payment made in a lump sum by the workplace, according to the length of service, to an employee who has worked for a certain period, where the employment contract is terminated or where the employee leaves on retirement.
As a rule, employees pay income tax on the wages they earn. By contrast, under Article 25(7) of the Income Tax Act, severance pay is exempt from income tax; accordingly, no obligation to pay income tax arises for employees in respect of this payment. Where a payment above the ceiling has been made to the employee, however, the portion exceeding that limit is subject to income tax. Stamp duty is withheld from severance pay.
Since severance pay is a payment arising after the employment relationship has ended, no social security premium is withheld from this amount.
How Is Notice Pay Calculated?
The provision governing notice pay is Article 17 of the Labour Act No. 4857. Under that provision, where the employment contract is terminated by one of the parties without just cause, the party failing to observe the statutory notice periods becomes liable to pay the other party notice pay in the amount laid down by the statute.
The calculation is built on the periods of service. The party who fails to observe the notice periods pays the employee or the employer, as compensation, the gross wage including fringe benefits for a period equal to the notice period. The notice periods laid down by the Labour Act, that is to say the periods of notice, are as follows:
- 2 weeks for an employee whose service has not reached six months
- 4 weeks for an employee whose service does not exceed one and a half years
- 6 weeks for an employee whose service runs up to three years
- 8 weeks for an employee whose service exceeds three years
Accordingly, the longest notice period that may be obtained is 56 days. For an employee with ten years of service, for example, the period applied is eight weeks, that is 56 days.
Deductions From Notice Pay
The payment is made on the basis of the employee’s final gross wage including fringe benefits at the date on which they left the workplace or were dismissed by the employer. No upper limit or ceiling wage restriction applies to notice pay.
The calculation of notice pay is made in line with the periods set out in the Labour Act; the employee’s gross wage including fringe benefits is established on the basis of those periods. The gross wage including fringe benefits denotes total earnings, covering not only the monthly gross salary but also fringe benefits. The payment is made on the basis of the amount so determined.
The Income Tax Act does not bring notice pay within the scope of the tax exemption. For that reason, both income tax and stamp duty are withheld from notice pay, which is calculated on the employee’s monthly gross wage. The employer must deduct these two items from the amount before making the payment; the net compensation the employee receives is likewise determined after those deductions.
Since notice pay is also a payment arising after the employment relationship has ended, no social security premium is withheld from this amount.
Frequently Asked Questions
Which method is followed in calculating severance pay?
Each completed year of service counts as 30 days, and that figure is multiplied by the daily gross wage in force at the date of termination.
How is the period of service reflected in the calculation?
In full-time employment, where the period between commencement and departure has not been interrupted at all, a complete and uninterrupted gross period of service emerges; the completed years and months within that period form the basis of the calculation. As regards periods subject to part-time, seasonal or half-time arrangements, the periods actually worked by the employee are included in the calculation in the proportions laid down.
Are fringe benefits included in the severance pay calculation?
Yes. Payments received by the employee in addition to the gross wage, such as travel and meal allowances, are taken into account. Severance pay covers fringe benefits alongside the gross wage so as to reflect the employee’s total income.
How is the severance pay ceiling determined?
Act No. 5434 has introduced an upper limit for the payment due, known as the severance pay ceiling. That limit may not exceed the highest retirement bonus paid to the most senior civil servant in respect of one year of service.
Is a minimum period of service required for severance pay?
Yes. For the entitlement to arise, the employee must have worked for the same employer for at least one year or longer. The minimum period is calculated over the years elapsed since the date on which employment began.
Can an employee who resigns claim severance pay?
As a rule, no. Severance pay is payable where the employee is dismissed by the employer or where the employment contract comes to an end for certain specified reasons. Resignation is the employee leaving the job of their own volition and does not produce the same result as a termination by the employer.
Compensation may nevertheless be payable where the resignation rests on just cause. For an employee who leaves by way of resignation to become entitled to compensation, a serious adverse situation attributable to the employer must be present.
Is income tax withheld from severance pay?
Under Article 25(7) of the Income Tax Act, severance pay is exempt from income tax; employees are under no obligation to pay income tax on this payment.
What course is followed if a dispute arises over payment?
An employee or employer in dispute over the payment of severance pay should obtain legal support. The first step to be taken as part of that support is an application for mediation; recourse to mediation is mandatory in actions concerning employment claims. Mediators seek to bring about a settlement between the parties. If no settlement is reached, the matter may be brought before the court, and the court reaches its decision by assessing the evidence submitted by the parties. Before going to court, it is important to observe the application periods laid down in the legislation.
What does termination for just cause mean?
The concept of termination for just cause denotes the ending of the employment contract by the employee on a legitimate and lawful ground. For a person who leaves in this way to become entitled to compensation, a serious adverse circumstance attributable to the employer must be present.
The employer disregarding the employee’s fundamental rights, or the employee becoming unfit to work because of a serious health problem originating in the workplace, are examples of such grounds. In such cases the employee may leave the job and receive their compensation.
In which situation does notice pay arise?
Where the employment contract is terminated by the employee or the employer without just cause, the party failing to observe the statutory notice periods becomes liable to pay the other notice pay in the amount laid down by the statute.
How long are the notice periods?
A party who ends the employment contract without observing the notice periods pays the other party, as compensation, the gross wage including fringe benefits for a period equal to the notice period. The periods laid down by the Labour Act are as follows:
- 2 weeks for an employee whose service has not reached six months
- 4 weeks for an employee whose service does not exceed one and a half years
- 6 weeks for an employee whose service runs up to three years
- 8 weeks for an employee whose service exceeds three years
Is there a ceiling applicable to notice pay?
No. No ceiling wage restriction or upper limit is prescribed for this payment.
Can an employee who resigns claim notice pay?
This payment is an item which, where the employment relationship is brought to an end by one of the parties, the party failing to observe the notice periods must pay to the other. When the employee resigns, the contract has not been terminated by the employer, and no entitlement to notice pay arises in that situation.
What course is followed in notice pay disputes?
An employee or employer in dispute over the payment should obtain legal assistance. An application for mediation must be made first in this context; mediation is mandatory in actions concerning employment claims. Mediators seek to bring the parties to a settlement; if no settlement can be reached, recourse may be had to the court. The court decides by assessing the parties’ evidence. Before applying to the court, care must be taken over the application periods laid down in the legislation.
Which deductions are made from notice pay?
Since the Income Tax Act does not bring notice pay within the scope of the tax exemption, income tax and stamp duty are withheld from the amount calculated on the employee’s monthly gross wage.
Independent Legal Assessment
Although both payments proceed from the same wage base, namely the gross wage including fringe benefits, they diverge in their outcome. Severance pay is capped by the ceiling and is exempt from income tax; notice pay, by contrast, is subject to no ceiling but does attract income tax. In the case of highly paid employees, a failure to consider these two differences together leads to appreciable divergences between the amount claimed and the amount actually received.
A significant proportion of disputes arises not from the figures themselves but from which items are to be included in the calculation. How fringe benefits are shown on the payslip directly determines the amount payable.
We recommend that the following points be observed when the calculation is made:
- Clarifying whether the wage is gross or net; where the net figure is the starting point, ensuring that the conversion to gross is carried out correctly
- Separating out the fringe benefits to be included in the wage including fringe benefits according to the criterion of continuity
- Taking as the basis the ceiling in force at the date of termination, bearing in mind that the ceiling is updated twice during the year
- Reflecting stamp duty alone in the case of severance pay, and both income tax and stamp duty in the case of notice pay
- Determining the notice period by reference to the band corresponding to the length of service at the date of termination
- Planning the time limits with regard to the fact that pre-action mediation is mandatory
Independent Legal advises both employers and employees on severance and notice pay calculations and on the mediation and litigation processes relating to these claims.