In today's globalized world, more companies are establishing foreign branches or expanding markets abroad. Overseas employers need to understand local hiring laws and compensation systems to properly manage staff and comply with regulations. This article introduces Turkey's pay cycles to help understand its compensation practices.
1. Compensation System in Turkey
Turkey's system offers flexibility determined through employer-employee negotiation. Legally, employers must pay monthly wages documented in pay slips listing name, position, pay amount, social insurance, and taxes. Employers are also responsible for staff's social insurance and tax payments.
2. Pay Cycles in Turkey
Pay in Turkey is typically monthly. Specifically, the wage payment period runs from the 26th day of the previous month to the 25th day of the current month. For example, if a company pays January wages between January 1-31, the payment cycle applies from December 26 to January 25. Within this window, employers must submit payments and related taxes to local tax bureaus and social security institutions.
3. Social Insurance and Taxes inTurkey
Employers must make following social security contributions according to Turkish law:
- Pension insurance: 14% of total employee wages paid by employer
- Healthcare insurance: 7.5% of total wages paid by employer
- Unemployment insurance: 1% of total wages paid by employer
Additionally, these income taxes apply as regulated:
- Income tax: rates vary based on income levels up to 35% maximum
- VAT: generally 18%, varying by product/service category
4. Conclusion
Understanding local compensation systems and pay cycles is crucial for foreign employers operating in Turkey. Employers are required to pay monthly wages while covering staff's social insurance and tax obligations. Payments occur monthly from the 26th day of the preceding month to the 25th day of the current month. This guide aims to aid overseas firms in Turkey.