Can a Resigned Employee be Paid Severance?

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Conditions for entitlement to severance pay are arranged in article 14 (still in effect) of Former Labor Law No. 1475; and resignation of an employee isn’t one of the reasons for entitlement. For detailed information please visit our website:

In practice employers may choose to make payment (while there is no obligation to pay it) to a resigned employee as a gratitude for his ex-services, and they usually wrongly call it severance pay. However, any payment made under any name for a resigned employee must be treated differently than severance pay from the point of SSI premium and income tax liability.


As per article 25 of Income Tax Law No. 193; total amount of severance payment entitled in line with above said Law No. 1475, and the amount not exceeding 24 months’ salary of press members (in the scope of Law No. 5953) are exempt from income tax.

Briefly, no income tax is applied to employees working under Labor Law, while press members’ severance pay exemption amount limited to their 24 months’ salary, income tax will be applied to exceeding part.

Only stamp tax (0,00759) is applicable for both employees.

Also, the severance payment is exempt from SSI premiums.


Any payments made to resigned employees should be considered as wage (not as compensation / severance) and will be subject to income tax and SSI premium.

As per article 61 of Income Tax Law No. 193; “Wage is a benefit provided by cash in kind and cash, represented by cash, in return of services performed by employees registered and subject to an employer.

It does not change the true nature of wage by paying it under the names of indemnity, allowance, cash compensation (Financial Liability Indemnity), allocation, increment, advance, remuneration, attendance fee, premium, bonus, in return of an expense or determined by a particular percent of revenue provided not to have the attribute of a partnership.”

Also, article 80 of Law No. 5510 clearly states that payments made to resigned employee are liable to SSI premium.

As a result, employers who want to make payments under the names such as gratitude or ex gratia settlement should take into account the income tax and SSI premium liabilities.

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