Turkish Labor Law
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The Turkish government’s plans to sharply reduce severance payments in a bid to increase firms’ competitiveness has sparked debate even before related legislation is officially launched. The new planned system seems to disfavor employees, some say. A radical cut in severance payments, one of the main reforms expected as part of Turkey’s new national employment strategy, has fired up debates even before it has been officially announced.
While authors of the strategy argue that the new system will take the domestic system to an Organization of Economic Cooperation and Development, or OECD, average, it does not seem likely that the changes will favor employees. A labor economics expert, meanwhile, said some countries have other mechanisms that make up for the lack of or low severance payments.
A new severance payments fund will be established where employers will only make their contributions for each employee, according to a draft of the government’s National Employment Strategy Document, daily Dünya wrote Monday.
Severance payments will be equivalent to six months’ pay per 20 years service, a very low level compared with the current severance level of one month’s pay per service year, the drafts says.
Employees that have worked more than 10 years in a certain company will be able to retrieve only a fraction of severance payments they deserve while the remaining will be paid after retirement.
“Plans to remove severance payments in Turkey date back to 2001,” Özgür Müftüoğlu, a labor economics professor at Marmara University, told the Hürriyet Daily News in a phone interview Monday. He said global bodies such as International Labor Organization, or ILO, the World Bank, the European Union, as well as local trade and industrial chambers have constantly called for the government to change its regulation regarding severance, which is considered too “solid.”
Due to high costs, severance payments are today acting like a job-guarantee shield that prevents many firms from firing their employees arbitrarily, Müftüoğlu said. The payment also serves as unemployment insurance and as a financial mean to afford to live while the dismissed employee looks for a new job, he added. “All these will vanish if the new planned system is approved.”
Authors of the employment strategy draft though, argue that the new severance payment system will make Turkey’s labor market more competitive and will reduce large burdens on firms.
“There are OECD countries which pay no or low severance, but they have other mechanisms that make for such a system, like unemployment benefits,” said Müftüoğlu.
Moreover, funds have a negative past in Turkey, as most of them have not functioned properly, which Müftüoğlu said, adds to the insecurity feelings of employees.
“The employment strategy document is just a draft and it is subject to changes until published in the official gazette,” a Labor Ministry official told the Daily News on a Monday phone interview, speaking on condition of anonymity. The official also confirmed that the details leaked to press were the same as those in the strategy draft.
Severance in OECD countries
The strategy draft reportedly states that severance payments will be brought to an average level compared to OECD countries. These countries, however, differ substantially, regarding such a system.
A severance payment exists in Germany, according to the ILO database. A dismissed German employee is entitled to severance pay, the amount of which equal two weeks’ pay for each year of employment.
A system identical to Turkey’s existing is functional in Chile, another OECD country. China and Russia have similar systems, too. In Italy, there is no severance pay as such. However, there is an end-of-employment contract indemnity. Severance pay amounts to 20 days’ wages per year of service with a maximum of 12 months’ wages in Spain.
Erisa Dautaj Şenerdem – Hürriyet Daily News
