- Regulation Regarding Hindered from Retirement Due to Age
The Law Amending the Social Security and General Health Insurance Law and Decree Law No. 375 (“Amending Law”) numbered 7348 was published in the Official Gazette dated 03.03.2023 and numbered 32121 and came into force with its publication. With the Amending Law, the details of the arrangement so-called “hindered from retirement due to age” (“EYT Arrangement”) were clarified.
With the EYT Arrangement those who started working before September 8, 1999, have been granted the right to retire early, in other words, become entitled to receive pension regardless of their age, once they fulfil the insurance period and contribution day criteria specified under provisional article 81/1-B of Law No. 506. Accordingly, the employees who wish to benefit from this arrangement may retire and leave their jobs. The insurance period condition that woman must fulfil is 20 years; whilst the men must fulfil is 25 years. Along with these, the number of contribution days that should be met vary between 5000 and 5975 days, due to the commencement date of insurance. The respective employees are not obliged to exercise this right promptly upon enactment of the law, but instead they may exercise it on a future date.
According to the Amending Law, people benefiting from crediting will also be able to retire and entitle to pension pay. Crediting is a concept in Turkish social security system stipulated in Social Security and General Health Insurance Law No. 5510 (“Law”) which enables the recognition of the uninsured periods based on limited reasons regulated under the Law (such as military service, birth or foreign insurance periods) as insured periods, once the insured persons pay the amount corresponding to the number of days spent without working. Thus, even though some employees are not able to retire as their insurance commencement date is later than 08.09.1999, they may be able to benefit from crediting and theoretically return their start of date of insurance to/before 08.09.1999. In such case, they will be able to retire and leave their jobs.
As a side but related note, it is possible for those to benefit from EYT Arrangement whose insurance commencement date is on or before 08.09.1999 in another country, with which Türkiye has a bilateral social security agreement allowing the recognition of the insurance periods spent in that country. Thus, it is possible for employees whose insurance commencement date is on or after 09.09.1999 in Türkiye, provided that (i) his/her commencement date in the country party to the agreement is earlier than 09.09.1999, (ii) this country concluded a social security agreement with Türkiye, and (iii) there is an explicit arrangement under that agreement allowing the recognition of insurance periods.
For the ease of the implementation, an announcement was published by the Social Security Institution (“SSI”) on 03.03.2023, regarding the employers’ requests as to their employees should obtain a document from the SSI showing that the relevant employee is able to retire. According to that announcement, employers should not direct employees to the SSI in order to obtain the documents in question, and documents obtained via e-Government system should be deemed sufficient to proceed with the termination of the employment (i.e. cease of social security registration). Relevant documents can be obtained through “SSI Social Security Registration and Service Document”, “Social Security Registration Document” and “My Working Life” tabs accessed via e-Government.
To sum up, those
- Who started working on or before 08/09/1999,
- Who return their insurance commencement date to or prior 08/09/1999 through crediting even though these persons started working on and after 09/09/1999
will be able to retire and entitle to pension pay regardless of the age, once they fulfil the insurance period and contribution day criteria.
Having noted above, a discount opportunity for the employers who employ persons retired according to the EYT Arrangement was also provided. According to that regulation, if those retiring according to the EYT Arrangement start to work in the same employer’s workplace within 30 days from the termination date subject to the social security premium contribution (“SGDP”), the employer’s part of their social security premiums will be reduced by 5-points, provided that conditions under article 81/1-ı of the Law are fulfilled. SGDP is premium which employers are obliged to pay for the insured persons who are entitled to receive pension-pay, for which the employers’ part is higher when it is compared to non-retired employee. As per article 81/1-ı of the Law, conditions for the employer to benefit from the discount are as follows:
- Monthly premium and service documents must be submitted to the SSI and withholding tax return and premium service declarations must be submitted to the Ministry of Finance within the statutory period,
- Payment of insurance premiums of all insured persons, corresponding to both the insured’s and the employer’s share, which is not covered by the Treasury must be made in due time, and
- There should be no unpaid premiums, administrative fines and related delay fines and late fees to the SSI.
With this discount, it is aimed to prevent higher costs to the employer due to the higher amounts of premiums paid because of the number of people retired according to the EYT Arrangement. Additionally, if the employee who starts to work after being granted to pension-pay leaves the job again for any reason whatsoever, employers will not be able to benefit from this discount for the same employee as per the Amending Law.
2. Evaluation of Labour Law Related Issues
Consequences that may arise due to the EYT Arrangement should be evaluated as this amendment affects almost 6 million people in Türkiye, and employers may experience a loss of skilled labour force accordingly. Most probable outcomes that employers may face are loss of experienced employees and burden of paying high amounts of seniority compensations and labour receivables (such as non-received salaries and paid leave fees). Moreover, albeit it was aimed to reduce costs of higher premiums arising out of SGDP through 5-points discount arrangement, employers may still face higher social security premiums that must be paid for employees remaining working although they retire according to the EYT Arrangement.
Apart from monetary burdens, it is likely that below issues related to labour law arise due to the EYT Arrangement:
- Must employers remain the employment relationship with the employees who retired according to EYT Arrangement?
Employers are not obliged to continue to employ such employees after they retire, under the freedom of contract. However, although the principle of equality is not applicable at the recruitment process, employers must not act in breach of prohibition of discrimination. As such, employers should not adopt discriminative behaviours such as based on sex or trade union subscription. As soon as employers are able to prove that they use objective criteria for the recruitment of employees who have retired as per EYT Arrangement, freedom of contract will be given priority.
- Are employers obliged to continue with the former employment contract of the employees who retired according to EYT Arrangement or execute new contract?
This situation is up to parties’ agreement; however, employers must not act against employees’ interests and cannot act against principle of equality. In principle, if working conditions are not planned to be amended between the parties, the employment conditions should not also be changed. However, as the relationship is newly established with the termination of the former employment relationship, parties are also free to change the structure of the employment relationship (e.g., they may decide to implement part-time working), and amend the contract accordingly. In any case, employers must act in accordance with the principle of equality, and must not make any discriminatory implementations e.g., creating gaps between employees who have retire according to the EYT Arrangement and not, albeit those have same/similar seniorities and/or experiences.
- Does the period spent before the retirement according to the EYT Arrangement will be considered while calculating seniority in the determination of whether relevant employee is subject to the job security?
Although there are different decisions of the High Court of Appeals in this regard, whole period that the employee worked (including the period before the termination of the employment relationship due to retirement according to the EYT Arrangement) should be taken into account while calculating the seniority in terms of 6 months condition for the job security as per explicit statement under article 18 of the Labour Law.
- What is the situation for the seniority compensation and notice periods?
With regards to seniority compensation, it is possible to determine between the parties that either the employer will pay or not pay the seniority compensation at the end of the first termination due to retirement according to the Amending Law. In such a case, if the second employment term (i.e. the period corresponding to the term after the relationship is terminated due to EYT Arrangement, however, the employee continues to work) is terminated due to a reason which does not allow employee to be entitled to a seniority compensation, then the seniority compensation the employee is entitled to will be calculated based on the last salary paid at the end of the first termination and the term worked before the first termination.
It is crucial to state that, if it is decided to pay the seniority compensation of the employee corresponding to the period worked before the termination due to retirement of the employee, whole seniority compensation that the employee entitled to must be paid. Otherwise, in other words the payment is not complete, this payment is deemed as an “advance payment” and will be deducted from the seniority compensation that will be made at the end of the second termination -which is calculated based on the last salary and whole working period- by applying interest.
- If the payment of the seniority compensation related to the term until the termination due to EYT Arrangement, is made completely, then for the employee who continues to work under the same employer, the seniority compensation payment related to the second working term will be made considering only the duration spent in the second term, based on the last salary;
- Otherwise, deficient or malicious payment of the seniority compensation will result in to be deemed as an “advance” and such advance payment will be deducted from the compensation calculated according to the last salary and the whole term of employment, by implementing interest.
Regardless of the above choices, employers in any case must act in accordance with the free will of the employee and the principle of goodwill.
Last of all, in terms of notice periods, given the fact that there is no explicit arrangement as the situation for the seniority, employers should consider only the second term of employment while calculating the notice periods as the case may be the termination of the relationship, which has continued after the termination due to EYT Arrangement.
- May the seniority compensation be paid with instalments?
In principle, the seniority compensation should be paid in time and in full by the employers as per article 32 of the Labour Law. However, payments in instalments are accepted by the case-law, provided that these payments are made according to and in compliance with an agreement which is concluded between the parties without defect in the consent of the employee. Once these conditions are met, it is possible for parties to determine instalments. In the case that the employer breaches the conditions of the agreement, then the employer must pay an interest to be calculated by initiating as of the lawsuit date upon the whole seniority compensation as per rulings of the High Court of Appeals.
- Does prior employment term be taken into consideration while calculating paid leave duration of the employees?
Similarly to the seniority compensation, as per explicit arrangement of the Labour Law, in the calculation of the time taken to be entitled to paid leave, the entire time worked in one or several workplaces of the same employer must be taken into account.Giventhis explicit arrangement, employers should consider the whole working term (i.e., the period spent before and after the termination of the employment due to EYT Arrangement, in case the employee continues to work) while determining when and for what duration the employee is entitled to the paid leave.