The most underestimated liability in your Turkish subsidiaries doesn’t show up in your monthly reporting

A foreign company opening a subsidiary in Turkey naturally applies Turkish labor law. That surprises no one.

What does surprise people is the mechanics of a financial obligation that grows every year, with no dedicated line in most management dashboards: kıdem tazminatı, the statutory severance payment.

The rule is simple to state, heavy to carry over time.

Any company employing staff in Turkey — regardless of its shareholders’ nationality — must, under Labor Law No. 4857 and Social Security Law No. 5510, pay an employee leaving under qualifying circumstances the equivalent of 30 days’ gross salary per full year of service. An employee with fifteen years of tenure therefore represents fifteen months of gross salary, due at departure.

This right cannot be reduced by contract. Any clause attempting to waive or lower it in advance is null and void.

The ceiling moves twice a year, and it has to be tracked.

The amount is capped at a threshold revised every six months, indexed to the retirement bonus paid to civil servants. For the first half of 2026, that ceiling stood at 64,948.77 TL per year of service; for the second half, it rose to 73,729.87 TL. This semi-annual revision, in a context of high inflation, means the social liability of a Turkish subsidiary increases mechanically every year, independent of any management decision.

It’s not just an exit cost. It’s a structural brake on flexibility.

A company looking to restructure a Turkish subsidiary, cut headcount, or close a site often discovers, when pricing the operation, that kıdem tazminatı represents a significant share of the total cost — sometimes more than the cost considered “standard” in other European geographies, where severance is more tightly capped or negotiated collectively.

Headquarters that manage their Turkish subsidiaries with an HR framework designed for Western Europe almost always under-provision this line item.

What sets well-prepared companies apart: they provision from the moment of hiring, not the moment of departure.

An actuarial calculation of the kıdem tazminatı liability, updated at each semi-annual revision of the ceiling, should appear in every Turkish subsidiary’s financial reporting alongside cash and inventory. It rarely does. Yet it is the only way to avoid an unpleasant surprise at the moment of a restructuring, a divestment, or a headcount reduction.

At Bosphorus Transition Partners, we help foreign companies build this Turkish social reality into their financial planning and restructuring plans, before it becomes a last-minute obstacle