How to Hire in Türkiye through an EOR
How to Hire in Türkiye through an EOR
Straddling continents with a population of 84.1 million people whose median age is only 32 years old (24.6% of the population belongs to the 0-14 years age group), Türkiye offers many economic opportunities.
Its workforce is young, educated, and tech-savvy. The country offers one of the largest talent pools in the EMENA Region (Europe, Middle-East and North Africa), with one million university graduates annually.
The appeal is clear for companies undertaking a global expansion and considering moving to Türkiye. Still, they should consider some critical points before starting the hiring process.
Overview of Türkiye
As your company prepares to hire in Türkiye, here’s what you first need to know about the country’s economy.
The country is classified as a newly industrialized country by economists who describe the country’s economy as an emerging market. The World Bank ranks Türkiye as an upper-middle-income country in terms of the country’s per capita GDP (EUR 8,094- USD 8,599 in April 2022).
Türkiye is a founding member of the Organisation for Economic Co-operation and Development (OECD) and the G-20 major economies (1999). Over the past 20 years, there have been significant developments in the financial and social aspects of Türkiye’s economy. Increased employment and average incomes brought even more competitiveness to the country.
The country’s economy grew 7.6% in the second quarter of 2022. According to the International Monetary Fund’s estimates, Türkiye is forecasted to grow 2.7% in 2023 and have the world’s 23rd-largest nominal and 11th-largest GDP by PPP by the end of 2022.
Education in Türkiye
Türkiye offers high levels of education, and the Turkish workforce is consequently well-educated. According to the World Bank, 74.91% of the total working-age population in Türkiye had advanced education in 2020.
Education in Türkiye, mandatory and free for all, is taken seriously and considered a fundamental right. Primary education lasts eight years. Primary school (İlköğretim Okulu) last four years and is referred to as “First School, 1st Level” (İlkokul 1. Kademe); then, middle school (ortaokul) lasts four years too and is referred to as “First School, 2nd Level” (İlkokul 2. Kademe).
Secondary education lasts four other years. Education can be general, vocational or technical, and aims to prepare students for higher education. During the academic year 2001–2002, 6,000 secondary education institutions in Türkiye educated 2.3 million students and employed 134,800 teachers. Secondary education is synonymous with high school education, and the schools are called lyceum (lise).
Türkiye counts 209 universities, in which eight million students are enrolled. With a schooling rate of 94.2%, Türkiye ranks second in the world in access to higher education.
Labour and workforce in Türkiye
As per the Turkish Statistical Institute, as of October 2022, Türkiye has a relatively high unemployment rate of 10.2% and a relatively low participation rate which peaked in October at 53.50% for its totalled 32.6 million people workforce.
Tourism is a leading sector of Türkiye’s economy and an employment driver. Over the years, Türkiye has become a popular tourist destination for many Europeans, competing with Greece, Italy and Spain. In 2019, Türkiye ranked sixth in the world regarding international tourist arrivals, with 51.2 million foreign tourists visiting the country. Overall, the hospitality and tourism sector generated, directly and indirectly, 2.4 million jobs in 2021, while the entire services sector employed 55.91% of the total workforce in 2020.
As a newly industrialized country, Türkiye still relies heavily on the agriculture sector, which remains an essential part of the economy. Half of the land is agricultural, employing 18% of the workforce and contributing 7% of GDP in 2020. Türkiye is a major producer of wheat, sugar beets, milk, poultry, cotton, tomatoes, and other fruits and vegetables. As of 2021, Türkiye is the world’s largest producer of hazelnuts and apricots.
According to the World Bank, the Turkish industry sector employed 26.07% of the workforce in 2020. The industry consists of public and private sector companies, automotive and textiles being among the top products made in the country. The construction sector is also a pillar of the Turkish economy.
Tax and employers’ contributions in Türkiye
There are five tax bands of personal income tax, starting at 15% on income up to TRY 32,000 (EUR 1,615 – USD 1,715.5) with a top rate of 40% on the excess over TRY 880,000 (EUR 44,410 – USD 47,176).
Additionally, there are two bands for tax on non-employment income of 27% for earnings up to TRY 170,000 (EUR 8,581 – USD 9,113.5) and 35% for the excess over that. There is no special tax regime for expatriate workers.
Employers contribute 20.5% of employees’ payroll to the Social Security Institution (SSI), which can be reduced conditionally to 15.5%. In comparison, employees contribute 14% of their salary, with 9% towards disability, retirement and life insurance and 5% for general health insurance.
The standard corporate tax rate in Türkiye is 20%. However, the rate was upped to 25% for income earned in 2021 and 23% for income earned in 2022. The rate is due to revert to 20% from the tax year beginning January 2023, subject to legislation. Financial sector companies are taxed at 25%.
Employers fund 2% and employees 1% towards Unemployment Insurance. Other taxes include the following:
- VAT: All companies supplying goods and services must register for Value Added Tax (VAT), although there is no threshold. The standard rate is 18%, reduced to 8% for basic foodstuffs, books and other publications (excluding online), textiles, and pharmaceutical products and 1% for some agricultural products and services.
- Withholding Taxes: The rates reflect whether the income is paid to residents, non-resident individuals, or companies. Resident individuals pay 15% on dividends and 20% on royalties, plus fees for technical services. Non-resident companies and individuals pay 15% on dividends, 0%-10% on interest payments, and 20% on royalties and technical services fees. Resident companies are not liable for WHT in any category.
Compensation law and employees benefits in Türkiye
In July 2022, Türkiye raised its National Minimum Wage for the second time in six months to combat inflation reaching 74% in May. The new monthly minimum is TRY 5,500 (EUR 277.65 – USD 294.82).
Under the Labour Code’s Working Time Regulations, regular working hours cannot exceed 45 hours a week. The Code stipulates minimum unpaid breaks as 15 minutes for working up to four hours, 30 minutes for between four and seven hours, and one hour for working over seven-and-a-half hours. Part-time, on-call and remote working are also covered by the Labour Code and Code of Obligations and operate by mutual agreement between employers and employees.
Overtime is restricted to 270 hours per year maximum under the Overtime Regulations Code. The overtime pay depends on the employee’s typical working week. Employees usually working 45 hours per week receive 50% above their standard hourly rate for extra hours. Those generally working fewer than 45 hours receive 25% above the regular hourly pay until they exceed 45 hours when the 50% extra applies.
Employees who have worked for more than one year, including any probationary period, qualify for the following leaves entitlement:
- One to five years – 14 days of leave
- Five to 15 years – 20 days of leave
- More than 15 years – 26 days of leave
- Employees under 18 years old or over 50 years must have a minimum of 20 days’ paid leave
On top of the entitled paid leaves above, Türkiye observes the following holidays, given as extra paid leaves for the employees:
- New Year’s Day (January 1)
- National Sovereignty and Children’s Day (April 23)
- Labour Day (May 1)
- Youth and Sports Day (May 19)
- Democracy and Freedom Day (July 15)
- Victory Day (August 30)
- Republic Day (October 29)
- Ramadan and Eid Holidays (date changes annually according to moon sightings)
How to hire in Türkiye
If you plan to hire in Türkiye, you must first consider all the factors that affect costs and expenses, not only the benefits and taxes that will be part of the payroll. Hiring costs usually include the following:
- Job postings
- Recruiter’s fees
- Pre-employment assessments
Then, you will need to decide which business structure best suits your plans. The typical choice in the private sector is to open a subsidiary as a limited liability company, signified by the suffix Ltd. Şti. which operates under the new Turkish Commercial Code (TCC). All registration is handled through the Central Registration System (Merkezi Sicil Kayit Sistemi, MERSIS).
Registration and other procedures include:
- Register with MERSIS; obtain a tracking number for registration and compile the subsidiary’s Articles of Association.
- Attend the Trade Registry Office or a public notary to have the Articles signed by the shareholders.
- 0.04% of the share capital (minimum shared capital is TRY 10,000) must be deposited into a bank account as a fee for the Turkish Competition Authority (anti-monopoly fee).
- Provide all required and notarized documents to the Trade Registry Office with the MERSIS tracking number. With the Registry’s approval, the company then becomes a legal entity.
- Register the business address with MERSIS. Then, the company’s formation must be published in the Trade Register.
- Register with the Social Security Institution (Sosyal Güvenlik Kurumu, SSI or SGK) through MERSIS.
- Register with the Turkish Revenue Administration (Gelir İdaresi Başkanliği, GİB) to obtain the Tax Identification Number, TIN (Vergi Numarasi).
However, there is a more straightforward option to the risks and costs of setting up a subsidiary in Türkiye. Using our Employer of Record (EOR) solution, your staff can be sourced, placed in their roles and up and running within days instead of months. All the payroll, taxation and compliance difficulties are under our control through our EOR platform. Meanwhile, your employees’ management remains under your control.
How to hire remote workers in Türkiye
In March 2021, the Government introduced a new regulation on Remote Work, legislating how companies onboard remote workers and hire in Türkiye, while protecting the workers from low wages.
The remote worker must now have a written contract with their employer before starting their remote job. The agreement should state the employee’s salary and how they will be paid. The agreement needs to determine the nature of the role, its length, and the employee’s working hours, and it must also list the tools and equipment the employer must provide to their workers.
If your company is interested in hiring in Türkiye and you want
to start working with employees there sooner rather than later, partnering with an Employer of Record is the way to go. You can bypass the process of establishing your company in-country and hire through an already set up and compliant entity.
With Bradford Jacobs, you can enjoy seamless remote talent sourcing. We attract, find, engage, and onboard the best employees for your business needs, no matter their location. If you want to attract and hire top global talent, contact us today or download our Türkiye guide to start your EOR journey to global mobility and remote working!