Less than six months before the Turkish presidential election, Turkish President Tayyip Erdogan recently announced in a press conference that the minimum age requirement for retirement (age 58 for women and age 60 for men) will be eliminated. This change allows more than 2 million workers to retire immediately. The Turkish government plans to introduce and approve a legislation in the coming weeks, and the changes are expected to enter into effect retroactively on 1 January 2023.

Background

On 8 September 1999, the Turkish government passed amendments to the social insurance law:

  • establishing a minimum retirement age requirement (age 58 for women and age 60 for men) and,
  • increasing the minimum number of days an employee is mandated to pay premiums to qualify for retirement from 5,000 days to 7,000 days for a minimum of 20 years of insured service for women and 25 years for men.  

That legislation was widely criticized as it prevented many employees who have met all the eligibility conditions for retirement except for the minimum age requirement, from retiring.

Key details

All workers will now be able to retire at any age and receive social security retirement benefits so long as they have the following:

  • a minimum period of paid premiums of 5,000 days.
  • a minimum of 20 years of insured services for women and 25 years for men.

Employees who meet the new eligibility requirements for retirement and choose to retire will be entitled to the existing mandatory employer-paid severance. The lump sum payout is equal to one month’s pay per year of service, subject to a salary cap of TRY 19,213 per month as of 1 January 2023.

Retirees may continue working after retirement and may be rehired by their former employer. Although the current social contribution rate for retirees is higher than for non-retirees, it is expected that employers’ social security contribution rate for retirees will be decreased to match non-retirees’ rates. More details on this will be announced once the legislation passes.

In addition, the Turkish government plans to introduce financial mitigation measures, including:

  • a social insurance premium incentive program to help employees pay for their social security contributions.
  • a loan program for small and midsize employers to help pay the existing mandatory severance payouts for eligible employees.

The government should announce additional details of the programs at a later, yet undetermined, date.

Next steps

The relaxed eligibility requirements may lead to an increase in retirements in the coming weeks and months. Employers should monitor the implementation timeframe of the upcoming legislation and plan for the financial impact that may result from mandatory severance payouts to eligible employees.