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Social Security Contributions in Turkey

Social Security Contributions in Turkey: A Guide for Foreign Investors

Turkey’s social security system is an integral part of the country’s labor market and provides a range of benefits to employees, including health insurance, pensions, and unemployment support. For foreign investors considering setting up a business in Turkey, understanding the social security contributions is crucial. This guide will provide an in-depth look at the structure of social security contributions in Turkey, how they are calculated, who is responsible for them, and the benefits they offer.

The Structure of Social Security Contributions in Turkey

Social security contributions in Turkey are governed by the Social Insurance and General Health Insurance Law No. 5510. The system is managed by the Social Security Institution (SGK), which is responsible for collecting contributions and disbursing benefits. The law mandates that both employers and employees contribute to the social security system, ensuring coverage for various risks such as illness, disability, unemployment, and retirement.

Who Is Required to Contribute?

In Turkey, all employees working under an employment contract are required to be registered with the SGK, and both the employer and the employee must contribute to the social security system. This includes Turkish citizens, foreign nationals employed in Turkey, and expatriates who are working in the country. Self-employed individuals and company directors who are not classified as employees under Turkish law are also required to contribute to the social security system.

Foreign investors should note that if they hire foreign employees, these employees must also be registered with the SGK and are subject to the same contribution requirements as Turkish nationals unless there is an applicable bilateral social security agreement between Turkey and the employee’s home country that provides otherwise.

Contribution Rates

Social security contributions in Turkey are divided into several categories, each of which covers a specific aspect of social security, such as health insurance, pension insurance, and unemployment insurance. The rates are applied as a percentage of the employee’s gross salary and are shared between the employer and the employee.

Pension Insurance (Old Age, Invalidity, and Survivors Insurance)

  • Employer’s Contribution: 11% of the gross salary
  • Employee’s Contribution: 9% of the gross salary

Health Insurance (General Health Insurance)

  • Employer’s Contribution: 7.5% of the gross salary
  • Employee’s Contribution: 5% of the gross salary

Unemployment Insurance

  • Employer’s Contribution: 2% of the gross salary
  • Employee’s Contribution: 1% of the gross salary

Occupational Accident and Disease Insurance

  • Employer’s Contribution: Ranges from 1% to 6.5% of the gross salary, depending on the risk category of the job.

In total, employers are generally responsible for contributing around 20.5% to 22.5% of the employee’s gross salary, while employees contribute 14%. The specific percentage may vary slightly based on the nature of the work and the risks associated with the job.

Payment and Reporting

Social security contributions are due on a monthly basis. Employers are responsible for deducting the employee’s share of the contributions from their gross salary and adding their own share before remitting the total amount to the SGK. These payments must be made by the last day of the month following the month in which the work was performed.

Employers must also submit a monthly declaration to the SGK, detailing the contributions made for each employee. This declaration must include information such as the employee’s identity details, gross salary, and the amount of contributions withheld and paid.

Failure to comply with payment and reporting obligations can result in significant fines and penalties, including interest on late payments. Therefore, it is essential for foreign investors to establish robust payroll systems to ensure timely and accurate compliance with social security obligations.

Benefits of Social Security Contributions

Social security contributions provide a range of benefits to employees in Turkey, making them a critical component of employee compensation. These benefits include:

  1. Health Insurance: Contributions to the general health insurance scheme provide employees and their dependents with access to public healthcare services, including medical treatment, hospitalization, and prescription drugs. This coverage is essential for maintaining employee health and well-being.
  2. Pension: The pension insurance scheme ensures that employees are entitled to receive a retirement pension once they reach the retirement age, provided they have met the minimum contribution period. This pension provides financial security in old age.
  3. Unemployment Insurance: Employees who lose their jobs through no fault of their own are eligible for unemployment benefits, which provide temporary financial support while they seek new employment. This benefit is particularly important in maintaining economic stability during periods of job loss.
  4. Occupational Accident and Disease Insurance: This insurance covers the costs associated with workplace accidents or occupational diseases, including medical expenses, rehabilitation, and compensation for lost income. It also provides benefits to the families of employees who suffer fatal accidents at work.

Special Considerations for Foreign Investors

For foreign investors, understanding the social security system in Turkey is not only important for compliance but also for making informed decisions about employee compensation and benefits. Here are a few special considerations:

  • Bilateral Social Security Agreements: Turkey has bilateral social security agreements with several countries, which may affect the contributions and benefits for expatriates. These agreements often prevent double contributions and allow for the transfer of social security benefits between the two countries. Foreign investors should check whether such agreements apply to their employees.
  • Voluntary Insurance: In some cases, foreign employees may choose to opt out of the Turkish social security system if they are covered by social security in their home country. However, this is only possible if a bilateral agreement exists. In the absence of such an agreement, employees must participate in the Turkish system.
  • Calculating Contributions for Expatriates: The calculation of social security contributions for expatriates can be complex, particularly if the employee is earning income in multiple currencies or working in multiple countries. It is advisable to seek professional advice to ensure compliance and avoid penalties.

Conclusion

Social security contributions are a fundamental aspect of doing business in Turkey, providing essential benefits to employees and ensuring compliance with local regulations. For foreign investors, understanding these contributions is crucial for managing payroll effectively and maintaining a competitive and compliant business in Turkey. By familiarizing themselves with the social security system, contribution rates, and reporting requirements, foreign investors can navigate the complexities of the Turkish labor market and focus on building a successful business in this dynamic and growing economy.

[OUR SERVICES] Simplify Compliance with Expert Guidance on Social Security Contributions in Turkey

Social security contributions are a critical component of payroll management in Turkey, covering pension, health, and unemployment insurance for employees. Foreign businesses must navigate these contributions to maintain compliance with Turkish labor and tax laws, ensuring employee benefits are accurately managed. Our services support foreign companies with the efficient handling of social security obligations, helping you stay compliant while optimizing payroll processes.

  • Advisory on calculating employer and employee social security contributions based on Turkish regulations
  • Assistance with timely reporting and payment of social security contributions to avoid penalties and maintain compliance
  • Guidance on managing contributions for different employment types, including full-time, part-time, and temporary staff
  • Monthly payroll reports detailing social security obligations, helping you track costs and budget accurately
  • Training for HR and payroll teams on Turkish social security rules and best practices for effective compliance

Contact us for professional assistance in managing social security obligations in Turkey.

FAQ

1. What are social security contributions in Turkey?

Social security contributions in Turkey are mandatory payments made by both employers and employees to the Social Security Institution (SGK). These contributions fund various social benefits, including pensions, health insurance, and unemployment insurance.

2. What is the rate of social security contributions in Turkey?

The total social security contribution rate in Turkey is approximately 37.5% of an employee’s gross salary. This includes contributions from both the employer (22.5%) and the employee (15%). The exact rate may vary slightly depending on the type of employment and sector.

3. Who is required to make social security contributions in Turkey?

In Turkey, all employers and employees, including foreign workers with a valid work permit, are required to make social security contributions. Self-employed individuals and company directors are also obligated to contribute to the social security system.

4. How are social security contributions paid in Turkey?

Social security contributions in Turkey are deducted from the employee’s salary by the employer and remitted to the Social Security Institution (SGK) on a monthly basis. Payments are typically due by the last day of the following month.

5. What benefits do social security contributions provide in Turkey?

Social security contributions in Turkey provide employees with a range of benefits, including access to healthcare, retirement pensions, maternity and sick leave, and unemployment insurance. These contributions ensure that employees are covered for various risks and life events.