Employment Regulations

Turkey has a plentiful supply of both unskilled and semi-skilled workers. While skilled labour
remains a relatively scarce commodity, returning migrant workers and various company sponsored training programmes have eased the situation. In the industrial centres, there is readily available supply of
well-trained managers.

Working Hours

The legal working hour is 45 hours. Overtime may not exceed 3 hours a day or 90 days a year, and
is not allowed in underground work. Usual overtime rates involve a 50% daytime premium on
weekdays and Saturdays and 100% Sundays and public holidays.

Wages and Benefits

As of 1 August 1996, the minimum wage was set at 17,010,000 TL/Month. In view of present
inflationary conditions, the minimum wage is reviewed frequently. Actual wages are much higher and rise
faster than the minimum. Employees of foreign owned companies normally expect slightly higher
wages than those offered by Turkish owned corporations. Salaries are normally reviewed on a half
yearly or quarterly basis. The review of wages depends on whether there is a collective bargaining
agreement with a union and how long this is valid for.

Fringe benefits cost employers about 40-50% of blue collar worker's gross wages and 25 -30% of
white collar salaries. The most common fringe benefits are meals, transportation and yearly bonuses
of two to four months salaries, which are usually paid half yearly or quarterly, as appropriate. In
addition, cash benefits payable in the event of births, marriage etc. and heating and clothing allowances are provided through union agreements. Although the Turkish Constitution grants workers the right to
establish labour unions, the number of workers covered by collective bargaining agreements is relatively
small, approximately 15% of the labour force. The law also requires some financial assistance in the
case of sickness or death of the employee.

As of July 1996, the government has set the maximum limit on severance payment upon dismissal or
retirement at TL 53,312,500 for each year worked. This limit is adjusted four times a year.
Severance pay is calculated at one month's salary up to this maximum amount per year of service. Notice
pay may also be payable for which there is no maximum amount. The employer has no obligation to
provide severance pay if the employee resigns.

Leave Entitlement

The legally allowed annual leave is 12 working days after one year of service up to five years.
However, the common practice among the well-known companies in major cities is 21 working days after one year of service.

Foreign Employment

Individuals may stay in Turkey for up to 3 months without a visa. A touristic visa may be purchased
at the airport, upon entering Turkey. In order to be able to work and reside in Turkey, all
non-residents must be granted permission from the FID and from the Foreigners Division of the Police

Social Insurance

Legislation currently requires that all employees (except agricultural workers, self-employed and civil
servants) be covered by the social security system. The system includes benefits for industrial
accident and sickness, health insurance, maternity, disability, old age and death. It also covers almost all
costs of a modest level of medical care.

The employer is obliged to make a declaration to the Social Security Institution within 30 days of the
start of employment. The total monthly contribution to the social security scheme is based on a
maximum monthly gross salary or wages rate as set by the related regulatory authorities. This ceiling is
quite low, currently just over TL 29 million per month. If the actual gross salary is below this maximum,
then the payments are based on the actual gross salary, being not less than minimum wage.
Contributions to the social security system are made by both employer and employee as follows:

  Employer% Employee%
Old age, disability and death benefits 11 9
Health Insurance 6 5
Maternity Insurance 1 -
Industrial accident and sickness 1.5-7 -
Total 19.5-25 14

All employees must belong to a social security scheme which provides coverage for work-related
accidents, illness, sickness, pregnancy, disability, old age and death. Contributions as a percentage of
gross salary are payable by individual employees and employers. These contributions are deductible
in determining taxable income. For citizens of countries with which Turkey has bilateral social security
agreements, it is possible to stay within their own national social security schemes for a period of
time set out in the treaty. Where there is no social security agreement all contributions are imposed
(except those for old age, disability and death which are voluntary). The countries having bilateral
agreements are set out in Appendix F.

The social security scheme for self-employed individuals is presently under the jurisdiction of another
institution although the system as a whole is under review. Individuals under this scheme are those
excluded by the other social security schemes and who are not tied to an employer through an
employment contract. In addition to the schemes mentioned above, civil servants, other personnel working in government agencies, personnel of municipal organisations, employees of Chambers of Commerce and Industry appointed by the Ministry of Trade, are subject to another retirement scheme.