The Legislative Proposal Amending the Social Security and General Health Insurance Law and Decree No. 375, which includes regulations for employees who are not eligible to retire due to the age requirement (“EYT”), was agreed on by the General Assembly of the Grand National Assembly of Turkey. The Legislative Proposal passed into law on 1 March 2023 and entered into force upon its announcement in the Official Gazette dated 3 March 2023 and numbered 32121 as per Article 3.

Implications of the New Regulations

The main objectives of Law No. 7438 Amending the Social Security and General Health Insurance Law and Decree No. 375 (“Law”) is to revoke the age requirement that is one of the conditions to be eligible for retirement under the current piece of legislation (i) for insured persons who started working on or before 8/9/1999 and (ii) for insured persons who started working on or after 9/9/1999 but who have made borrowings pursuant to the provisions of the relevant pieces of legislation enabling them to backdate their commencement date of insurance as 8/9/1999 or a date before; provide social security support premium incentives to the insured persons who continue working in order to support their registered employment; and abolish the provisions requiring the mandatory termination of employment agreements for permanent employees employed in governmental bodies and public institutions in the event that they are entitled to receive retirement, old age, or disability pension.

With the Law, insured persons who were registered to the social security system for the first time before 8 September 1999 and who have completed (i) 20 years of the insurance period for women and (ii) 25 years of the insurance period for men have been given the opportunity to retire by completing their insurance premium day requirement, varying between 5,000 and 5,975 days and is gradually spread out as per the commencement date of employment.

In addition, the regulations regarding compulsory retirement have been abolished, which demanded that employment agreements for employees entitled to receive retirement, old age, or disability pensions be terminated if such employee was employed by a public institution or organization, a special provincial administration or municipality, or any affiliated organization or local administration union to which such government institution is a member. The same applied to individuals who were transferred as employees to companies in which more than half of the company’s capital is held by a special provincial administration, municipality, or an affiliated organization, collectively or separately.

Issues That May Arise in Practice

The changes envisaged by the Law have brought along other controversial issues for both employees and employers in practice. These controversial issues include whether it is possible for insured persons who are eligible for retirement as per the Law and who have retired can be re-employed in their previous workplaces, whether the employer is obliged to re-employ the retired insured persons, and whether the same working conditions and salaries should be applied if the retired insured person is re-employed. These questions have been highly debated, especially by employers.

First, it should be noted that insured persons who are eligible for retirement by fulfilling the requirements set forth under the Law can leave their jobs by receiving severance payment in accordance with peremptory Article 14 of the Turkish Labor Law No. 1475. The previous term of employment must be liquidated by paying all of the employment receivables that the insured person is entitled to with regard to the previous term of employment.

The right to terminate an employment agreement due to retirement is only granted to employees under Turkish law. Employers cannot terminate an employment agreement due to the retirement age of their employee; termination of the employment agreement by the employer against the employee’s will to continue working would constitute an unlawful termination. In this respect, an employer cannot ask an employee to go into retirement. Therefore, it is at the employee’s discretion and will to retire and terminate their current employment agreement.

It is common practice for employees to retire and subsequently be re-employed in the same company by the same employer. That said, employers are not obliged to re-employ retired employees. The Law does not stipulate any explicit provisions regarding such obligation.

However, with the changes introduced by the Law, if the employee and the employer agree on re-employment within thirty (30) days following the employee’s leave of employment, the employer will be provided with social security premium support and an amount corresponding to five (5) points of the employer’s share of the social security support premium will be covered by the Treasury.

The Court of Appeal’s established precedent reveal that if all of the employment receivables related to the pre-retirement term of employment have been paid in full, the second term employment (“Second Term Employment”), which starts with the re-employment by the same employer after retirement, should be considered independently from the previous term of employment. In this respect, the employee and the employer would be able to negotiate a new employment agreement, remuneration, working conditions, and additional benefits separate from the previous term of employment. The employer and employee may determine new conditions without being subject to the material change in procedures envisaged under Article 22 of the Turkish Labor Law No. 4857. In such a case, since the previous employment relationship has been liquidated, the employee’s severance and notice periods as well as her/his annual leave days will start from the beginning in the Second Term Employment. Since severance payment due to retirement is a right that can only be used once, it is not possible for the employee to request severance payment based on the retirement provisions again for their works in the Second Term Employment.

Although employers are not obliged to re-employ employees who terminate their employment agreement following retirement, it is also a point of debate whether it would be against the prohibition of discrimination for employers to opt to re-employ certain retired employees and not others upon their application. It has been explained above that as supported with the Court of Appeal’s precedent, upon retirement, the previous term of employment is liquidated and the Second Term Employment is a brand new employment relationship. For this reason, the working conditions and the employment agreement applicable to the employment relationship for Second Term Employment can be determined by and among the employee and the employer through renegotiation. In this regard, we believe that there is no obstacle preventing employers from re-employing certain retired employees and not re-employing others, provided that the objective standards applicable to the candidates at the time of recruitment are complied with and due care is paid for equal treatment to candidates as set forth in the relevant piece of legislation. In addition to this, we believe that employers must communicate with employees in writing beforehand that all employees who retire as per the Law will not directly be re-employed upon their application and the EYT does not provide such a guarantee.

As the Social Security Institution (“SSI”) has published on its website, applicants will be entitled to their first salary in the month following the application date and the first salaries are expected to be paid in April. In addition, as per the internal letter entitled “Retirement Letters” sent by the SSI to the distribution authorities and the declaration published on its website, the goal is to prevent long bureaucratic procedures during the retirement process and integration works are being carried out via the E-Government system. In this respect, in order to eliminate individual applications made to the SSI by each insured person and employer and in order to facilitate the process, it became possible to easily obtain information on retirement conditions through the “SSI Registration and Service Transcript,” “When Will I Retire Under Normal Circumstances,” and “My Working Life” applications via the E-Government system. Nonetheless, insured persons who are in doubt with their services have the opportunity to request an official letter from the SSI.

This alert is not intended to be construed as legal advice and has been drafted for information purposes only. We hope to further see what the implications of the application of the Law will bring, what kinds of disputes will be brought to the judiciary in due course, and whether any secondary legislation will be needed as this situation continues to evolve.