A GUIDE FOR EMPLOYERS ON THE LEGISLATION FOR “RETIREMENT AGE VICTIMS” (RAV)

The Law on the Amendment of the Social Security and General Health Insurance Law and the Decree Law No. 375, both of which entered into force on 3 March 2023, abolished the age requirement for retirement for those who have completed a certain number of premium days and period of insurance, and who had entered the insurance system before 8 September 1999.

This guide raises the questions that may arise for an employer on the RAV legislation and our relevant assessments. As the RAV legislation has recently been passed, it has not yet been reflected in the Court of Cassation’s decisions. Therefore, the advice in this guide is based on the existing regulations and Court of Cassation precedents on retirement benefits. As the implications of the RAV legislation are taken into account in new Court of Cassation decisions, there may be changes to its precedents and the conclusions reached in this guide may need to be revised.

1. Who benefits from RAV legislation? What are the conditions for qualifying?

   Under the new legislation, those who meet all the conditions for retirement pension other than age, can benefit from retirement pension. The relevant regulation has abolished the age requirement only for those who have been insured for the first time before 8 September 1999¹.

   Accordingly:

   1. For 4/a (SSK) insured, those who meet the conditions of 20 years’ of insurance for women and 25 years for men, and have fulfilled 5000-5975 gradual premium days requirements,
   2. For 4/B (Bağkur) and 4/C (Retirement Fund) insured, those who meet the conditions of 20 full years of service for women and 25 full years of service for men, will be able to benefit from the relevant legislation, if they have an insurance entry made before 8 September 1999.

2. What is the application process for an employee wishing to benefit from the RAV legislation?

   Payment of old-age pensions to employees who fulfill the requirements to qualify for retirement pension within the scope of the RAV legislation is only possible after the employees leave their jobs, as a result of which their employer would submit a termination of employment notice, and the employees then apply to the Social Security Institution (SSI) by filling out “Income/Pension/Allowance Request Documents”.

   An employee to whom the employer gave a notice of termination may also apply for the pension via e-Government (online government portal).

   An employee may apply for retirement pensions within the scope of the RAV legislation after receiving the notice of termination of employment. As explained below, we recommend the employer to first obtain a resignation letter from an employee who notifies of an intent to benefit from RAV legislation. Once the resignation letter is received, the employer should terminate the employee and give the employee a notice of termination. The employee to apply to the SSI via e-Government or physically, on the day following the termination. If the employer is planning to re-employ the employee, it is necessary for the SSI to confirm that the employee’s retirement application under the RAV legislation has been received. After the SSI’s confirmation, the employer may re-employ the employee.

3. Does the employer have to continue to employ the employee who retired within the scope of RAV regulation?

   If the employee retires by benefiting from the RAV legislation, the employer may decide, within the scope of its management right, whether to continue to employ an employee that wishes to continue working in the workplace. Therefore, the employer is not obliged to continue to employment.

4. Should an employee who benefits from the RAV legislation be paid severance pay?

   In principle, if an employee who qualifies under the RAV legislation resigns due to retirement, the employee must be paid severance pay.

   Where an employee who qualifies under the RAV legislation resigns to apply for retirement and returns to work, the employee and the employer may agree that the employee’s severance pay will be paid at the end of the post-retirement employment period. To avoid disputes and for ease of proof, this agreement should be made in writing.

   In calculation of the severance pay to be paid to the employee at the end of the post-retirement period, it should be considered whether the post-retirement working period of the employee has ended in a way that entitles employee to severance pay. (This is explained in more detail under question 7).

   However, it is possible that an employee may not accept the payment of the severance pay at the end of the post-retirement employment period. In this case, the employer would be required to pay the severance pay to the employee on the date of termination for retirement.

5. Is it possible for an employer to postpone the severance pay or pay it in installments?

   If the employee and the employer agree, the severance pay of the employee may be paid by the employer at a later date or in installments. When an employee accepts the postponement or the installment payment of the severance pay without reservation, since the Court of Cassation decisions provide that in this case, the employee would be deemed to have relinquished a claim for interest, it would not be possible for the employee to claim interest later on.

6. If the employee is re-employed, what should the conditions of employment be?

   In order for employees to benefit from the RAV legislation and apply for retirement, their employment must first be terminated (and taken out of the payroll). Therefore, we strongly recommend that a letter of resignation be obtained from the employees before their employment is terminated.

   After the employees retire for the purposes of benefiting from the RAV legislation, a new term of employment begins when they are re-employed and continue to work. It is therefore possible for the parties to determine new conditions for the new employment term. It is advisable to set out the new conditions in writing in case of any future disputes.

   However, it is also possible for employees to continue to work in the post-retirement period under the same working conditions as in their pre-retirement period.

7. Will an employee who retired under RAV legislation and is re-employed be entitled to severance pay for the post-retirement period?

   1. As explained above, in case of an employee who benefits from the RAV legislation by resigning for retirement and then returns to work, the employee and the employer may agree that the employee’s severance pay will be paid at the end of the post-retirement period. For the purposes of the payment to be made within the scope of this agreement, it should be considered whether the employee’s post-retirement working period has ended in a way that entitles the employee to severance pay. Please note that under the relevant legislation, an employee’s resignation, except for specific incidents², does not result in the employee’s entitlement to severance pay.
      1. If the employee’s post-retirement working period has ended in a way that entitles the employee to severance pay, the severance pays for the period ending with retirement must be calculated based on the last wage of the period ending with retirement and paid to the employee.
      2. If the employee’s post-retirement working period has ended in such a way that does not entitle the employee to severance pay, the severance pay for the period ending with retirement must be calculated based on the last wage of the period ending with retirement and paid to the employee. As the highest interest rate on deposits accrues on severance pay from the date of retirement, the applicable interest amount would also need to be added to the employee’s severance payment arising from the pre-retirement term.
   2. If severance pay has been paid to an employee as of the date of retirement, it should be considered whether the severance pay payment has been made in full and the severance at the end of the post-retirement period pay should be calculated by taking this into consideration.
      1. The pre-retirement period will be deemed discharged if the employee receives the full amount of severance pay entitled to by retirement. In this case, under the Court of Cassation’s established precedents, since severance pay cannot be paid for the discharged period for a second time, this period will no longer be taken into account in the calculation of severance payment ın the post-retirement period. In the case of termination of the employment contract of the employee in the post-retirement employment period, the severance payment will be calculated and paid only for the post-retirement period over the last wage in that period.
      2. If the severance pay for the pre-retirement period has not been fully paid to the employee, under the Court of Cassation’s established precedents from recent years, the remainder of the employee’s severance pay entitlement for the relevant period should be determined according to the wage in the relevant period. In other words, the remaining severance pay receivable of the employee for the pre-retirement period will be calculated over the last wage of the employee in the pre-retirement period. If an employee’s employment is terminated after retirement in a way that entitles the employee to severance pay, the severance pay for the post-retirement period will be calculated over the last wage in the post-retirement period. Consequently, if the pre-retirement period’s severance pay had been underpaid and the post-retirement period ends in a way that entitles the employee to severance pay, while calculating the pre-retirement and post-retirement periods, the two working periods should be evaluated separately, and the severance pay for the relevant period should be calculated over the wage of the period to which it belongs along with accrued interest³.

8. Is it possible to terminate the employment contract of an employee who benefits from the RAV regulation?

   Under Court of Cassation’s established precedents, being entitled to retirement or reaching a certain age is not a legitimate ground for termination by the employer. The right to terminate the employment contract due to retirement is granted to the employee and it is provided that an employer’s termination of the employment contract due to retirement would be invalid. Nevertheless, as explained above, if the employee resigns in order to benefit from the RAV legislation, the employer is not obliged to re-hire the employee.

9. Is it against the principle of equality to employ some of the workers who terminated their employment contracts to benefit from the RAV legislation but not others?

   As mentioned above, an employer is not obliged to re-hire an employee who resigns in order to retire by benefiting from the RAV legislation. The employer may decide whether or not to re-hire the employee within the scope of its management right. Also within the scope of its management right, an employer may decide to re-hire some employees and not to others. We are of the opinion that this situation would not constitute a violation of the principle of equality and would be considered to be within the scope of the employer’s management right.

10. Is it possible for an employer to determine age or retirement as a termination criterion?

    Under the Court of Cassation’s established precedents, being entitled to retirement or reaching a certain age is not a legitimate ground for employer’s termination. However, it is accepted that the personnel regulations or collective labour agreements that qualify as annexes to employment contracts may include provisions stipulating that the employment contracts of those who are entitled to retirement or who reach a certain age will be terminated. If there is a pre-determined rule regarding retirement or age, then the termination of the employee’s employment contract on that basis would be considered valid if the rule is applied throughout the company and objectively.

11. Do employees whose employments were terminated to benefit from RAV legislation have a claim for a re-employment lawsuit if other employees terminated to benefit from RAV legislation continue to work upon re-employment?

    An employee who resigns in order to retire under the RAV legislation has not the right to file a reemployment lawsuit, which can be filed in cases of termination by the employer, since the employee would have expressed a desire to resign.

12. Can the employer impose any sanctions on employees who are entitled retire within the scope of the RAV legislation but decide not to do so because they will not be re-employed?

    Retirement is a right granted to the employee and it is not possible for an employer to force an employee to retire. Therefore, in addition to not being able to force the employee to retire if the employee declines to do so, it is also not possible to impose any sanctions against an employee for not retiring.

    As explained above, if there is a pre-determined rule in the personnel policies or a collective labour agreement providing that the employment contracts of employees who become entitled to retire or reach a certain age will be terminated and this rule is applied objectively throughout the company, it would be possible for the employer to terminate the employment contract of an employee for valid cause on this basis.

13. What is the scope of the incentive to be provided by the government for severance payments?

    It is expected that the government will provide low-interest loans from the Credit Guarantee Fund for severance payments. However, there is no regulation on the incentive yet.

14. Is it possible for an employee who retired by benefiting from the RAV legislation but who continues to work, if accepted by the employee, to not be paid the annual paid leave receivable for the pre-retirement period on the date of retirement and to transfer its balance to the post-retirement period?

    Article 54 of the Labour Law provides that in calculating the period required to qualify for annual paid leave, the periods of employment of the employees in one or several workplaces of the same employer should be taken into consideration by adding them. According to the relevant regulation, in case of an employee who retires and continues to work, the periods of employment in the same workplace will be added up, and if the employee agrees, the employee’s unused annual paid leave can be added to the post-retirement period. Court of Cassation’s established precedents provide that the payment of severance pays for the period of employment that ends with retirement and the discharge of the relevant period would not constitute an obstacle to this arrangement.

    However, it is also possible to pay the unused annual paid leave receivable for the pre-retirement period and discharge that liability for the pre-retirement period. In this case, the paid leave days that the employee would be entitled to in the post-retirement period would be calculated on the basis of the date of re-employment after retirement.

    Current practice is as explained above. However, we have been informed that the Court of Cassation’s established interpretations may evolve to provide that the annual paid leave entitlement in the post-retirement period of employees who have retired by benefitting from the RAV legislation but then continued to work, will be calculated based on their initial date of employment, even if their pre-retirement annual paid leave receivables had been fully paid and discharged as of the retirement date.

[1] Per subparagraph (B) of the first paragraph of Provisional Article 81 of the Law No. 506; second paragraph of Provisional Article 10 of the Law No. 1479; subparagraph (B) of the first paragraph of the Provisional Article 2 of the Law No. 2925; and Provisional Article 205 of the Law No 5434.

[2] Pursuant to article 14 of Labour Law numbered 1475, the specific instances entitling an employee to severance pay in the event of a resignation are: where the employment is terminated by the employee for just cause, terminated by the employer for just cause or with valid grounds (except where employer terminated for acts against morality or good faith), military service, women employee’s resignation within one year following marriage and death of employee.

[3] According to the previously accepted opinion of the Court of Cassation, the pre-retirement working period and the post-retirement working period of the employee were combined and the severance pay was calculated over the last wage of the employee. In a possible dispute, it may also be possible to apply the opinion accepted by the Court of Cassation in the previous period. In the adoption of the opinion of the Court of Cassation, which was accepted in the previous period, the pre-retirement and post-retirement periods can be combined and the severance pay can be calculated based on the last wage of the employee.