Employment & HR in Turkey

Do you believe that your business idea can break new grounds? And so, you aspire to reify it into a full-blown startup? If that is the case, you need to batten down your hatches to live through the exhaustive yet adventurous process of establishing a venture. Once done with the teething problems and initial formalities, you will finally get to relish the reward you have been waiting for. 

If Turkey has been on your mind lately, you are at the right place to locate your business. The country comes in the group of the globe’s newly industrialized countries. It leads the world to produce motor vehicles, agricultural products, home appliances, transportation equipment, and textiles. Being one of the fastest-growing economies globally, Turkey promises a vast array of opportunities for new businesses. Furthermore, with robust consumer spending from Turkey’s young population who craves to adopt and follow the latest trends, your business can thrive marvelously. Furthermore, Turkey allows a great chance for new businesses by furnishing them with workers and employees at economical labor costs and salaries. So, launching a startup in Turkey won’t cost you an arm and a leg as it would in countries like the US and UK. 

As you finalize the decision of starting a business in a country, you need to acquaint yourself with the legal obligations, formalities, business culture, and other requirements. Here, we have prepared an ultimate guide for basing a business in Turkey, which also walks you through different factors that indicate how easy it is to start a business in Turkey and what you need to keep in mind when hiring employees for your business. Read on!

Quick Overview

Launching a venture in a foreign country is as exciting as it can be hassling. Turkey offers a qualified workforce, governmental incentives, low operating costs, high income, stable consumer expenses, and other perks for foreigners seeking to establish a business in the country. You may have to confront a bit of bureaucracy while starting a business in Turkey, but it can be sorted out and streamlined with the guidance and assistance of a Turkish business partner. 

How to start a business in Turkey? The process of starting a business in Turkey, just like any other country, starts with a conception of a profitable and marketable business idea. Then, you need to know and abide by the formalities and legal obligations specific to the industry you want to operate in. You can’t bake a cake without knowing the ingredients and how they are put in!

However, to carry out all the official procedures, you must first procure a potential tax number. As you progress through the journey of starting a business in Turkey, you need to decide the business structure, get a legal business address, register the business, and open a business bank account. 

Process of setting up a business in Turkey

Every country has its own rules and regulations when starting a business. Whatever and howsoever they are, you need to know them and follow them if you aspire to establish a business in a specific country. Before you begin to fulfill the paperwork and face the red tape, take care to research the business culture. For instance, Turkey’s business culture is primarily inspired by Islamic values, which is the dominant religion here. When communicating, Turkish people tend to stand close physically, kiss both cheeks or shake hands when meeting, maintain direct eye contact, practice gift-giving, be intensely punctual and formal while engaging in business, etc. Furthermore, the official language of Turkey is Turkish, so you will have to find a way to deal with it. 

Now, we shall walk you through the process of starting a business in Turkey with all the formalities and procedures it takes. Read on!

  • Come up with a business name: Create a splendid business name that reflects the core idea, purpose, and values of your brand and takes care that it is not already taken by someone else. Once you finalize your business name, check its availability, and get it registered in time.
     
  • Create a business plan: While starting a business, you need to map out all things like market size, competition, product/ service demand and supply, your budget, the profitability of the business idea, and other things in an elaborate business plan. Having a business plan will help you get new investors, associates, and other valuable people in your business. 

  • Get a potential number: Every official procedure for establishing a business in Turkey demands a potential tax number. Therefore, as a first thing, “start-uppers” must strive to grab potential tax numbers. You may seek professional help from a seasoned business consultant as well. 

  • Establish your business’s location: Legal address of the company is necessary to establish a business in the country for starting a business in Turkey as a foreigner. Therefore, be it a physical office or a virtual one, you must identify and rent a location. You will be asked for your potential tax number through the renting process, and the amount here will be paid from the business bank account, not your one. 

  • Decide the business’s legal structure: For ex-pat investors, corporation structures are of two types, namely, LLC (limited liability company) and JSC (corporate company). If yours is a small business, choosing LLC is practical since the process of registering an LLC business is quite cheap, easy, and fast. Furthermore, the legal structure you pick for your business also depends on other factors like the ownership arrangement of your business. 

  • Get an accounting outsourcing firm: Having a reliable accounting outsourcing company is needed to handle the ins and outs of your business. The company which will act as your business partner, in the long run, will initiate the venture establishment process and prepare for the master agreement. Tax office documents, apply for the trade registry to secure an appointment and prepare a power of attorney in the interests of your business. 

  • Register your business: To get your business registered, you must apply to the tax office, tax registry, and other administrative offices. You will have to wait for 2 to 3 days until the process completes. Once you get the documents from the trade registry office, you will have to take the signature circular of your business to the notary as well. You should have a sworn translator to assist you through the process. Furthermore, you will have to allocate power of attorney to your accountant to represent your business. 

  • Open a business bank account: To perform and manage the financial operations of your business, you need a business bank account. For this, you will first need to acquaint yourself with the obligations and requirements of Turkish banks. Although the process is easy, you may consider consulting your accountant. 

Hiring Employees in Turkey 

No matter how automatic your business operations are, you can never do it without human labor. And so, after you have got all things in place like choosing a name, registering your business, fulfilling other formalities, etc., it’s time to hire people to get the job done. But you can’t just start away by announcing vacancies or end it, thereby directing the chosen individual to their office desk. 

As an employer, you first need to familiarize yourself with the employment and labor laws of the country where your business is located. This is why having an experienced partner like Zimyo by your side is extremely important, as their expert consultants can handle all these intricacies professionally.

Here we have collated the important aspects and obligations related to labor and employment laws in Turkey. These rules exist to regulate the work-related entitlements of employees and employers of a company and the working conditions. Read on!

  • Trial Period/Probation Period: Article 15 of the Labour Act of Turkey clarifies that if the trial (probationary period) is included in the employment contract, the duration shall surpass two months. Under collective agreement, however, the probationary term duration can be extended to four months. During the trial period, both the parties involved (employee and employer) can terminate the employment contract with no prior notice or any compensation.

  • Leave and Holidays: Employees who have been employed in the company for a minimum of 1 year, including a trial period, are entitled to annual leave. Employees working in a company for 1 to 5 years should get 14 days of paid leave, while it has been set to 20 days for employees working in the company for 5 to 15 years. Moreover, in Turkey, there are eight public holidays, where 6 are public while the remaining two are religious holidays. 

  • Maternity Leave: Article 74 of the Labour Act of Turkey entitles pregnant employees to 16 weeks of paid leave, where eight weeks are allowed before accouchement and the remaining eight after childbirth. On top of this, if it is a case of multiple pregnancies, the employee should be allowed 2 extra weeks of leave before childbirth. According to the physician, a fit woman employee can continue work until three months before child delivery. In this case, however, the employee should be allowed leave for a period corresponding to the time she gave to the company during her confinement before delivery. 

Every female employee is entitled to be allowed paid leave for regular medical examinations during pregnancy. If needed, as per the medical report, the employee’s workload shall be reduced without any reduction in her wages. After the 16-week paid leave period and the employee solicits further leave, she should be granted a further leave for up to 6 months, which shall be unpaid. 

Moreover, female employees are also entitled to receive a nursing leave for one and a half hours to feed a child younger than 1 year. The nursing leave is considered as a part of regular working time. 

  • Termination of Services: According to Article 17 of the Labour Law of Turkey, an indefinite-period employment contract can only be terminated with prior notice by the terminating side. The employment contract then terminates in the following cases: 
  1. If the employee worked for less than 6 months, a contract would be terminated at the end of the second week following the notice. 
  2. However, if the employee worked for one and a half years or more, less than 3 years, the employment contract would be terminated after notification at the end of the sixth week. 
  3. However, if the employee has worked for about 6 months or above, less than one and a half years, the employment contract would be terminated after notifying the other party at the end of the fourth week. 
  4. If the employee worked for more than 3 years in a company, the employment contract will be terminated at the close of the eighth week. 

If an employee is terminated on weak grounds, the employer will face the following consequences:

  1. The employer would have to take back the employee in the company within 1 month. However, to re-engage in the company, the employee needs to send an application within ten working days of the date of the court’s final verdict. 
  2. In case the re-engagement of an employee is not considered, the employer will have to compensate the employee with wages no less than four months and no more than eight months. 
  3. The court may also designate a compensation amount for the employer to pay the employee. 

  • Pension: At present, the retirement age for women in Turkey is 58 years while that of men is 60 years with a minimum of 7200 days of contributions. If they please, employees can postpone the pension beyond the usual pension age requirement. Folks with disabilities or workers employed in mining fields have the facility to retire early. However, they can’t claim the pension before the eligible age. 

  • Work Hour Norms: A standard working week in Turkey is 45 hours, and any hour exceeding this limit would be counted as overtime work. For overtime work, employees should be paid a basic wage plus a 50% increment for every hour. Overtime working hours cannot exceed 270 hours per year. The parties may decide and agree upon the distribution of working days in a month; however, the daily work limit should not exceed 11 hours. One day of holiday per week is necessary. 

How easy is it to conduct business in Turkey?

Although starting a business anywhere is an exacting process, it is still easier in some countries. But, how do we know in which economy you won’t have to hassle much for establishing a venture? Well, the Doing Business report does it for you. This report tends to look at and estimate different indicators that render the business setup process difficult. 

For instance, it considers factors like getting electricity, getting credit, procuring permits and licenses, the efficiency of the court system, and more. Analyzing these indicators individually confers an Ease of Doing business rank to the economy. Among 190 countries the Doing Business report compares, Turkey was ranked at 33rd position in the 2020 EODB index. Let’s find out where its indicators stan so you can decide confidently about starting your business in the country. 

  • Starting a Business: To start a business, you need to grab many other things such as permissions from administrative departments, meet different expenses, invest your time, and go through several procedures. That’s what the Starting a Business indicator considered by the Doing Business targets t study here. It looks at the cost, formalities, and time to start a business in the country. Of the other 189 countries, Turkey secured the 77th position, implying that you will have to endure many procedures. 

  • Managing Permits: To legally establish and operate your business, you must get permits and licenses. The licenses and permits a business requires are determined by your business’s activities. Doing business considers the time, formalities, procedures, and fees involved in launching a business in the country. And in this subindex, Turkey came at 53rd position while scoring 73.8 out of 100. The country, however, eased the process of procuring construction permits by simplifying the procedure to get the fire clearance. 

  • Getting Electricity: Getting electricity is another indicator the Doing Business considers when ranking the economies in the EODB index. It regards the number of procedures, formalities, fees, other costs, and time connecting a business with the electrical grid. Furthermore, it also takes the reliability of the country’s electricity supply system and transparency of taxes and tariffs. Turkey got 41st position in the Getting Electricity subindex while scoring 84.5 out of 100. The country reduced certain administrative fees and eliminated external inspections for electricity connections, thereby making the process smoother. 

  • Getting Credit: Business credit and funding allow you to meet your regular expenses, grab inventory, expand the business, hire extra staff and cover other costs of operating and managing a business. Thus, the Doing Business report also considers the Getting Credit as one factor that influences the EODB rank of an economy. It looks at the strength and efficiency of credit reporting systems, collateral laws, and bankruptcy laws. Turkey, in this subindex, got 37th rank while scoring 75 out of 100. The country enhanced its access to credit information when the private credit bureau of Turkey added firms to the database. Furthermore, it adopted a fresh law to protect users’ data, thus improving the country’s credit information system. 

  • Managing Payroll: With the company’s growth, you will need to manage a larger workforce and regulate their salaries while taking care of taxes and social security laws. There’s a lot to be done. That is why it becomes necessary to incorporate an efficient and productive payroll management consultant like Zimyo into the company. It would look after the staff salaries and contribute to other crucial activities like unemployment tax, income tax, social security, etc. Meanwhile, Zimyo does its job; you can focus on other important business operations. 

  • Paying Taxes: To operate legitimately, your business needs to pay local, state, and federal taxes. The taxes your business needs to reimburse depend on your business’s legal structure and income. Paying taxes requires filing, time, and other costs to get done. Thus, Doing Business considers paying taxes as one of the indicators of the EODB index. Apart from the time, procedures, and cost it takes for filing taxes, it also counts the efficiency of the tax system of the company. Turkey’s rank in this subindex is 26, while its score was 86.6 out of 100. 

  • Enforcing Contracts: You may end up in some of the other legal and commercial disputes and thus would need a court to resolve them. In some countries, it may take longer and higher charges to settle the dispute justly; however, in others, the process of enforcing contracts may not be so excruciating. The Doing Business rigged Turkey at 24th position in the Enforcing Contracts subindex while assigning it a score of 71.4 out of 100. With the induction of a new civil procedure regulation, Turkey streamlined the process of enforcing contracts. 

  • Resolving Insolvency: The Doing Business looks at the insolvency regimes, the power and efficiency of its judicial systems, and insolvency laws. Turkey ranked 120 while it scored merely 38.5 out of 100 in the subindex. The country streamlined resolving insolvency by enhancing the voting structure in a reorganization, allowing greater participation of creditors in court proceedings, and adopting the possibility to procure post-commencement credit. 

Turkey, with its 16th-largest economy in the world, and the sixth-largest in the EU, offers fantastic opportunities for businesses in various industries, especially construction, IT sector, natural stone mining, oil & gas, textile, tourism, and hazelnut farming, and more. And that said, you are all set with the knowledge of how to start a business in Turkey, its regulations, and other relevant details. 

Zimyo is a leading HR and Payroll management services provider in Turkey with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.