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Article | Global News Briefs

Turkey: Easing of retirement eligibility for EYT employees

By Sema Gökdemir | January 6, 2023

Turkey is taking measures that could make millions of employees eligible for immediate retirement who previously weren’t due to age, with significant workforce and financial implications for employers.
Retirement|Health and Benefits|Wellbeing
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Employer Action Code: Act

After years of debate, the president has announced key measures to relax retirement eligibility rules for the so-called “hindered from retirement due to age” (Emeklilikte Yaşa Takılanlar – EYT) cohort of employees. The cohort was created in September 1999 when eligibility requirements to commence social security retirement benefits were changed effective immediately for all employees: A minimum retirement age (58 for women and 60 for men) was introduced and the minimum paid premium period was increased (to 7,000 days from 5,000 days). The related eligibility requirement on minimum years of insured service (20 for women and 25 for men) was unchanged. The EYT group consists of workers who were in employment before September 8, 1999, and who still haven’t met the age requirement but have met the other eligibility conditions. EYT employees have long demanded that they be permitted to retire, but the government has resisted this primarily for cost reasons. Formal legislation is expected to be submitted to parliament and approved in the coming weeks, with changes effective as of January 1, 2023.

Key details

  • Individuals who were in employment before September 8, 1999, will be eligible to retire and commence social security retirement benefits at any age if they have a minimum period of paid premiums (5,000 days) and a minimum number of years of insured employment (20 for women and 25 for men). The government estimates that 2.25 million people will be made eligible to retire immediately as a result of the change.
  • Affected employees who elect to retire will be eligible for the existing mandatory employer-paid severance lump sum (one month’s pay times years of service, with monthly pay capped at 19.982,83 Turkish liras as of January 1, 2023) and may be rehired by their former employer or a new one.
  • The Ministry of Treasury and Finance will launch a loan program (details to be announced) for small and midsize employers to support their severance payouts for affected employees.
  • For affected employees who choose to retire and continue working:
    • The employer social security contribution rate is expected to be equal to that for non-retirees (details to be announced); currently the employer contribution rate is higher for retirees.
    • The government will introduce a Social Insurance Premium Incentive program (details to be announced) to support employees’ payment of social security contributions.

Employer implications

The relaxed eligibility rules may create a wave of accelerated retirements. According to OECD projections, social security retirement income is estimated to replace 103% of preretirement pay, net of tax, for a new worker with earnings at the national average. Besides the human resource issues presented by greater-than-expected retirements, a financial strain could also be put on employers due to the mandatory end-of-service lump sum payable. Employers should prepare for the potentially significant workforce and financial implications of the announced changes and monitor progress of the forthcoming legislation as well as any further program details.

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Sema Gökdemir

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