How to hire and pay independent contractors in Turkey

Hiring independent contractors abroad is an excellent way to leverage top talent if you prefer not to hire full-time employees. Working with global contractors can also add diversity to your team, and help you stay ahead of the competition in your industry. 

But international hiring can be a tricky process, and things can get complicated fast. If you’re looking to hire independent contractors in Turkey, for instance, there are several things you should know. To start with, you have to understand employment laws, tax legislation, and how to classify your workers correctly. You’ll also need to sort out a payment system to ensure that your contractors are paid quickly and compliantly.

In this detailed guide, we’ll take you through Turkish labor laws, tax and compliance practices, and how to avoid the dangers of misclassification so that you can hire and pay contractors in the country with confidence.

Ready to learn more? Let’s dive in.

Unique considerations of managing contractors in Turkey

There are a few things to note before hiring a contractor in Turkey.

Minimum wage: The minimum wage in Turkey is set by the Minimum Wage Determination Commission every year. The current gross minimum wage for 2023 in Turkey is 8,506.80 TRY per month.

Income tax: Turkey-based workers are considered responsible for paying taxes on all the money they earn, regardless of where it comes from. In Turkey, the tax system combines income from different sources and calculates the total tax due on the combined income. Tax authorities collect taxes annually, using the calendar year as the basis.

Social security: Both the employer and employee contribute to the payment of Turkish social security premiums based on the employee's salary.

Holidays: Workers in Turkey are exempted from work during public holidays. Some of them include:

• New Year’s Day on 1st January

• National Sovereignty and Children’s Day on 23rd April

• Labor Day on 1st May

• Commemoration of Ataturk, Youth and Sports Day on 19th May

• Ramadan and Eid on select dates in March and April

• Democracy and Freedom Day on 15th July

• Victory Day on 30th August

• Republic Day on 29th October

How do I pay an independent contractor in Turkey?

Recent amendments to foreign exchange regulations have made it obligatory for individuals and entities to send and receive payments in equivalent Turkish lira.

It's now mandatory to pay your contractor in Turkish Lira based on the current exchange rate on the date of payment. You can pay your contractors via one of the following methods:

• Bank transfer

• Direct deposit 

• Paper check

• Virtual wallet

• Online payment provider (Wise or PayPal)

Keep in mind that using the above options may not be cost-effective, as they might offer high currency exchange rates or charge hefty transaction fees.

Alternatively, you could use Remote’s global payroll system to make contractor payments swiftly and compliantly. Besides, Remote’s Fair Price Guarantee protects your company from additional fees that may apply when paying international contractors. 

What are the risks of misclassifying independent contractors in Turkey as employees? 

Turkish employment law does not make a clear distinction between an employee and an independent contractor. Unlike an employee, however, a contractor:

• Can refuse to take on work from the employer

• Is not protected by the Turkish Labor Act

• Have to perform their work obligations at their own risk.

A contractor can become a de facto employee if the relationship between the contractor and employer resembles an employment relationship. In that case, the Turkish Labor Act and the Turkish Code of Obligations Act — which govern individuals who provide personal services to employers — will apply.

The Labor Act governs various forms of employment contracts. Some of them include:

• Remote-work employment contracts

• Employment contracts with a probation clause

• Indefinite period contracts 

• Fixed-term employment contracts

• Full-time employment contracts

• Part-time employment contracts

• On-call employment contracts

It is not unusual for a contract to have characteristics of more than one type. The actual content and essence of the contract, not just how it's labeled or categorized by the employer, are considered when determining the employee's real status.

In Turkey, the most common type of employment contract is one that has no specified end date. On the other hand, employees who work under fixed-term contracts are not entitled to some legal rights granted by the legislation, including the ability to sue for reinstatement, receive severance pay, and receive notice pay. Even so, you may need to protect yourself further.

It's important to understand the implications of misclassification which include lawsuits, fines, back taxes, and more. Many companies tend to ignore the possibility of losing their intellectual property (IP) rights as a consequence of misclassifying their workers. If someone questions the classification of a worker and finds it to be incorrect, your company may lose its right to the IP that the worker created while employed at your company.

When you are not familiar with the laws of the country from which you want to hire an independent contractor, you can easily misclassify your contractor as an employee. Working with a global employment solution like Remote can alleviate these risks, and help you hire and pay international contractors compliantly.

What are the labor laws in Turkey?

In Turkey, the labor law outlines certain employee benefits which employers must provide. These benefits are mandatory and include social security benefits, a probationary period, public holidays, paid annual leave, sick leave, maternity and paternity leave, overtime pay, and severance pay.

Employee probation period: According to the Labor Law in Turkey, the employee probationary period lasts for a maximum of two months. During this time, you can terminate the employee’s employment contract without facing any penalties.

Termination of employment: The Labor Act mandates employers to give employees a minimum notice period when terminating employment, which varies based on the employee's length of service. Notice periods are set as follows:

• Two weeks' notice if an employee has served for less than six months.

• A minimum of four weeks' notice for those who have served between six and 18 months.

• A minimum of six weeks' notice for employees who have served between 18 months to three years.

• A minimum of eight weeks' notice for those who have served for more than three years.

Nevertheless, it's possible for both parties to agree on longer notice periods in the employment contract.

Severance payments: If an employer terminates an employee for a justifiable cause, they are not required to provide a severance payment. But if the employee has worked for the same employer for at least one year and is terminated for any reason which is not backed by a justifiable cause, the employer must provide a severance payment. The amount of severance pay must be equal to 30 days' gross salary for each full year of service, beginning from the start of the employment relationship.

If an employee has not worked for a full year, the severance payment should be based on the employee's latest gross salary, but it should not exceed 15,371.40 TRY for each year worked.

Annual leave: In Turkey, workers are eligible for paid vacation days as long as they have completed one year of service, including the probationary period. An employee's length of employment determines the number of paid vacation days they receive. Paid leave in Turkey is stipulated as follows:

• 14 days for employees who have worked between one and five years

• 20 days for those who have worked for more than five but less than 15 years

• 26 days for those who have worked for 15 years or more

Maternity leave: Mothers have the right to take a total of 16 weeks off work for maternity leave. Pregnant women get 8 weeks of leave before and after giving birth. Furthermore, pregnant women can also receive a one-time payment for benefits related to pregnancy, childbirth, and nursing.

Paternity leave: The labor law in Turkey allows fathers to take five paid days off work when they have a new child, and three paid days off if they adopt a child.

Sick leave: According to Turkish labor law, employees can take up to one week of paid sick leave when they present a medical report as evidence. The employer can extend the sick leave period but isn't required to provide compensation for the additional time. 

Although it is not mandatory for employers to offer sick pay, workers have the right to receive sick pay through the government's disability programs. Many employers choose to continue paying their employees their regular salary during sick leave, but they deduct the amount paid by the Social Security Institution from the employee's salary.

Working hours: Turkey does not have a standard workweek. However, employees cannot work more than 45 hours a week. Work hours are divided equally between work days.

Breaks: The length of an employee's workday determines the duration of their lunch break. If their shift is less than four hours long, their lunch break cannot exceed 15 minutes. If the shift lasts up to seven and a half hours, the employee must have a break of at least 30 minutes and a full-hour break for longer shifts. Additionally, the weekly rest period must be a minimum of 24 hours.

Overtime: Employees who work for more than 45 hours per week are entitled to receive additional compensation for their overtime hours. This compensation includes a 50% increase in their regular hourly rate. Alternatively, instead of payment, employees may be given one and a half hours of leisure time for every overtime hour they work. A year's total number of overtime hours cannot exceed 270 hours.

Only workers who are classified as employees or workers are entitled to statutory employment rights such as minimum wage, leaves, notice periods, and severance pay. Independent contractors in Turkey are not protected by the country’s labor laws and do not receive benefits.

Tax and compliance practices for hiring independent contractors from Turkey

Independent contractors in Turkey must file and submit their tax returns in their country. 

If your company is US-based, and you want to hire contractors located in Turkey, it is crucial to keep in mind the tax compliance regulations established by the Internal Revenue Service (IRS). As per the regulations, you should collect Form W-8 BEN from each contractor working for you outside the US. This form helps determine the foreign status of non-residents. Additionally, you may have to complete the 1096 Form, which is used to report payments made to independent contractors.

It is common for companies to make errors when navigating the complexities of tax compliance for international contractors. Failing to file the necessary tax paperwork on time could result in significant penalties for the employer. Fortunately, Remote's contractor management platform has a feature that streamlines tax compliance procedures so that US-based companies can remain compliant with the IRS.

When you use Remote to onboard a contractor, Remote directs your contractor to complete and submit the appropriate tax forms automatically. This saves you the time and hassle of making sure that your company complies with tax regulations.

How do I convert an independent contractor in Turkey to an employee?

Working with independent contractors has its advantages. At some point, though, you may consider making your contractor a full-time employee. Take, for instance, an independent contractor who turns out to be a key asset to your company — you might want to offer them benefits to retain their services and make them a permanent employee.

A key benefit of converting your contractors to employees is that you don’t have to worry about losing the intellectual property rights of work produced by your contractors. And, importantly, you can minimize the risks of noncompliance and misclassification.

The process of converting a contractor to an employee in Turkey, however, is not straightforward. Apart from updating your workers' employment contracts, you'll also have to adjust their pay, offer statutory benefits, and make tax and payroll deductions, all while staying compliant with local labor laws.

When you’re ready to convert your contractors to employees, you can rely on Remote’s contractor management service to handle the process quickly and easily for you. Remote’s team of experts has the knowledge and expertise to ensure compliance with Turkish labor and tax laws. Remote can handle the hassles and inconvenience of international hiring so that you don't have to.

The best way to hire international contractors in Turkey

Expanding your team and recruiting skilled workers globally can give you access to the best talent around the world. But hiring independent contractors in Turkey can be a challenge. You have to keep up with legal obligations, understand Turkish tax and labor laws, and ensure you’re classifying workers correctly.

But there's no need to stress. A trusted global employment partner like Remote can do the heavy lifting for you and help you hire, onboard, and pay contractors in minutes. With Remote’s cutting-edge global employment services, you can:

• Onboard contractors with customizable contracts

• View and manage all your global contractors in a single platform

• Automate payments, approve invoices, and pay your global contractors fast

• Stay compliant with labor laws and tax regulations

Managing your contractors abroad has never been this easy. Sign up for Remote’s contractor management services and begin onboarding your contractors in Turkey right away!