The Meaning of PEO
in Turkish Legislation

The Meaning of PEO in Turkish Legislation

The Turkish government has always prioritized systematic reforms to give legal certainty for foreign companies to invest in Türkiye. Türkiye has been adopting new regulations to meet the political and economic criteria of the EU. Despite the reforms, Türkiye has its own country-specific regulations as well as the other countries.

As per the Labor Law (amended on the 6th May 2016 by Article 1 of the Law No. 6715), a temporary labor relation may be established if there is a holding or another workplace that is affiliated with the same group of companies. The service contract can be signed for a period of a maximum of four months. This contract may be renewed twice at most, provided that it will not exceed eight months in total. The employer who employs temporary workers shall not employ temporary workers again for the same work unless there is a period of six months in between. Similarly, the authorized private employment agencies can establish a temporary labor relation with the same conditions.

Türkiye enacted this law by taking the Directive of the European Parliament No. 2008/104/EC as an example. Likewise, the temporary work relation is regulated with "Arbeitnehmerüberlassungsgesetz" in Germany, and "Bundesgesetz über die Arbeitsvermittlung und den Personalverleih - Arbeitsvermittlungsgesetz, AVG" in Switzerland. Hereby, we would like to emphasize once again that, in order for the temporary work relation to achieve the aforementioned goals, it must be regulated by law, and its term and conditions must be clearly set out. The limit of 4 months period is an important restriction to give as an example in this regard. The updated law lead to severe financial and legal liabilities for foreign companies doing business in Türkiye through a PEO. Therefore, it is crucial to have an intense understanding of its obligations and requirements prior to engaging staff onsite. As it is seen in the above, for indefinite term employments, it is not possible to consider temporary worker agreement as mentioned in the law. In other words, PEO agreement is not regulated in Turkish legislation. Therefore, an outsourcing company cannot enter into a "co-employment" relationship with a client just to act as an HR arm or managing some activities like payroll, benefits, social security. The provider must handle some business activities such as managing employees' working conditions, travels, leaves. To sum up, the outsourcing service provider must manage some functions of the project related to the employee.

PEOs are generally for companies that need to compound their HR functions and use the PEO as a long-term business partner. PEO carries out a co-employer role, if you are looking for an international expansion you need to set up your presence in the chosen country.