Employer Support Payments on Short-Term Employment

As known, the short-term employment period expires as of March 31, 2021 (The deadline for cash wage support/pandemic unpaid leave and termination ban is on March 17, 2021).

Accordingly, it is necessary to recall the issue of social security and income tax declarations of employers' payments as a support in the short-term employment period.

Social Security Premiums

Per the Article 80 of the Law No. 5510;

"Earnings subject to premium for insurance holders under item (a) of paragraph one of Article 4 shall be determined as follows.

a) In the calculation of earnings subject to premium, a gross total of;

1. Deserved wages,
2. Amounts paid to the special health insurance holders and personal retirement system for insurance holders by employers and payments made in the concerned month from the premium, bonus, and any similar deserved amount,
3. Payments made to the insurance holders in the concerned month in the form of earnings stated in above numbers (1) and (2) pursuant to resolutions of administration or legal authorities, shall be taken as the basis."

Also, the below statements are located on the same article as:

"d) Wages shall subject to premium by attributing to the month they are deserved. Other payments shall be included in the earning of the month they are paid, and the section not subject to premium due to exceeding the upper limit in the month such payments are made out of wage shall be added to the earnings subject to premium of the subsequent months under the upper limit, not to be later than two months following the month of payment. Based on resolutions reached by employers of workplaces subject to collective labor agreement or by public administrations or legal authorities, where the payments paid later on other than wage are paid when service contract is not present or suspended, considering the provision of Article 82, this shall be included in the earning of the final month to which earning subject to premium belongs to. In such cases, where the insurance premiums are paid until the end of the month following the finalization date of the resolution of the abovementioned authorities, default fine or default increment shall not be collected, and provisions of Article 102 shall not be applied."

In addition to these, the following statements are included in the Employer Implementation Communiqué under the heading "7.5 - Payments except wages which are higher than the Upper Limit of Social Security Cap":

"If a payment other than the wage that will be included in the earning subject to premium is made to the employee for various reasons (such as unpaid leave, rest) during the months when they do not work during the month and wages are not paid, these payments other than wages are to be included in the earnings subject to premium of the relevant months, not to exceed two months following the payment date. However, in cases where wage payment is not entitled in the two months following the payment date, these payments other than wages will not be included in the earnings subject to premium."

Income Tax

Wage is defined under the Article 61 of the Income Tax Law as below:

"Wages are money and goods given in compensation for services to those who work subject to an employer and in association with a specific place of business, as well as benefits derived which are capable of representation in terms of money.

The nature of wage is not changed by the fact that it is paid under such titles as subsidy, compensation, cash compensation (compensation for cashier's responsibility), allocation, raise, fees, per diem, premium, bonus, expense compensation, etc., or by the fact that the earnings are established in the form of a particular percentage (provided they are not in the nature of a partnership)."

Based on that, the support payments made during the short-term employment period would be considered as an additional benefit and subject to taxation per the withholding rules under Article 94 of the Income Tax Law.

Conclusion

1. All payments made as support during the short-term employment period are subject to social security premium and income tax (e.g., wage difference payments, etc.)
2. If there are no premium payment days (workdays) of the employee in the month in which this payment is made, it will be included in the earnings subject to premium for the relevant months, not exceeding two months following the payment date. However, in cases where wage payment is not entitled in the two months following the payment date (no workdays on the following two months), these payments other than wages will not be included in the earnings subject to premium.
3. If these payments made in a month that the employee has workdays (premium days), the related amounts will be declared to the Social Security Institution based on those workdays (premium days)

Should you have any queries or need further details, please contact your customer representative.