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Payment in Lieu of Notice

Also known as: Notice Pay, Notice Compensation, İhbar Tazminatı

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In short

Compensation equal to wages for the notice period that the party terminating an indefinite-term employment contract without observing the notice period must pay the other party.

Payment in lieu of notice (ihbar tazminatı) is compensation under Article 17 of the Labour Law paid by the party terminating an indefinite-term contract without observing the notice period. It equals wages for the notice period and may arise for either employer or employee.

Who Can Claim?

  • Employee: Receives notice pay where the employer terminates without observing the notice period and without just cause.
  • Employer: May claim notice compensation from an employee who resigns without just cause and without observing the notice period.

No notice pay arises for terminations for just cause, terminations during the probation period or fixed-term contracts ending on expiry.

Calculation

Notice pay is calculated on the employee’s gross wage including regular benefits: regular monetary and money-measurable benefits such as meal and transport allowances and bonuses are added to the last gross wage. For example, an employee with more than three years’ service receives eight weeks’ wages. Notice pay is subject to income tax and stamp duty. Unlike severance pay, no cap applies.

Relationship with Bad Faith Compensation

Where the right to terminate is abused, an employee not covered by job security receives, in addition to notice pay, bad faith compensation equal to three times the wages for the notice period.

Limitation and Mediation

Notice pay claims are subject to a five-year limitation period from the end of the contract. Applying to a mediator is mandatory before filing a claim; see the Mandatory Mediation Guide.

Frequently Asked Questions

Is an employee who resigns for just cause entitled to notice pay?

No. No notice is required for terminations for just cause, so no notice pay arises. An employee resigning for just cause receives severance pay if the conditions are met.

Is tax deducted from notice pay?

Yes. Notice pay is subject to income tax and stamp duty; no social security premium is deducted. Severance pay, by contrast, is generally subject only to stamp duty.

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