Calculation of Annual Leave Pay 2025

Calculation of Annual Leave Pay 2025. The right to annual paid leave, one of the most fundamental dynamics of working life, is a basic human right derived directly from the Constitution, aiming to protect the employee’s physical and mental health, reproduce their social life, and refresh the workforce. However, upon the termination of employment contracts due to dismissal, resignation, death, or other reasons, this “right to rest” changes its nature and becomes a “receivable” item under labor and obligations law principles, termed “Annual Leave Pay.” As of 2025, macroeconomic updates in the Turkish economy, increases in the minimum wage, changes in income tax brackets, updates in stamp duty rates, and most importantly, the 2024 decisions of the 9th Civil Chamber of the Court of Cassation changing established precedents regarding high-level executives, have necessitated a renewed, in-depth, and multidimensional handling of this issue.

This report has been prepared in light of the relevant articles of Labor Law No. 4857, general provisions of the Turkish Code of Obligations No. 6098, premium principles of the Social Insurance and General Health Insurance Law No. 5510, and the 2025 parameters of the Income Tax Law No. 193. The primary objective of the report is to examine the entire process from entitlement to calculation, taxation to payment procedures, and resolution of legal disputes in minute detail, creating a strategic reference for employers, lawyers, and human resources professionals. In particular, critical technical issues such as the application of the “naked gross wage” basis in calculating annual leave pay, the effect of the type of termination on payment, the commencement of statute of limitations periods, and the Ministry of Treasury and Finance raising the documentation obligation limit to 30,000 TL constitute the backbone of the report.

1. Legal and Philosophical Foundations of the Right to Annual Paid Leave

1.1. Rest as a Constitutional Right and its “Mandatory” Nature

In the Turkish legal system, annual paid leave is not merely an ordinary fringe benefit regulated by Labor Law No. 4857 or a favor left to the employer’s initiative. This right is guaranteed by Article 50 of the Constitution of the Republic of Turkey, which sits at the top of the hierarchy of norms. The relevant article of the Constitution mandates that “Rest is the right of employees,” placing paid weekends, holidays, and annual paid leave rights on a constitutional ground. This constitutional basis indicates that the right to annual leave cannot be taken away even with the employee’s consent, cannot be waived, and cannot be eliminated by converting it into money while the employment relationship continues.

In legal doctrine, the right to annual leave is evaluated not among “relatively mandatory” but among “absolutely mandatory” legal rules. This means that parties cannot change or eliminate this right to the detriment of the employee, even by agreement. The fundamental philosophy of the annual leave right is to ensure that the employee, who labors throughout the year and wears out physically and mentally, rests without loss of income, renews themselves physically and psychologically (regeneration), and participates more effectively in social life. Therefore, as long as the employment contract continues, the essential principle is the “actual use” of the annual leave; its conversion into wages is legally an exceptional situation and is only possible upon the termination of the contract. Established precedents of the Court of Cassation emphasize that annual leave payments made to the employee while the employment relationship continues do not eliminate the right to leave; such payments can only be considered as an “advance,” the employee’s right to rest remains intact, and the employee’s right to demand this leave persists.

1.2. Annual Leave in the Systematics of Labor Law No. 4857

Article 53 and following of Labor Law No. 4857 regulate in detail the conditions for entitlement to annual paid leave, leave durations, how the leave will be used, and leave pay. The legislator has stipulated that for an employee to benefit from this right, they must have worked for at least one year, including the trial period, at the workplace belonging to the employer. This one-year period is called the “waiting period” (qualifying period) and is accepted as an objective parameter measuring the employee’s loyalty, integration into the workplace, and the emergence of the need for rest.

The fact that annual leave relates to public order imposes serious obligations on the employer as well. The employer cannot accept an employee’s request stating, “I do not want to use leave, I want to work and get paid.” Such an agreement is null and void (invalid) under Article 27 of the Turkish Code of Obligations due to violation of mandatory provisions of the law. Protecting the employee’s health is a duty of the state pursuant to the social state principle, and employers are the practitioners of this duty in the field. Therefore, the regular granting of annual leaves is not only a right of the employee but also a part of the employer’s duty of care within the scope of occupational health and safety.

1.3. Conceptual Distinction: Right to Annual Leave vs. Annual Leave Pay Receivable

“Annual Leave Pay,” the main subject of our report, does not refer to the normal salary received by the employee during the period they are actually on leave (wage for the leave period), but to the money in the nature of compensation paid for the leave periods not used when the employment contract is terminated for any reason. This distinction is of vital importance.

Article 59 of the Labor Law decrees that in case the employment contract ends for any reason, the wages for the annual leave periods to which the employee is entitled but has not used shall be paid to them or their beneficiaries based on the wage at the date the contract ends. At this point, a legal transformation occurs between the “right to leave” (a real right) and “leave pay receivable” (a monetary receivable). A leave that is a “right” and must be used while the employment relationship continues transforms into a “monetary debt” by changing its legal nature upon termination. This moment of transformation is considered the milestone for interest commencement, the start of the statute of limitations, and the determination of the wage basis for calculation. There is no longer a leave period to be used, but a receivable item to be collected.

2. Conditions for Entitlement to Annual Leave, Durations, and Special Forms of Work

2.1. One-Year Waiting Period and “Service Year” Calculation

To be entitled to annual paid leave, the employee must have worked for at least one year, including the trial period, from the date of starting work. This period is determined not by the calendar year (January 1 – December 31) but by the “service year” calculated according to the employee’s individual start date. For example, an employee who starts work on February 15, 2024, becomes entitled to annual leave on February 15, 2025. If the employee leaves the job before this date, as a rule, they cannot be entitled to annual leave pay; because the right has not arisen. The “pro-rata” leave practice, i.e., paying proportional leave pay for work of less than 1 year, is not accepted in the Turkish Labor Law system unless there is a provision to the contrary in the contract. The Court of Cassation also rejects leave pay claims for work that does not complete 1 year.

In the calculation of this period, not only the days the employee actually worked but also the periods deemed by law to have been worked even though not worked (Labor Law Art. 55) are taken into account. The legislator has accepted certain absenteeism situations occurring outside the employee’s will or protected by social policy as “worked.” These include:

• Periods of temporary incapacity due to work accidents or occupational diseases,
• Periods during which female employees are not employed before and after childbirth (maternity leave),
• Periods up to 90 days spent by the employee during exercises or duties arising from any law other than regular military service,
• Weekly rest days, national holidays, and general holidays,
• Half-day leaves that must be given in addition to Sundays to those working in X-ray clinics.

2.2. Exception in Seasonal and Campaign Works

According to paragraph 3 of Article 53 of the Labor Law, the provisions of this law regarding annual paid leaves do not apply to those working in seasonal or campaign works that last less than a year due to their nature. This regulation excludes short-term (seasonal) works in sectors such as agriculture, construction, or tourism, which do not show continuity due to the nature of the job. However, the point to be noted here is the employee’s “seasonal” status. If the employee is employed uninterruptedly in successive seasons even if working in a seasonal job, or if their contract is suspended and continued the next season and this chain of work exceeds 11 months, the Court of Cassation accepts that these employees will also be entitled to annual leave. Otherwise, annual leave rights do not arise in true seasonal works lasting less than 1 year.

2.3. Leave Days According to Seniority (2025 Outlook)

The minimum leave periods the employee is entitled to according to their seniority (length of service) at the workplace are determined gradually in Article 53 of the Law. Although no legal changes have been made to these periods as of 2025, these are “minimum” periods; it is possible to increase these periods through collective bargaining agreements (CBA) or individual employment contracts. The legal base periods are as follows:

In the application of this general rule, there are three important exceptions and positive discrimination regulations protecting the employee:

1. Protection of Young and Elderly Employees: The annual paid leave period to be given to employees aged 18 and under (young employees) and employees aged 50 and over cannot be less than 20 days, regardless of their seniority (even if it is 1 year). This regulation aims to protect young people whose physical development continues and employees who need more rest due to old age.
2. Underground Workers: The annual paid leave periods of employees working in underground works such as mines are calculated by adding four days to the general levels above. For example, an underground worker with 3 years of seniority is entitled to 14+4=18 days of leave.
3. Travel Leave: Provided that it is documented that the employee will spend their annual leave in a place other than where the workplace is located, the employer is obliged to grant up to 4 days of unpaid travel leave to cover the time spent on the round trip. This period is not included in the paid leave calculation, but the employer has an obligation to grant this leave.

2.4. Status of Part-Time Employees

Annual leave practice in part-time work, one of the increasingly common models of modern working life, is a frequently misinterpreted issue. The “Regulation on Annual Paid Leave” and established precedents of the Court of Cassation are extremely clear on this matter: Part-time employees have the same rights as full-time employees, and annual leave periods are given on a “day” basis; no reduction can be made in proportion to working hours.

To put this concretely; an employee working only 2 days a week earns 14 days of annual leave rights just like a full-time employee when they complete the 1-year waiting period (1 year has passed since the start date). The employer cannot say, “You work 2 days a week, I will give you leave equal to 2/6 of 14 days.” However, a difference arises at the point of wage payment. Within this 14-day leave period, the employee receives wages for the days corresponding to their normal working days. That is, the “leave period” is full, but the “leave pay” is naturally shaped according to the non-working period (part-time ratio). The employee does not come to work for 14 days, but within these 14 days, receives wages for however many days they would normally work (e.g., 4 days). This approach is one of the rare points where the concepts of “duration” and “wage” diverge.

2.5. Effect of Unpaid Leaves on Entitlement Period

Unpaid leaves used within the working period (e.g., excuse leaves given upon the employee’s request or long-term unpaid leaves) do not eliminate the annual leave right but “postpone” the entitlement date. In the calculation of the 1-year period required to be entitled to annual leave, periods spent on unpaid leave are not counted as “worked.”

Example Scenario: If an employee who started work on January 1, 2024, used a total of 30 days of unpaid leave during the year for various reasons, the date they will be entitled to annual leave will not be January 1, 2025. This date will be pushed forward by the duration of the unpaid leave used, becoming January 31, 2025. This detail plays a critical role in determining whether the employee is entitled to leave for the last year, especially in calculations made at the stage of leaving the job. In many disputes, the employer’s defense of “1 year has not been filled when unpaid leaves are deducted” against the employee’s claim of “my 1 year is full” is found justified.

3. Termination of Employment Contract and Conversion of Leave Right into Monetary Receivable

3.1. Termination Condition and Legal Mechanism

Article 59 of Labor Law No. 4857 seeks the termination of the employment contract as an absolute condition for the annual leave right to transform into a “wage receivable.” Without this condition being realized, that is, while the employment relationship continues, the employee has no right to demand money for accumulated leaves; nor does the employer have an obligation or authority to make such a payment. The Court of Cassation accepts leave pay payments made while the employment relationship continues not as a transaction extinguishing the leave right, but as an advance or additional payment given to the employee, and assumes that the leave days are still standing at the moment of termination.

The manner of termination of the contract (resignation, employer termination, termination for just cause, valid termination, retirement, death, expiration of fixed term, etc.) carries no importance regarding entitlement to leave pay. Even if the employee is dismissed without compensation due to “situations not complying with rules of morality and good faith” such as theft or abuse of trust pursuant to Article 25/II of the Labor Law, they are entitled to receive the wages for the annual leaves they have earned but not used up to that moment. This is the biggest difference from severance pay; while severance pay depends on certain types of termination, annual leave pay is a right that must be paid in any type of termination (even if the employee is at fault).

3.2. “Last Wage” Principle and Inflationary Protection

While calculating annual leave pay, the last naked wage at the date the employment contract ends is taken as the basis, not the wage at the date the employee was entitled to the leave. This choice of the legislator provides great protection in favor of the employee, especially in high-inflation economies like Turkey.

For example, an employee will collect the equivalent of 14 days of unused leave earned while working for minimum wage in 2018 based on their current salary in 2025 when leaving the job in 2025. The immense difference between the wage in 2018 and the wage in 2025 ensures the protection of the employee’s purchasing power. However, this situation implies that for employers, “unused leaves” constitute a cost item (similar to severance burden) that grows day by day on the balance sheet, weighing like an interest-free loan. Therefore, the basic principle in modern Human Resources management should be “granting the leave, not paying the leave money.”

3.3. Unpaid Leave Pay and Risk of Just Cause Termination

According to established and current precedents of the 9th Civil Chamber of the Court of Cassation, annual leave pay not used although earned, or annual leave pay not paid immediately upon termination of the employment contract, can even be considered a reason for “just cause termination” for the employee. Specifically, not paying the leave pay (advance for the leave) in cash to the employee sent on leave, or withholding the leave pay at the moment of termination, gives the employee the right to terminate the contract for just cause and claim severance pay pursuant to Article 24/II-e of Law No. 4857 (failure to pay wages in accordance with the law or contract terms).

When an employee files a lawsuit for annual leave pay not paid at the moment of termination, interest and statute of limitations rules applicable to this receivable item come into play. According to Court of Cassation decisions, annual leave pay becomes “due” (demandable) upon termination and must be paid immediately.

4. Methodology for Calculating Annual Leave Pay

4.1. Wage Basis for Calculation: “Naked Gross Wage”

The most common mistake and biggest misconception in annual leave pay calculation is using the “dressed wage,” which is used in severance and notice pay calculations. However, Article 59 of the Labor Law and established decisions of the Court of Cassation are extremely clear: Annual leave pay is calculated based on the employee’s “naked gross wage.”

Difference Between Naked Wage and Dressed Wage:

• Naked Wage: The basic salary paid in cash to the employee for their main work.
• Dressed Wage: The amount found by adding all cash or in-kind social benefits such as bonuses, premiums, travel allowance, meal allowance, fuel aid, family aid to the naked wage.

In the annual leave pay calculation, only and solely the naked wage is taken into account. Overtime wages, premiums, weekend wages, travel, and meal aids are not included in this calculation. The decision of the 9th Civil Chamber of the Court of Cassation numbered 2018/5253 also underlined this rule by stating, “Annual leave pay should be calculated over the naked gross wage, overtime wages and supplements should not be included.”

4.2. Calculation Formula

The mathematical calculation of annual leave pay is based on the following formula:

Daily Naked Gross Wage=30Monthly Naked Gross Salary​

Gross Annual Leave Pay=Daily Naked Gross Wage×Number of Unused Leave Days

The amount obtained as a result of this formula is the “Gross” amount. To find the net amount to be deposited into the employee’s bank account, legal deductions for 2025 (SGK, Income Tax, Stamp Duty) must be deducted from this gross amount.

4.3. 2025 Minimum Wage Data and Example Calculation

Minimum wage data determined for 2025 constitute the base for calculations. The Gross Minimum Wage valid between January 1, 2025 – December 31, 2025, has been determined as 26,005.50 TL.

The table below shows the 2025 minimum wage parameters and an employee’s cost structure:

Example Scenario: Annual leave pay calculation for an employee working at minimum wage and having 14 days of unused leave upon leaving (Raw calculation excluding tax bracket and exemptions):

1. Daily Gross Wage: 866.85 TL
2. Gross Leave Pay: 866.85×14=12,135.90 TL
3. SGK Deduction (15%): 12,135.90×0.15=1,820.39 TL
4. Tax Base: 12,135.90−1,820.39=10,315.51 TL
5. Income Tax: (Applied at 15%, 20% etc. rate according to the employee’s bracket and exemption is deducted)
6. Stamp Duty: 12,135.90×0.00759=92.11 TL (Deducted if exemption exists)

5. Deductions, Taxation, and 2025 Fiscal Parameters

Since annual leave pay is considered “wage” by its nature, it is subject to all legal deductions just like normal salary payments. However, since a lump sum payment is made at the termination stage, it cumulatively increases the tax base and carries the risk of pushing the employee into a higher tax bracket.

5.1. Social Security Deductions (SGK)

A total of 15% insurance premium deduction is made from annual leave pay, consisting of 14% SGK Employee Premium (Disability, Old Age, Death insurances and GSS) and 1% Unemployment Insurance Premium.

Additionally, costs of SGK Employer Share (20.5% or 15.5% with 5-point Treasury incentive) and Employer Unemployment Share (2%) arise for the employer. However, only employee shares are deducted from the gross wage to find the net amount payable to the employee.

SGK Ceiling (SPEK Upper Limit) Warning: The 2025 SGK ceiling is 7.5 times the gross minimum wage. 26,005.50×7.5=195,041.25 TL. If the total of the employee’s normal salary, premiums, and annual leave pay in the month of termination exceeds this ceiling, no SGK premium is deducted from the exceeding part. This situation ensures that the net annual leave pay comes out higher for high-wage employees because the 15% deduction is not applied to the part exceeding the ceiling; only income and stamp taxes are deducted.

5.2. Income Tax and 2025 Tax Brackets (Tariff)

The 2025 Income Tax tariff has been updated with revaluation rates. Annual leave pay is taxed as “wage” income and is processed by adding onto the employee’s cumulative tax base earned within that calendar year.

2025 Income Tax Tariff (For Wage Incomes):

Cumulative Base Effect: Since annual leave pay is usually a lump sum payment upon leaving, it suddenly raises the employee’s tax base. For example, for an employee leaving in the 10th month and in the 20% bracket, a substantial leave payment may jump their base to the 3rd bracket (27%). In this case, part of the leave pay is taxed at 20% and the rest at 27%. This mechanism causes a proportional decrease in the net money received by the employee.

Tax Exemption Application: The minimum wage tax exemption applied since 2022 continues in 2025. The tax amount (and stamp duty) corresponding to the tax base of the minimum wage for that month is deducted from the employee’s total income (salary + leave pay), and the remaining amount is paid. But beware! If this exemption has “already been used” in the employee’s normal payroll for that month, the exemption is not applied again from the leave pay payment made in the same month. The exemption is person-based and monthly-based; not payment item-based.

5.3. Stamp Duty

Stamp duty at a rate of 7.59 per thousand is deducted from the annual leave pay payment over the gross amount. For 2025, the stamp duty corresponding to the minimum wage (around 197 TL) is within the scope of exemption. If the minimum wage exemption is fully used in the normal salary, stamp duty of 7.59 per thousand is deducted from the entire leave pay.

6. Payment Procedures, Bank Obligation, and Burden of Proof

6.1. Obligation to Pay via Bank and New 30,000 TL Limit

Recent regulations made by the Ministry of Treasury and Finance through the Tax Procedure Law (VUK) General Communiqué (Serial No: 575) have introduced a revolutionary change in payments and collections. The documentation (certification/bank) obligation limit, which was 7,000 TL, has been raised to 30,000 TL.

This regulation is critical for 2025 practices. If the total of annual leave pay and other termination receivables exceeds 30,000 TL, making this payment in cash (by hand) is strictly prohibited. The payment must be made via:

• Banks,
• Payment institutions (Electronic money institutions),
• PTT (Post Office), and it is mandatory to clearly note phrases like “Annual Leave Pay,” “Termination Receivable” in the description section.

Paying salaries via bank is already mandatory in workplaces employing 5 or more workers under the Labor Law. However, raising this general limit under VUK to 30,000 TL has created a new threshold where tax procedure penalties (Special Irregularity Penalty) will be applied against errors made especially in small businesses or piecemeal payments. An employer paying annual leave pay by hand faces both the risk of “inability to prove payment” in terms of labor law and irregularity penalty in terms of tax law.

6.2. Burden of Proof: “Leave Ledger” and Written Document Condition

The most fundamental rule in legal proceedings is that “the claimant is obliged to prove their claim.” However, the burden of proof has shifted regarding annual leave. The burden of proving that annual leave pay has been paid or that the leave has been used belongs to the employer. When the employee says “I did not use leave,” if the employer says “no, they used it,” they are obliged to document this.

The employer must prove that the employee used their leaves with the “Annual Leave Ledger” or equivalent written documents (leave request form, leave approval letter, leave schedule). These documents must bear the employee’s wet signature or secure electronic signature. Excel spreadsheets, computer records, PDKS (Personnel Attendance Control System) printouts, or witness statements not bearing the employee’s signature are not sufficient alone to prove that the leave was used. The Court of Cassation does not accept witness testimony in the defense of “leave was used”; this matter can only be proven with written evidence.

6.3. Interest Type, Rate, and Start Date

If annual leave pay is not paid on time, the applicable interest type is “Legal Interest.” The rule of “highest interest applied to deposits” applied in severance pay is not valid for annual leave.

• Interest Rate: As of 01.06.2024, the legal interest rate is applied as 24% annually.
• Interest Start: Interest does not automatically start with the termination date. In annual leave pay receivables, interest starts on the date the employer is put in default. If the employee sent a notary notice to the employer upon leaving saying “pay my annual leave money within 3 days,” default occurs at the end of the given period and interest begins to accrue. If there is no notice, the lawsuit filing date or mediation application date is accepted as the interest start.

7. Critical Court of Cassation Precedents and Changing Balances in 2024

7.1. Revolutionary Decision: High-Level Executives and “Discretionary Reduction” (50%)

In terms of annual leave law, the 9th Civil Chamber of the Court of Cassation signed a precedent-setting decision in 2024 that breaks the mold and will guide 2025 practices (E. 2024/6366, K. 2024/9427).

The practice that had been going on for years was, “If the employer cannot prove with a signed document that the leave was used, they pay the wage for the entire period claimed by the employee.” However, the new precedent has introduced an exception to this absolute rule with the principle of “ordinary course of life.” According to the decision: If the employee is in a high-level executive position (General Manager, CEO, Deputy General Manager, etc.) and has the authority to determine their own working hours/leaves, it is “contrary to the ordinary course of life” for this person to claim that they have not used any leave for many years (e.g., 9-10 years). It is considered illogical for a high-level executive to work for years without taking a vacation while granting leave to personnel reporting to them.

In this case, the Court of Cassation ruled that even if the employer cannot present a written document (signed leave form), the judge should use their discretionary power to make a 50% equity reduction from the calculated total annual leave pay. For example, for a General Manager calculated to have 100,000 TL leave receivable without documentation, the court can now decide to pay 50,000 TL. This decision has become a very strong defense tool in favor of the employer in lawsuits filed by high-level executives and has stretched the strict rules of burden of proof for those bearing the title of “executive.”

7.2. Statute of Limitations Period and Start

The statute of limitations for annual leave pay receivables is 5 years pursuant to Article 147 of the Turkish Code of Obligations and Additional Article 3 of the Labor Law. However, the most confused issue in practice is when this period starts to run.

The statute of limitations starts not on the date the leave was earned (e.g., in 2018), but on the date the employment contract ends.

• Example: Suppose an employee did not use their 14-day leave from 2015. If the employee leaves the job in 2025, the 5-year statute of limitations to claim the wage for this leave from 2015 starts in 2025 and continues until 2030. The employer cannot make a defense saying “10 years have passed since 2015, it is time-barred.” Because the right to leave turns into a receivable upon termination; statute of limitations does not run before the receivable arises.

8. Strategic Recommendations

The annual leave pay process is of critical importance for employers and employees in the 2025 projection with both its financial dimension (high minimum wage increase and cumulative tax effect) and legal dimension (new Court of Cassation decisions and rules of proof).

Strategic Recommendations for Employers:

1. Leave Granting Policy: Accumulation of leaves is a huge financial risk as it will be paid over the last wage at the moment of termination. Priority should be given to the planned use of leaves within the year, and the approach of “don’t use leave, you’ll get the money” should be avoided.
2. Recording and Documentation Discipline: “Leave Request Form” and “Leave Ledger” practices should be kept completely digitally or physically, and the employee’s approval must be obtained for every leave use. For the legal validity of “approval logs” in digital HR systems, e-signature or timestamp integrations should be reviewed.
3. High-Level Executive Contracts: In light of the new Court of Cassation decision, it should be clearly written in contracts with executives to whom the authority and responsibilities regarding the use, timing, and recording of leaves belong.
4. Bank Payment and Description: Maximum attention should be paid to making payments over 30,000 TL via bank channels upon leaving employment and writing “Annual Leave Pay” in the receipt description.

Recommendations for Employees:

1. Record Check: It should be checked whether used leaves are correctly recorded, and documents showing unused leaves as “used” should not be signed.
2. Right Claiming Period: It should not be forgotten that if leave money is not paid, a lawsuit must be filed or a mediator applied to within 5 years from the date of termination.
3. Power of Proof: The claim that leave was not used starts with the employee’s statement, but if the employer cannot prove otherwise, the employee gets their receivable. Therefore, the compatibility of the actual situation with the recorded situation should be monitored.

In conclusion; the annual leave pay process is not just a payroll calculation, but the management of the delicate balance between the protection of a constitutional right and the employer’s right to manage within the framework of law and finance rules. The 2025 parameters and changing judicial precedents make it mandatory to carry out this process more meticulously, recordedly, and in accordance with the rules than ever before.