Severance Pay Calculator: Guide to Compensation Rights
Severance pay is a lump-sum payment provided by employers to employees when their employment contract ends under specific legal conditions, provided they have worked for at least one year.
Key Terms
- Period of Service: The duration from the start date to the end date of employment. A minimum of 1 year is required to qualify for severance.
- Last Gross Salary: The total monthly gross salary at the time of departure, including regular bonuses and social benefits.
- Severance Pay Ceiling: A statutory maximum limit on the annual amount of severance pay per year of service, usually updated semi-annually by the government.
- Stamp Tax: The only tax deducted from severance pay (Rate: 0.759%). Severance pay is generally exempt from income tax in many jurisdictions like Turkey.
How Severance Pay is Calculated
Severance pay is calculated as one month's gross salary for each full year of employment. Partial years are calculated proportionally.
- Applicable Salary: If your gross salary exceeds the severance ceiling, the ceiling amount is used as the base.
- Annual Amount: Service Years * Applicable Salary.
- Proportional Calculation: For months and days beyond full years (Salary / 12 * Months and Salary / 365 * Days).
- Net Amount: The stamp tax is deducted from the calculated gross total.
Step-by-Step Calculation Example
Consider an employee with a gross salary of $5,000 who worked for 5 years and 6 months:
- Ceiling Check: If the ceiling is $4,000, $4,000 is used for calculation.
- 5-Year Amount:
5 * $4,000 = $20,000 - 6-Month Amount:
($4,000 / 12) * 6 = $2,000 - Total Gross:
$22,000 - Net Payment: Deduct stamp tax (approx 0.759%) from the $22,000 to get the net amount.
Calculate your entitlement easily based on current ceiling limits and service duration using our Severance Pay Calculator Tool.