How will the Complementary Retirement System affect severance pay?

The planned changes to working life by the Medium-Term Program (PMP) and subsequent statements by Vice President Cevdet Yılmaz raised concerns about whether severance pay would be eliminated.

The text of the MTP stated that the Automatic Enrollment System (OKS) would become a ‘second-stage retirement system’ and in that area a Supplementary Retirement System (TES) would be established.

With this system, which is expected to be implemented in the last quarter of 2024, it is also expected to reorganize severance payments.

Even if this system is implemented, the employee will no longer receive a lump-sum compensation when leaving work, but in the form of a monthly payment during retirement.

However, there is a danger: even if this amount, which will be received in addition to the current pension, is presented as a second pension and is shown as a situation in favor of the employee, he will be deprived of the opportunity to receive the lump sum payment. . You deserve severance pay and will not be able to pay it due to the low rate of premium your employer will likely pay you. The worker will receive a low amount.

NEW DANGER IN PENSIONS

Currently, the worker receives 8.33 percent of his gross salary as severance pay. There is no draft text yet, etc. about the new system. There is not, but the statements mentioned in previous years are that the worker will have a total of 8.33 percent entitlement in TES, of which 5.33 percent is severance pay and 3 percent is employer contribution… This 3 percent employer contribution is also included. in the individual It is said that it will be charged to the fund account.

Speaking to Sozcu.com.tr, Professor of the Department of Labor Economics and Industrial Relations at Kocaeli University, Prof. Dr. Aziz Çelik, “The employer will not pay severance pay or make additional contributions. It will contribute to the private pension system instead of severance pay. This money will also be paid upon retirement. However, the premium is expected to be limited to 3-4 percent. “For this reason, the amount payable during retirement will be a very small amount.”

“Currently a 20 percent premium is paid and even the lowest pension of 7,500 TL is supplemented by support from the Treasury,” Çelik said, adding: “A second pension with a 3-4 percent premium would be around of 1,000 TL”. “It is a ridiculous amount, which does not reach a quarter of the current monthly salary,” he said.

Teacher. Dr. Çelik continued:

“That is, both compensations will be eliminated and there is a risk that the improvement made in existing pensions will be limited by saying ‘there is also a second retirement.’ We will see this clearly when the final version of the regulations is announced.”

‘THE GOAL OF FLEXIBLE WORK IN OVP IS ALSO A DANGER FOR SENIORITY’

The goal of popularizing the flexible working models included in the OVP was another issue that increased concerns about severance pay.

The text of the PMP stated the following regarding the policies to be followed and the measures to be taken regarding employment:

“To facilitate young people’s transition into the labor market, internship, part-time and flexible work models will be expanded, and emphasis will be placed on training, programs and activities that increase their professional awareness.”

Pointing out the danger of the flexible work model, supported by types such as temporary work and remote work, for dismissal compensation, Prof. Dr. Çelik said: “Increasing and expanding flexibility means that fewer workers have access to severance pay. Because temporary workers do not have the right to compensation,” he stated.

‘EMPLOYERS WHO DO NOT PAY FULL PAY CAN BE FIRED MORE EASILY’

Another concern on the issue is that the employer could facilitate layoffs with the new practice.

In his evaluation to sozcu.com.tr, a social security expert from a workers’ union widespread throughout the country said: “With the new regulation it is established that the employer will deposit the premiums in the private pension companies on behalf of the employee. This money was normally accumulated as severance pay. “I think that the employer, who does not have to pay a lump sum to the employee, will find it easier to fire him,” he said.

WHAT WAS SAID IN THE LAST MTP?

In the latest PMP, which covers the period 2023-2025 and includes predictions on basic economic data such as unemployment, inflation, national income and growth, the statement that sparked all these discussions were the following articles in the Policies and Measures section:

“To achieve a sufficient level of insurance rate and number of participants in our country, deepen the private insurance and pension sector and extend it to the base, practices will be developed to support the increase in product diversity in individual insurance and branches of private pensions.

23. The automatic enrollment system will be comprehensively evaluated together with other retirement systems and transformed into a complementary and long-term private savings and retirement system for employees.”

In fact, although the issue of compensation was not directly mentioned, the connection between the complementary retirement system and the compensation mentioned in the MTP was not rejected by the ruling party. This deepened concerns that “severance pay is being abolished.”

CEVDET YILMAZ: THE TRANSFER TO THE FUND WILL BE ON THE AGENDA

President Yılmaz’s statements on this issue also support this concern.

Responding to a question on the topic, Yılmaz said: “Unfortunately, there are very serious problems regarding severance pay. “There are non-payment problems, there is uncertainty that this generates,” he said and continued as follows:

“For a while there was the idea of ​​​​creating a fund and solving this problem with it. Therefore, these issues will be back on Turkey’s agenda in the coming period.

TÜRK-İŞ: DISTURBED THE PEACE

On the other hand, Türk-İş expressed his discomfort about this issue that has been on the agenda recently, in a written text published yesterday.

In the statement made on behalf of the Board of Directors of Türk-İş, it was stated that the “Second Stage Pension System”, which is intended to be regulated as a priority reform area in the Price Stability and Financial Stability section of the Middle Termination Program (MTP), caused great anxiety and unrest among workers and said:

“TÜRK-İŞ advocates that the right to severance pay should be protected and developed, not eroded, modified or made part of retirement. It has always been expressed that we are willing to contribute to this issue if the objective is to include workers who cannot benefit from this right.

The fact that such a regulation proposal has been included on the agenda and discussed at the MTP has disturbed the peace of working life. “The objective of the retirement system to be introduced is not to create a structure that compensates for the loss of income of retirees and maintains their standard of living during the working period, but to meet the resource needs of the economy.”