What Is Severance Pay in Lieu of Notice and When Is It Paid?

To prevent either party from being caught off guard when an employment contract ends, the law provides a notice period. This allows the employee to look for a new job and the employer to find a replacement.

This period is called the notice period or notice of termination. Severance pay in lieu of notice (notice pay) is the compensation for not utilizing this period.

Don't confuse it with severance pay

Both come up during termination, and both involve payouts. But they compensate for different things.

The last row is important: notice pay is subject to income tax. You must account for this deduction when calculating the gross amount to find the net payout. There is no such deduction for severance pay.

Notice periods vary based on tenure

The duration depends on the employee's tenure at the workplace. The longer they have worked, the longer the required notice.

These are minimum periods. They can be increased by contract, but cannot be reduced.

Two options: work through the period or pay in lieu

When you notify an employee of termination as an employer, you have two choices.

• Working through the notice period. You give notice, the employee continues to work throughout the period, and leaves at the end. In this case, you do not pay notice pay. Additionally, you must grant the employee job-search hours during this period.
• Paying in lieu (severance in lieu of notice). If you want the employee to leave immediately, you pay their wages for that period in advance. The amount you pay is the notice pay.

In practice, the second option is more common. Keeping an employee whose relationship with the company is clearly ending in the workplace for another eight weeks is rarely productive for most employers.

How is the calculation done?

Like severance pay, notice pay is calculated based on the gross salary including fringe benefits (giydirilmiş brüt ücret). This means transportation, meals, and regular bonuses are included.

Example: Let's assume an employee who has worked for 2 years has a gross monthly salary including benefits of 45,000 TL. Since their tenure is between 1.5 and 3 years, the notice period is 6 weeks.

• Daily salary including benefits: 45,000 / 30 = 1,500 TL
• 6 weeks = 42 days
• Gross notice pay: 1,500 × 42 = 63,000 TL

Income tax and stamp duty are deducted from this gross amount; the net figure received by the employee will be lower. The exemption that applies to severance pay does not apply here.

Does an employee also pay notice pay?

Yes, and this is unknown to most employers. The obligation is mutual.

If an employee leaves without complying with the notice period, saying "I am not coming starting tomorrow," they owe you notice pay calculated the same way. In practice, collecting this is a separate issue and most employers don't pursue it; however, the right exists.

In the event of immediate termination by the employer for just cause, notice pay is not paid—because the obligation to observe the notice period is eliminated anyway. The existence of just cause requires proof; do not make this assessment on your own.

Anticipating departure costs

Staff termination is not a single line item. Severance pay, notice pay, unused annual leave compensation, and any overtime claims are paid within the same week.

Knowing this total before making a decision to part ways changes both your bargaining position and your cash flow planning. Calculate a single grand total along with severance pay calculation and carried-over annual leave balance.

Frequently asked questions

Is notice pay paid to an employee during the probation period?

During the probation period, parties can terminate the contract without complying with the notice period; in this case, notice pay does not arise. The probation period must be stated in the contract.

How long is the job-search leave?

If you are having the employee work through the notice period, you must grant them at least two hours of job-search leave per day. This leave is paid.

Can I have them work half the notice period and pay for the other half?

Partial work can be done in practice; compensation is paid for the remaining period. Put this arrangement in writing.

Is notice pay tax-deductible as an expense?

It is considered a personnel expense in the period it is paid. Along with tax deductions, it is reflected in the withholding tax return.

In short: notice pay is not a penalty, but compensation for the unused period. If you manage the timeline knowingly, costs become predictable.

By opening a free account on Qolay.App, you can record personnel payments along with your cash and bank transactions.

This article is for general informational purposes. Consult your financial advisor or labor law expert regarding termination types, just-cause assessments, and tax deductions.