Under the employer of record model, a company based abroad employs staff in Turkey without forming a legal entity here: the employee’s legal employer is a service provider resident in Turkey, while day-to-day direction of the work stays with the client. Turkish legislation contains no provision headed “employer of record”; the model arises from combining an ordinary employment contract under the Labour Law with a service agreement given to the company abroad. Its limits are therefore drawn by other institutions in the legislation.
The service provider is the legal employer. The employment contract, social security filings, income tax and stamp duty withholding, and severance and notice obligations belong to the employer of record. The client company directs the content of the work and gives day-to-day instructions.
This is not a temporary employment relationship. Supplying workers to an employer in Turkey is a separate institution, conducted through a private employment agency licensed by the labour agency and subject to limits on duration, quota and sector. In the employer of record model the employer for whom the worker works is abroad and there is no workplace in Turkey; the structure rests on that distinction.
Tax risk is not transferred. An employer of record does not remove the risk that the company abroad creates a permanent establishment or permanent representative in Turkey. What the employee actually does determines whether that risk arises.
2026 Parameters That Drive the Cost
What an Employer of Record Is, and Is Not
Four separate structures are routinely confused. The difference is not academic: choosing the wrong one means employment claims, social security premiums and administrative fines find their way back to the client company.
| Structure | Legal employer | Basis and limits | When it fits |
|---|---|---|---|
| Employer of record | Service provider resident in Turkey | An ordinary employment contract under the Labour Law, with a service agreement to the company abroad. There is no special licensing regime | A foreign company with no Turkish entity employing a limited number of staff |
| Temporary employment through a private agency | The private employment agency | Labour Law art. 7: a licence from the labour agency is compulsory and the relationship may be established only in the cases listed in the law. In many cases the contract runs for at most four months and may be renewed twice, not exceeding eight months in total; the number of temporary workers may not exceed a quarter of the workforce at the workplace | A temporary workforce need at a workplace in Turkey |
| Subcontracting | The subcontractor | Labour Law art. 2: dividing out the principal work is restricted; where the arrangement is a sham, the workers are treated as the principal employer’s from the outset | Transferring the whole of an auxiliary or specialist function |
| Independent contractor | None; a service purchase relationship | Where dependence, instruction, working hours and workplace are present, the relationship is treated as employment and retrospective premiums, tax and compensation arise | Genuinely independent, outcome-based and time-limited work |
In a temporary employment relationship a Turkish employer engages another party’s worker at its own workplace, and that is possible only through a licensed private employment agency. In the employer of record model there is no such engaging employer in Turkey: the employer is abroad, and the employer of record employs the worker on its own workplace registration.
Which side of that line a structure sits on is determined by how the arrangement actually operates, not by the wording of the contract.
Which Structure Fits?
In either case, work permits, personal data transfer and intellectual property are arranged separately.
Where Responsibility Sits
- Written employment contract and personnel file
- Social security entry, monthly premium and service filings, exit notifications
- Income and stamp duty withholding, the withholding and premium service return
- Severance, notice and annual leave obligations
- Occupational health and safety services, pre-employment examination and training
- Work permit applications for foreign nationals
- Candidate selection and setting the salary and benefit level
- Content of the work, objectives and day-to-day direction
- Performance management and promotion decisions
- Equipment and system access
- Communicating the decision to terminate and meeting its cost
- The intellectual property chain: rights arise first with the employer of record and must be assigned on
- Confidentiality and non-compete provisions
- Transfer of personal data abroad
- Allocation of compensation and litigation risk on termination
How the Cost Is Built
| Item | Description | Point to watch in 2026 |
|---|---|---|
| Gross salary | The monthly gross amount set in the contract | The floor is the gross minimum wage of TRY 33,030; no income or stamp duty is charged at minimum wage level |
| Employer’s social security and unemployment insurance | Calculated on earnings subject to premium | A five point reduction applies to employers meeting the conditions; the earnings ceiling is TRY 297,270 |
| Income and stamp duty withholding | Withheld from the employee, declared by the employer | An exemption applies to the portion corresponding to the minimum wage |
| Severance and notice provision | Provision made against the termination scenario | The severance ceiling is TRY 73,729.87 from 1 July 2026 |
| Annual leave provision | The monetary value of leave days accrued | At least fourteen days for one to five years of service; may be increased by contract |
| Benefits | Meals, transport, private health insurance, equipment | Meal and transport exemptions are updated annually; the excess is treated as salary |
| Service fee | The employer of record’s monthly fee | Set as a fixed amount per person or as a percentage of gross salary |
Risks an Employer of Record Does Not Remove
Where the employee negotiates contracts, concludes orders or agrees prices in Turkey on the client’s behalf, a permanent representative question arises under the permanent establishment article of the double taxation agreements. The result may be a Turkish corporate tax liability for the company abroad. The role definition is for that reason the most important annex to the agreement.
Where a person invoicing as an independent contractor works under conditions of dependence, the relationship is treated as employment, and retrospective premiums, late payment charges, administrative fines and compensation follow. Moving to an employer of record is often chosen precisely to close this exposure.
The exercise of rights over works an employee creates in the course of their duties belongs as a rule to the employer. In this model that means the rights arise first with the employer of record; passing them to the client is achieved by an express assignment in the service agreement. Without that provision the chain breaks.
Sharing payroll and personnel data with the client abroad is subject to the transfer regime under the personal data protection legislation. The transfer mechanism must be settled in advance and the information notices prepared accordingly.
Where the person to be employed is a foreign national, the work permit is a separate process. The assessment requires at least five Turkish citizens insured at the workplace for each foreign national, financial capacity, and the multiples of the minimum wage set by occupation; the criteria are updated periodically.
At a workplace with thirty or more employees, terminating an employee with at least six months’ service must rest on a valid reason; otherwise a reinstatement claim may be brought. The client’s decision to end the arrangement does not by itself constitute a valid reason under Turkish employment law.
The line the model rests on is this: there is no employer in Turkey for whom the worker works; the employer is abroad. If the arrangement in practice crosses that line — for example where the employee works at another group company’s premises in Turkey, with its equipment and under its daily direction — the relationship may be characterised as worker supply.
On such a characterisation, workers will have been supplied without a licence from the labour agency, administrative sanctions follow, and the party actually engaging the worker may also be held liable for employment claims. What determines the outcome is how the work is carried out rather than the wording of the agreement, which is why the role definition matching actual practice matters more than drafting the contract well.
Tax Framework: Service Fee and Withholding
| Item | Position |
|---|---|
| Value added tax | Applying the export of services exemption to the invoice issued to the client abroad depends on the service being enjoyed abroad. Whose activity the employed person’s output serves is central to that assessment and should be defined clearly in the agreement |
| Taxation of the salary | Because the employer of record is resident in Turkey, the salary is subject to the ordinary withholding regime. The exemption for salaries paid by an employer abroad out of foreign currency brought from abroad rests on a different structure with different conditions and should not be confused with this model |
| Social security agreements | Where the employee comes on temporary assignment from a country with which Turkey has a social security agreement, a certificate permitting continued coverage there may change the premium obligation in Turkey. Scope and periods differ by country |
| Transfer pricing | This does not arise where the client and the employer of record are not related parties. Where a group structure is established, the arm’s length nature of the service fee must be documented |
How the Process Runs
- Role analysis and the structure decisionThe employee’s job description, authority and contact with clients are examined; the employer of record, company formation and liaison office options are compared on tax and employment law.
- Proposal and cost modelGross salary, employer burdens, benefits, provisions and the service fee are presented in a single table, with the cost of the termination scenario calculated at the outset.
- The contract setThe service agreement with the client, the employment contract with the employee, and the confidentiality, intellectual property assignment and data transfer provisions are drawn up together.
- Onboarding and filingsSocial security entry notification, pre-employment medical examination, occupational health and safety training, the personnel file and, where required, the work permit application are completed.
- Monthly operationPayroll is calculated, salary paid through the bank, returns filed, and the cost report and invoice provided to the client.
- Exit, or transfer to your own entityWhen the client forms a company in Turkey the employees are transferred. Preserving service length, carrying over leave balances and the order of the notifications should be planned in advance.
For a Turkish citizen, two to four weeks from first instruction to start date is realistic. For a foreign national the work permit governs the timetable and the total period lengthens materially, which is why a start date should not be committed to before the permit application is made.
Common Mistakes
- Choosing the structure by the employee’s job title. What decides it is not the title but what the person will actually do in Turkey; authority to conclude contracts changes the answer from the outset.
- Leaving the intellectual property assignment out of the agreement. Rights arise first with the employer of record; without an express assignment the client may not own work it paid for.
- Discussing termination cost later. Severance, notice and unused leave provisions belong in the first cost model.
- Treating the client’s decision to end the arrangement as a valid reason. At a workplace with thirty or more employees, terminating an employee with six months’ service must rest on a valid reason.
- Committing to a start date before the work permit application. The application is concluded within thirty days and a postponement period is added where documents are missing.
- Overlooking dependence in a contractor arrangement. Where instruction, working hours and workplace are present, the relationship is treated retrospectively as employment.
- Setting up the data transfer mechanism after onboarding. Payroll and personnel data are shared from the first month; the basis must be in place beforehand.
- Comparing service fees without comparing scope. What is included, what is invoiced separately and how termination costs are shared matter more than the headline fee.
Frequently Asked Questions
Is the employer of record model legal in Turkey?
What is the difference between an employer of record and a private employment agency?
Does using an employer of record create a tax liability in Turkey?
Does the process change if the employee is a foreign national?
Who owns the software and designs the employee produces?
What happens when we want to part ways with the employee?
What severance ceiling applies?
Why did the cost of higher-paid employees rise in 2026?
What happens to the employees if we later form our own company?
How is the service fee determined?
Sources
- Labour Law No. 4857 — art. 2 (subcontracting), art. 7 (temporary employment relationship), art. 18 onward (job security), art. 53 onward (annual leave)
- Labour Law No. 1475 art. 14 (severance) and the Ministry of Treasury and Finance circular on financial and social rights — 1 July 2026 ceiling of TRY 73,729.87
- Law No. 5510 art. 82 (limits on earnings subject to premium) and Law No. 7566 (Official Gazette 19.12.2025) raising the ceiling to 9 times
- Turkish Employment Agency — licensing, guarantee and prohibition provisions for private employment agencies and temporary employment
- International Labour Law No. 6735 and the Work Permit Assessment Criteria
- 2026 minimum wage: gross TRY 33,030.00, net TRY 28,075.50, daily TRY 1,101.00
- Personal Data Protection Law No. 6698 — the regime for transfer abroad
- Law No. 5846 on Intellectual and Artistic Works — exercise of rights over works created by employees
As the Ozbek CPA team, we have provided payroll and compliance services in Turkey since 2002. Scope: structure analysis comparing the employer of record, company formation and liaison office; preparing the employment contract together with the confidentiality, intellectual property assignment and data transfer provisions; monthly payroll, social security and return filings and salary payments; work permit and residence permit processes for foreign nationals; and transferring employees to your own entity. See also our pages on payroll services, work permits, Turkish labour law and liaison office formation. Contact us.
