One of the most fundamental disputes between employers and employees in business is the failure to pay workers’ compensation on time and in full. An employer’s delay or failure to pay wages, severance pay, or other receivables can lead to serious hardship for the employee. In such cases, Turkish Labor Law implements interest rates to compensate the employee for the damages incurred and to encourage the employer to fulfill its obligations. This issue, which is frequently encountered in Antalya, forms the basis of legal proceedings for both employees and employers. In this article, we will thoroughly examine the types of interest, starting dates, and calculation principles applicable in the event of an employer’s failure to pay an employee.
Fundamentals of Default and Interest Application in Labor Law
Interest charges begin when an employer fails to meet its payment obligation on time, meaning it enters default. Default is the failure to pay a debt when it is due and refers to the legal consequences arising from the debtor’s (in this case, the employer’s) delay in paying the debt. In labor law, the interest rates and starting dates applicable to labor receivables may be subject to special regulations that differ from general obligations law. These differences stem from the principle of worker protection.
Employer’s Default
There are generally two main situations for an employer to go into default:
1. Due Date and Maturity: If an employee’s receivables are due (become payable) and the payment is due, the employer automatically becomes in default as of that date. For example, wages are generally paid on a specific day of the month; after that date, the employer becomes in default. Receivables such as severance and notice pay become due as of the termination date of the employment contract.
2. Notice or Filing a Lawsuit: If the receivable is not due, or if an additional condition is required for the employer to be in default, the employee can force the employer into default by either sending a notice to the employer demanding payment or directly filing a lawsuit. This method is frequently used, particularly for receivables arising after the termination of the employment contract and whose exact amount cannot be determined. By filing a lawsuit, the employer is deemed to be in default for the receivables in question as of the date of the lawsuit.
Interest Types Applied to Labor Receivables
Turkish Labor Law stipulates different interest rates based on the nature of employee claims. This aims to provide fairer compensation based on the nature of the employee’s claim.
Legal Interest Rate
Legal interest is the standard interest rate generally applied to all debt receivables. This rate, determined by the Turkish Code of Obligations and other relevant legal regulations, is announced annually or at specific intervals by the Ministry of Treasury and Finance. In labor law, legal interest is applied specifically to receivables such as wages, overtime pay, weekly and national holiday pay, and annual leave pay. This interest begins to accrue from the date the employer becomes in default.
Highest Bank Deposit Interest Rate
For certain special labor claims, the “highest bank deposit interest” is stipulated to better protect workers against inflation and preserve the value of their claims more effectively. This interest rate is the highest interest rate applied to one-year term deposits by commercial banks. As clearly stipulated in the Labor Law and relevant legislation, this special interest rate applies particularly to claims such as severance pay, notice pay, bad faith compensation, and severance pay. This rate is generally higher than the statutory interest rate and provides more robust relief to the worker’s grievances. Because bank deposit interest rates can fluctuate depending on market conditions, it is crucial to consider the highest rates during the relevant periods when making calculations.
Interest Beginnings and Rates for Different Labor Receivables
Since the nature and maturity date of each labor receivable vary, the starting date of the interest and the interest rate to be applied also change accordingly.
Severance Pay and Interest Application
Severance pay becomes due and payable on the date the employment contract is terminated. The employer is obligated to pay severance pay from this date. If the employer fails to fulfill this obligation, the highest bank deposit interest rate will apply from the termination date. Because severance pay represents the employee’s long years of hard work, the legislature has provided special protection for this claim.
Notice Compensation and Interest Application
Notice pay, like severance pay, becomes due and payable on the date the employment contract is terminated. If the employer terminates the employment contract without complying with the notice period or the employee terminates for just cause, the highest bank deposit interest rate will apply to this claim, effective from the termination date.
Wage Receivables, Overtime and Holiday Pay
The employee’s basic wage is generally paid on a specific day each month. Overtime, weekly, and national holiday pay are also due when payment is due. Legal interest is charged on these types of receivables from the date the payment is overdue. If there is no specific payment due date or the employer has not been declared in default, interest begins to accrue from the date of the lawsuit or enforcement proceedings.
Annual Leave Fee and Other Labor Receivables
Annual paid leave is a right granted to employees for rest and does not translate into wages during the employment contract. However, in the event of termination, wages for unused annual leave become due and payable on the termination date. Statutory interest is charged on this claim from the termination date.
In special compensations such as bad faith compensation and non-employment compensation, the highest bank deposit interest is applied, again with the motive of protecting the employee.
Statute of Limitations on Labor Claims and Their Effect on Interest
Certain statutes of limitations are stipulated for the claim of labor receivables. These periods vary depending on the nature of the claim, but are generally five years (with legal amendments in 2017, this period was reduced to five years for most claims; however, different periods may apply for claims made before this date). A claim that has expired becomes legally unclaimable. Therefore, since the principal cannot be claimed, interest cannot be claimed on the claim. It is crucial for workers to closely monitor the statutes of limitations to avoid losing their rights.
Things to Consider in Interest Calculations
Interest calculations are a complex process, especially when it comes to variable interest rates on bank deposits. Determining the correct interest rate, determining the starting date, and accurately calculating the amount of accrued interest requires expertise. Supreme Court precedents stipulate that interest calculations should be based on the gross receivable amount. However, interest is collected based on the net amount remaining after deducting legal deductions (taxes, insurance premiums) during the collection phase. These nuances are critical for a correct and complete interest claim.
The Importance of Interest Claims in Labor Law Cases in Antalya
In cities like Antalya, which have a dynamic labor market, disputes between employees and employers are frequently brought to court. Interest on labor receivables can often reach as much as, or even exceed, the principal, significantly increasing the employee’s final compensation. Therefore, in a labor case, it is crucial to accurately and completely state the interest claim in the petition, and to ensure the type and start date of interest are requested in accordance with applicable laws. An incorrect or incomplete interest claim can result in the employee losing their rights and lead to unnecessarily high interest payments for the employer.
Because labor law cases often involve technical issues, particularly interest calculations and statutes of limitations, seeking support from a qualified legal professional in Antalya and throughout Turkey is essential to ensuring both the employee fully fulfills their rights and the employer properly fulfills their legal obligations. Taking the right steps from the outset of the legal process is key to preventing potential grievances and achieving a fair resolution.