Unused Annual Leave Payments: A Persistent Challenge for Employers

Annual leave is a constitutional right of employees in Türkiye, serving not only to protect their well-being but also to support occupational health and safety measures.

The Turkish labour law sets out statutory minimum annual paid leave periods, which can be increased through mutual arrangements between the employers and the employees. While these statutory provisions generally apply to most employment relationships, the situation becomes more complex when it comes to high-level executives.

High-level executives, given their managerial authority and absence of an overseeing superior to approve their leaves, often bypass annual leave procedures and do not formalize their leave requests appropriately. This practice creates significant challenges for employers, particularly during termination of employment, as unused annual leave days’ must be paid-off to employees regardless of the termination reason, which may lead to substantial financial burden for companies.

Furthermore, under Turkish labour law, the burden of proof lies with the employer to demonstrate that annual leave was duly taken by the employee, typically by presenting a signed leave record or a similar document. In the absence of such documentation or credible evidence showing that the employees took their annual leave, it will be assumed under Turkish law that the leave was not taken.

In the previous decisions, the Court of Appeals overturned decisions of the lower courts that partially accepted employee’s unused annual leave payments mainly on procedural grounds such as judge’s failure to obtain employee’s statement on the subject matter. This was a rather mild approach for overturning the lower court’s ruling, focusing not on the substantive merits of the case but merely on procedural grounds.

However, in a 2024 landmark decision, the Court of Appeals applied a 50% reduction in the unused annual paid leave entitlement of an executive working as the general manager of the company. The court underlined that the general manager had the authority to arrange annual leave documentation and further stressed that it was against the ordinary course of life for an employee to work for nine years without taking annual leave.

This decision marks a significant milestone for employers, offering a less conventional interpretation of annual leave payments. By acknowledging the unique dynamics of executive roles, the ruling introduces a more balanced perspective that aligns with the practical realities of management responsibilities, paving the way for more balanced legal outcomes in similar disputes.

First published in the Edition 7, No. 2 of LIR Türkiye.