Funding Discussions Regarding the Severance Pay and Unemployment Insurance Dilemma in Turkey

Unemployment insurance and severance pay mandated in passive labor market policies are important regulations aimed at eliminating the negative results of unemployment. Severance pay in Turkey was implemented in 1936 with the first labor law, Law No. 3008. Although the efforts to establish unemployment insurance began earlier, it was continuously postponed for various reasons; in particular, regarding the application of severance pay. Unemployment was finally put into practice in 1999 with the passing of Unemployment Insurance Law No. 4447. While the expenses of the unemployment insurance fund, created in combination with unemployment insurance, were aimed only at those who lost their jobs in the beginning, since 2008, this has continuously expanded to include all unemployed individuals. The increase in the expense items of the fund covered in the regulations has been the subject of constant criticism regarding the efficiency of the fund. However, for various reasons, only a small portion of those who lose their jobs benefit from any form of severance pay; therefore, discussions on the creation of a fund system to benefit all employees who lose their jobs that saves employers from obligations to produce sudden and heavy payments are a regular agenda item. Although the efforts to establish a severance pay fund have continued since 1954, no results have been achieved to date. In the preparations for the study, regulations, including laws, draft laws, development plans and published literature and statistics were used as a reference. The purpose of this study is to provide a comprehensive evaluation of ongoing discussions regarding the establishment of a severance pay fund in Turkey, which has been on the agenda for many years, offering an overview of various opinions, research, and suggestions in this direction, as the use of Turkish unemployment insurance fund falls outside of its aim.