- June 3, 2025
- Posted by: admin
- Category: Blog
Foreign Managers in Turkey: Are They Employees or Employers Under Turkish Labor Law?
As Turkey becomes an increasingly attractive destination for foreign investment and international companies, the number of foreign nationals assuming managerial roles in Turkish companies has risen steadily. Foreign individuals often serve as directors, managers, or even shareholders in limited liability (Ltd. Şti.) or joint stock companies (A.Ş.). However, this leads to a complex legal question that can have major implications for both the foreign national and the company: Is a foreign manager considered an employee or an employer under Turkish labor law? What are the consequences on labor law for foreigner managers in Turkey.
Understanding the difference between an employment relationship and a commercial/business relationship is critical. This distinction determines entitlement to severance pay, the right to sue for reinstatement after unfair dismissal, and obligations concerning social security and tax.
This article will explore the legal classification of foreign managers under Turkish law, drawing from statutory provisions, court precedents, and practical considerations.
1. The Legal Framework: Labor vs. Commercial Law
Under Turkish law, the concept of an “employee” is defined under the Turkish Labor Code No. 4857. An employment relationship exists when one party (the employee) undertakes to perform work under the direction and supervision of another party (the employer), in return for remuneration.
Conversely, a manager, particularly one who also holds shares or exercises significant control in a company, may not fit this traditional mold. Such individuals often act in the name of the company, have signature authority, and assume fiduciary and financial duties normally reserved for the employer.
This distinction in labor law for foreigner managers in Turkey has led to divergent views in both academic circles and court rulings, particularly in cases involving foreign nationals.
2. The Status of Company Shareholders and Directors
Foreign nationals often serve as:
- Managing directors (in Limited Liability Companies)
- Board members or executive board chairs (in Joint Stock Companies)
- Shareholders with management authority
The key legal question is whether these roles, in practice, equate to employment. In general, Turkish courts assess the level of control, the subordination relationship, and the presence of remuneration in making this determination.
For example, if a foreign director regularly reports to a higher authority, receives a monthly salary, and performs routine tasks under the company’s direction, courts may be more inclined to classify them as an employee. However, if the individual has unilateral decision-making authority and is not subordinate to another person or body, they are likely to be viewed as part of the employer structure.
3. Social Security Obligations
Even if a foreign manager is not considered an employee in the strictest sense, Turkish law still imposes obligations concerning social security contributions. According to the Social Security Institution (SGK), individuals who perform work in Turkey — even in executive roles — may be subject to mandatory insurance, unless they are covered by international bilateral agreements.
For foreign managers sent to Turkey on assignment (expats), the legal regime may differ. Bilateral agreements between Turkey and the individual’s home country may exempt them from SGK requirements for a limited period, provided proof of foreign insurance coverage is presented.
4. Work Permit Requirements for Foreign Managers
Every foreign national seeking to work in Turkey must obtain a valid work permit in Turkey. However, certain managerial roles — particularly shareholders or board members who do not receive a salary — may be exempt from some work permit requirements.
The International Labor Law No. 6735 provides guidance on when work permits are necessary. Foreign individuals holding shares and acting as company managers often still need permits, especially if they reside in Turkey or are involved in daily operations.
Failure to secure a valid work permit can result in fines and even deportation. Employers also risk administrative sanctions.
5. Labor Rights of Foreign Managers
Whether a foreign manager can benefit from the protection of Labor Law in Turkey depends largely on the nature of their role.
If a court determines that the individual is an employee — for example, due to subordination and a fixed salary — they are entitled to:
- Severance and notice pay
- Paid leave and rest breaks
- Reinstatement following unfair dismissal
- Labor court jurisdiction for employment disputes
However, if the manager is deemed to be an employer or a board-level executive acting on behalf of the company, they are typically excluded from these protections.
6. Tax Implications
The classification also affects income taxation. Employees are subject to withholding tax, while self-employed individuals or those earning dividends as shareholders are subject to different taxation rules.
Companies must ensure that remuneration paid to foreign managers is correctly classified and taxed. Misclassification can result in penalties and double taxation.
7. Business Registration and Corporate Governance
Understanding this topic is also important during the business registration in Turkey process. When forming a company, decisions about the legal status and functions of foreign managers must be addressed from the beginning.
For example, registration with the Istanbul Chamber of Commerce may require submitting documentation showing the structure and authorities of shareholders, directors, and company managers. If these individuals will also have employment contracts, it should be reflected clearly in corporate records and in filings with the tax office and SGK.
8. Court Precedents in Turkey
Turkish courts have produced a variety of rulings on this subject. In some decisions, courts have ruled that foreign directors with defined working hours and salary are employees under Turkish law. In other cases, especially where the individual holds a significant equity stake or executive authority, courts have ruled that there is no employment relationship.
There is no one-size-fits-all answer. Each case is evaluated individually, with attention to:
- The content of contracts
- Daily functions and subordination
- Company structure and authority delegation
9. Best Practices for Companies and Foreign Managers
To reduce legal uncertainty and mitigate risk, companies should:
- Draft clear contracts defining the nature of the relationship
- Clearly distinguish shareholder/manager authority from employment obligations
- Seek legal advice on SGK, taxation, and work permit compliance
- Regularly update corporate records to reflect changes in roles
Foreign nationals should also consult an English Speaking Lawyer in Turkey who is experienced in both corporate and labor law to evaluate the risks and rights associated with their position.
10. Conclusion
Labor law for foreigner managers in Turkey in Turkey is not always clear-cut. Depending on the structure of the company and the nature of the individual’s role, a foreign national may be treated as an employee, employer, or neither.
Understanding this classification is essential for proper contract drafting, tax compliance, and securing legal rights. Given the complexity and potential consequences of misclassification, both companies and foreign individuals should proactively assess their situation with the support of qualified professionals.
Whether you are preparing for a business registration in Turkey, applying for a work permit in Turkey, or seeking to ensure your labor rights are protected, early legal consultation can prevent costly mistakes in the future.
For tailored advice, contact a qualified English Speaking Lawyer in Turkey who can help navigate these nuanced legal issues.
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