Tax changes crucial in Turkey
Only 17% of the companies participating in a survey on employee benefits in Turkey provide retirement benefits to their workforces. The survey, commissioned by multinational Glaxo Wellcome and developed by consultants William M Mercer, is based on the responses of 23 companies with operations in Turkey, nine of which are pharmaceutical multinationals.
“The main issue we were looking at was what sort of retirement benefits were provided by companies based in Turkey,” says Paul Kelly at the international consulting practice of William M Mercer in London. “And what we found was the lack of any tax structure which could encourage people to hold corporate sponsored pension schemes. Only four of the respondents actually provide this sort of benefit to their employees, quite often through an insurance company.”
According to the report, three of them provide this supplementary end of service or retirement benefits in the form of a pension. One company offers two separate schemes; a pension for management, professional and supervisory employees and a lump sum for manual, junior supervisory and clerical staff. The same four companies also provide early retirement benefits with different restrictions regarding age, years of service and status. Employees retiring early often get the same type of benefits as at normal retirement, but in one case these are reduced by a factor of 3% for each year that retirement is below age 60.
The normal retirement age ranges from 55 to 60 for males and 50 to 60 for females and all the plans are run under a defined benefit (DB) system. “All the companies providing these benefits follow a DB model financed by the employer, although in one of the cases the plan was funded outside the company,” says Kelly.
“The lack of tax breaks which are necessary to get employees to pay a contribution to their pension plans makes the creation or the move to defined contribution schemes very difficult.”
In terms of life assurance the percentage of companies responding positively increase. Around 50% of the companies provide this benefit which generally is received by all employees, although some firms only offer this coverage to managers. The way this benefit is calculated differs from company to company, but is always based on base salary, following a different formula depending on the firm.
The survey also focuses on expatriate benefits. Twenty six per cent of the companies provide expatriate benefits such as hardship allowance, housing, schooling in Turkey or abroad and flights home. “This is quite unusual, or at least it’s not the case in most European countries at this point in time,” Kelly says. The rest of the respondents did not provide information or stated that these benefits did not apply as there were no expatriate employees.
Only three companies provide spouse and children’ benefit on death in service and in retirement. In these three, a spouse’s pension for death in service amounts to 50% of the projected pension to normal retirement date. The children’s pension differs, ranging from 10% of spouse’s pension up to a maximum of 100%.
More than a half of respondents
provide private medical insurance and in the majority of cases the employer meets all the cost of coverage for employee, spouse or children. In general the employee has to pay 20% of any claim paid, and has maximum limits on benefit per annum. The medical insurance covers all medical treatments including ambulatory care.
In line with what is becoming an important trend for multinationals, five of the companies surveyed provide stock and share plans, generally to top management and executive staff and other type of benefits such as personal accident cover, transport allowance, company loans and long service awards.
“In general the type of benefits provided by Turkey-based companies is very varied,” says Kelly. “One of the intentions of this survey was, and the reason why it was commissioned, to find out whether companies were planning to make any improvements regarding their employee benefits.” “In my opinion until the tax system changes no major changes will happen in terms of employee benefits in Turkey,” Kelly says.