How is holiday pay paid, and what happens to unused leave on termination?

When is holiday pay paid?

The employer must pay every employee taking annual paid leave the wage for the leave period before the leave starts, either in full in advance or as an advance payment (Labour Law No. 4857, Article 57(1)). The Annual Paid Leave Regulation likewise requires the wage and any other entitlements falling in that period to be paid in advance, before the leave (Article 21).

This is not a mere formality. The Court of Cassation has accepted that failing to pay holiday pay before the leave gives the employee just cause to terminate the contract, and that having given the employee more leave than they had earned does not remove the obligation to pay in advance (9th Civil Chamber, E.2025/2024, K.2025/2487, 10 March 2025). In practice, this means approved leave has to reach the payroll team in time.

What goes into holiday pay?

Holiday pay is calculated under the Labour Law's general wage rule (Article 50, applied through Article 57). For wages that cannot be fixed in advance, such as piece rates or commission, an average is used: the wages paid over the last year divided by the days actually worked.

Part-time and on-call employees receive, as holiday pay, the wages for the hours they would have had to work during the leave period (Regulation, Article 21).

If it turns out that an employee worked elsewhere for pay during their annual leave, the employer may recover the holiday pay paid for that period (Article 58).

Can leave be converted to cash while employment continues?

No. In the Court of Cassation's words, annual leave is a right to rest with a constitutional basis and does not turn into money while the employment contract continues (the Chamber's view as set out in the Assembly of Civil Chambers decision E.2016/1346, K.2019/1160). According to the Court, paying the wage instead of granting the leave while employment continues does not extinguish the right to annual leave (9th Civil Chamber, E.2015/8588, K.2016/20520). In other words, an employer that "buys out" leave pays the money and still owes the leave. The contract must end before the right turns into pay (9th Civil Chamber, E.2016/28722, K.2017/8264).

Unused leave when employment ends

When the employment contract ends for any reason, whether resignation, dismissal, retirement or death, the pay for annual leave the employee earned but did not take is paid to the employee or their heirs on the basis of the wage at the date the contract ended (Article 59(1)).

Key points:

• All days are paid. Leave carried over from earlier years is included; because annual leave never lapses, there is no limit such as "only the last year's leave".
• The final wage applies. The calculation uses the wage on the date the contract ended, not the wage in the years when the leave was earned.
• The base wage is used. According to the Court of Cassation, holiday pay is calculated on the base wage (9th Civil Chamber, E.2016/1579, K.2019/7058); bonuses, premiums, overtime and social benefits are left out (to the same effect, 22nd Civil Chamber, E.2017/40076, K.2017/21233).
• As a rule, there is no equitable reduction (9th Civil Chamber, E.2016/25817, K.2020/12037).

Example

An employee whose contract ends on 30 September 2026 has 23 days of unused annual leave: 9 days from the current year's entitlement and 14 days carried over from the previous year. If the final monthly base wage is TRY 60,000 gross and, for this example, the daily wage is taken as TRY 60,000 / 30 = TRY 2,000, the holiday pay is 23 × 2,000 = TRY 46,000 gross. The 14 carried-over days are priced at the same final wage. The exact amount and any deductions are determined in payroll.

Limitation: five years from termination

The limitation period for holiday pay is five years (Additional Article 3, added by Law No. 7036 and in force since 25 October 2017). It starts running on the date the employment contract ends (Article 59(1)). An employee who files a claim within five years of termination can therefore claim pay for all leave earned and not taken over their whole period of service (9th Civil Chamber, E.2019/1172, K.2019/4261). The Court has also held that applying a ten-year period to this claim is wrong (9th Civil Chamber, E.2020/4509, K.2021/1927).

The burden of proving that leave was taken lies with the employer (Assembly of Civil Chambers, E.2016/1346, K.2019/1160). That is why complete leave records should be kept for at least that long.

Notice periods and annual leave cannot overlap

When the employer terminates the contract, the notice periods under Article 17 and the job-search leave under Article 27 may not overlap with annual leave (Article 59(2)). According to the Court of Cassation, if they do overlap, it is the notice period that becomes invalid, not the leave, and the employer may then owe pay in lieu of notice (7th Civil Chamber, E.2015/39535, K.2016/12040). Where the employee resigns with notice, the two periods have been allowed to coincide (9th Civil Chamber, E.2016/25817, K.2020/12037).

Example

If the employer gives notice of termination on 1 October 2026, it should not schedule the employee's annual leave within the notice period. The unused leave days are paid out on exit instead.

For finance teams: accumulated leave is a liability

Because unused annual leave never lapses and is paid at the final wage when the contract ends, a company's total leave balance is a monetary obligation that grows over time. Pay rises increase it for past days too, because the calculation always uses the latest wage. It is therefore worth tracking regularly by multiplying remaining leave days by current wages. Agree with your accountant how to reflect this amount as a provision in your books. The lawful way to reduce the liability is to plan leave and have it taken; see scheduling and splitting annual leave.

How İzin360 handles it

• HR records an employee's exit with the date the contract ends. The exit screen shows unused annual leave days and an estimated gross holiday pay ("last monthly gross / 30 × days"), and reminds you that the exact amount must be calculated in payroll on the base wage and that annual leave may not be placed within the notice period when the employer terminates.
• Because unused annual leave carries over without expiry, the days shown on exit include those carried over from earlier years. No new entitlement arises after the exit date.
• The "Accrued leave liability" report in the plan-dependent advanced reports shows, for each employee, remaining annual leave days × (monthly gross / 30), plus totals. Salary data is stored encrypted; the report is open only to the owner and HR managers, and every view is written to the audit log.
• Payroll export (plan-dependent) provides approved leave in the selected payroll period as a CSV or Excel file, with paid/unpaid status and a suggested SGK missing-day code that your payroll specialist confirms. İzin360 does not calculate payroll.

See reports and payroll export for details.