Pay Contractors in Turkey: The Ultimate Guide to Hiring

When expanding globally, many companies turn to freelancers and contractors to gain flexibility and minimize costs. But if you want to pay independent contractors in Turkey, you must navigate Turkish tax, labor, and foreign exchange rules carefully. This guide outlines how to compliantly run Turkey payroll for contractors, compare contractor vs employee models, and when you should consider to hire employees in Turkey.

Table of Contents

• Understanding Independent Contractors in Turkey
• Who is an Independent Contractor in Turkey?
• Penalties for Contractor and Employee Misclassification in Turkey
• What are the Labor Laws in Turkey?
• Steps to Hire a Contractor in Turkey
• Important Considerations
• How to Draw up an Independent Contractor Agreement
• How Payroll Works
• Tax Filing Requirements
• Tax Compliance for U.S.-Based Companies Hiring Contractors in Turkey
• Minimum Wages for Contractors in Turkey
• Best Ways to Pay Contractors in Turkey
• Currency, Payroll & Benefits Context
• Taxation & Payroll in Turkey
• Termination or Extension Terms for Independent Contractors in Turkey
• Payment Methods for Contractors in Turkey
• Convert an Independent Contractor in Turkey to an Employee
• Conclusion
• FAQs

Understanding Independent Contractors in Turkey

Under Turkish law, an independent contractor is a person or business that provides services under a contract, rather than being a formal employee. Contractors have flexibility over how, when, and where they work, and they take on their own tax and business obligations.

Contractor vs Employee in Turkey

Authorities look beyond labels and examine the real nature of the working relationship. Some red flags for misclassification include:

• The company directs the contractor’s schedule, tools, or how to perform the work
• The contractor depends on one client for income
• The contractor is fully integrated into company operations

If the relationship resembles employment, Turkish labor law and social security obligations may apply. Misclassification can result in fines, back payments, and labor disputes.

Who is an Independent Contractor in Turkey?

An independent contractor in Turkey is a self-employed professional who provides services to companies or individuals under a contractual agreement rather than as a full-time employee. They usually work on a project or assignment basis, enjoying flexibility and autonomy over how and when the work is completed. Unlike employees, contractors are not part of a company’s formal payroll in Turkey and instead manage their own business and financial responsibilities.

Independent contractors are responsible for:

• Taxes: Filing their own income tax returns and paying income tax on earnings.
• Social security contributions: Making regular payments into the Turkish system through self-employment taxes.
• Insurance and benefits: Arranging their own health insurance and retirement planning since they do not receive paid leave, severance, or company-sponsored benefits.

While this model requires more financial management and compliance awareness, many people choose to work as independent contractors in Turkey because it offers flexibility, the chance to pursue passion projects, and exposure to diverse clients. With the right contracts and compliance practices, contractors can build sustainable careers and strong professional networks, which may later evolve into opportunities to hire employees in Turkey or collaborate on larger ventures.

Also Read: Pay Contractors in India- The Ultimate Hiring Guide 

Penalties for Contractor and Employee Misclassification in Turkey

Misclassifying workers as independent contractors when they should be classified as employees can have serious consequences under Turkey payroll and labor law. Getting classification wrong not only disrupts compliance but also exposes companies to heavy financial and legal risks. Employers must carefully assess whether to pay independent contractors in Turkey or formally hire employees in Turkey, based on the nature of the working relationship.

1. Hefty Fines

Employers found guilty of misclassification face significant fines that can range from thousands to millions of Turkish Lira. These penalties depend on the severity and length of the misclassification and can create a major financial burden for businesses.

2. Back Wages, Benefits, and Social Security Contributions

If a contractor is reclassified as an employee, the employer may be required to retroactively pay all missing social security contributions, benefits, and payroll obligations. This includes pension contributions, health insurance, paid leave, and other entitlements under Turkish employment law. For companies with multiple misclassified workers, the cumulative cost can be substantial.

3. Legal Conflicts and Compensation Claims

Misclassified workers have the right to file legal claims demanding their full employee entitlements. Employers may face lawsuits for unpaid wages, benefits, and severance, along with compensation claims. Legal proceedings themselves can also lead to costly disputes and reputational damage.

Why Proper Classification Matters

The Turkish government enforces strict rules to protect both workers and the economy from misclassification abuse. To avoid penalties, employers should:

• Conduct thorough worker classification audits
• Draft clear contracts distinguishing contractors from employees
• Seek legal or EOR (Employer of Record) guidance for compliance

By taking proactive steps, companies can ensure compliance with payroll in Turkey, minimize misclassification risks, and build stronger relationships with both contractors and employees.

Suggested Read: Employee Misclassification Guide- The Key to Avoiding Hefty Penalties 

What are the Labor Laws in Turkey?

In Turkey, labor laws distinguish between employees and contractors, each having specific provisions. These are:

1. For Employees

• Working Hours: The standard working week is 45 hours, typically spread over five days. Overtime pay is applicable for exceeding the regular working hours.
• Leave: Employees are entitled to annual paid leave, maternity leave, and sick leave.
• Minimum Wage: The government sets a minimum wage, and employers must adhere to it.
• Social Security: Employers are required to provide social security coverage for employees, contributing to health insurance and retirement funds.

2. For Contractors

•  Contractual Agreements: Contractors operate under service contracts, defining the scope of work, compensation, and duration.
• Taxation: Contractors are responsible for their own tax payments, and employers are not required to deduct income tax or social security contributions.
• Work Hours and Location: Contractors often have more flexibility regarding work hours and may work off-site.
• No Employment Benefits: Contractors do not receive employee benefits such as paid leave, health insurance, or retirement benefits.

Common Provisions for Both

• Non-Discrimination: Both employees and contractors should not face discrimination based on gender, race, religion, or other factors.
• Health and Safety: Employers are obligated to ensure a safe working environment for both employees and contractors.
• Termination: There are specific procedures and grounds for termination for both employees and contractors, ensuring fairness and legal compliance.

It’s crucial to consult with legal professionals or the relevant Turkish authorities for the most up-to-date and accurate information, as labor laws may undergo changes.

Also Read: Independent Contractor Agreement (Download Template)

Steps to Hire a Contractor in Turkey

When hiring a contractor in Turkey, there are several important steps to follow:

1. Define the Scope of Work: Clearly outline the tasks, deliverables, and timeline for the project.
2. Identify Suitable Contractors: Search for experienced contractors through professional networks, referrals, or online platforms.
3. Negotiate and Sign a Contract: Agree on the terms and conditions of the project, including payment terms and deliverables, and sign a written contract.
4. Register the Contract: Register the contract with the relevant authorities if required by local regulations.
5. Provide Necessary Documentation: Request the contractor to provide necessary documents, such as tax identification number and any other required permits or licenses.

Important Considerations for Hiring and Managing Contractors in Turkey

When hiring and managing contractors in Turkey, there are several important considerations that should be kept in mind. These considerations will help ensure a smooth and successful working relationship with contractors and compliance with local regulations.

1. Apt Classification of Workers

First and foremost, it is crucial to properly classify contractors as independent contractors. This is important to comply with labor regulations in Turkey. By ensuring proper classification, businesses can avoid potential legal issues and penalties.

2. Familiarity With Local Labor Laws

Another key consideration is familiarizing oneself with the local labor laws and regulations. Understanding these laws is essential to ensure compliance and avoid any legal complications. Turkey has specific regulations regarding working hours, overtime, and other labor-related matters that businesses must adhere to.

3. Being Aware of Tax Obligations

Businesses must be aware of the tax obligations and social security contribution requirements for contractors. It is important to understand the tax laws and regulations in Turkey to ensure proper taxation and avoid any potential tax-related issues. By complying with these requirements, businesses can maintain a good relationship with contractors and avoid any unnecessary financial burdens.

4. Paying Heed to Language & Cultural Differences

Language and cultural differences can also play a significant role when hiring and managing contractors in Turkey. It is important to be mindful of these differences and ensure effective communication. Language barriers can lead to misunderstandings and miscommunication, which can hinder the progress of a project. By being aware of these differences and making efforts to bridge the communication gap, businesses can foster a more productive working environment.

5. Discussion of Payment Terms

When entering into a contract with a contractor in Turkey, it is crucial to discuss and agree upon payment terms. This includes determining the frequency and method of payment. By having a clear understanding of the payment terms, both parties can avoid any disputes or misunderstandings regarding compensation.

6. Periodic Performance Assessment

Regular performance evaluation is essential when managing contractors in Turkey. By assessing the contractor’s performance on a regular basis and providing constructive feedback, businesses can ensure the success of the project. This allows for adjustments to be made if necessary and helps maintain a high standard of work.

In conclusion, hiring and managing contractors in Turkey requires careful consideration of various factors. By properly classifying contractors, understanding local labor laws, complying with tax obligations, bridging language and cultural differences, establishing clear payment terms, and conducting regular performance evaluations, businesses can foster a successful working relationship with contractors and ensure project success.

How to Draw up an Independent Contractor Agreement in Turkey

When engaging an independent contractor in Turkey, it’s important to have a written agreement in place. The agreement should include essential details such as:

• Identification of the parties involved
• Scope of work and deliverables
• Payment terms and conditions
• Duration of the contract
• Termination clauses

While it is recommended to have the agreement reviewed by legal counsel, you can create a basic contract using templates provided by online resources. However, ensure that the contract complies with local laws and regulations.

1. Identification of the Parties

When identifying the parties involved in the independent contractor agreement, it is crucial to include their full legal names, addresses, and contact information. This ensures that both parties can easily communicate and resolve any issues that may arise during the contract period.

2. Scope of Work

The scope of work and deliverables section should clearly outline the specific tasks and responsibilities of the independent contractor. It is important to be detailed and specific to avoid any misunderstandings or disputes later on. Additionally, it is advisable to include a timeline or deadlines for the completion of each deliverable to ensure timely completion of the project.

3. Payment Terms

Payment terms and conditions should be clearly stated in the agreement. This includes the agreed-upon compensation amount, payment schedule, and any additional expenses that will be reimbursed. It is important to discuss and agree upon these terms with the independent contractor before finalizing the agreement to avoid any payment-related issues in the future.

4. Tenure of the Contract

The duration of the contract section should specify the start and end dates of the agreement. This ensures that both parties are aware of the contract’s duration and can plan their work accordingly. It is also important to include provisions for contract renewal or extension if required.

5. Termination Clauses

Termination clauses are essential to protect the rights of both parties in case the agreement needs to be terminated prematurely. These clauses should outline the circumstances under which either party can terminate the contract, the notice period required, and any penalties or consequences for early termination.

While using online templates can be a convenient way to create an independent contractor agreement, it is important to ensure that the contract complies with local laws and regulations in Turkey. Each country may have specific legal requirements and provisions that need to be included in the agreement. Therefore, it is advisable to have the contract reviewed by legal counsel familiar with Turkish employment laws to ensure its validity and enforceability.

Also Read: Invoice for Contractors- The Guide to Making an Ideal One!

How Payroll Works When You Move Ahead to Pay Contractors in Turkey

When it comes to paying contractors in Turkey, there are specific payroll requirements to keep in mind:

• Payment Schedule: Determine the payment schedule with the contractor, whether it’s weekly, biweekly, or monthly.
• Payment Method: Decide on the preferred payment method, such as bank transfer or electronic payment platforms.
• Invoicing: Contractors may issue invoices for their services, which should include necessary details such as tax identification number and business information.
• Withholding Taxes: As a payer, you may be required to withhold taxes and make income tax deductions from the contractor’s payment based on relevant tax laws.

It’s crucial to ensure accurate payroll calculations and timely payment to maintain a good relationship with contractors.

Tax Filing Requirements for Contractors in Turkey

Contractors in Turkey are responsible for fulfilling their tax obligations. They need to apply for the e-Declaration System at their nearest tax office and fill in a couple of forms. Once these forms are submitted, they will receive their respective user codes and passwords to gain access to the e-Declaration System.

Tax filing can’t be completed without downloading the following crucial programs:

• Java Runtime Environment (JRE)
• Beyanname Duzenleme Programi (DBP)
• Beyanname Duzenleme Programi Yardim (DBP Help)
• Adobe Acrobat Reader

Contractors can then use the BDP to submit the crucial tax forms. Upon logging in to e-Beyanname, the DBP forms need to be uploaded to e-Beyanname. Once the tax declaration receives the nod of final approval, contractors can make the requisite payments either to the bank or tax office.

Let’s now have a look at the varying tax rates applicable for contractors, depending on their grossed income range.

Tax Rates

Note: There is no tax-free threshold in Turkey.

It’s advisable for contractors to consult tax professionals or utilize online resources to stay updated on their tax filing requirements and deadlines.

Tax Compliance for U.S.-Based Companies Hiring Contractors in Turkey

When a U.S.-based company decides to pay independent contractors in Turkey, it must comply with tax rules in both the United States and Turkey. This involves proper IRS reporting on the U.S. side and ensuring that Turkish contractors meet their own obligations under Turkey payroll and tax law. Missteps can create compliance risks, double taxation issues, or financial penalties.

IRS Forms for U.S.-Based Companies

1. Form W-8BEN – Certificate of Foreign Status
   Turkish contractors provide this form to confirm their foreign status and claim tax treaty benefits. It helps reduce or eliminate U.S. withholding taxes on payments.
2. Form 1099-NEC – Nonemployee Compensation
   If a U.S. company pays a Turkish contractor more than $600 in a calendar year, it must issue Form 1099-NEC to report the total nonemployee compensation.
3. Form 1042-S – Foreign Person’s Income Subject to Withholding
   If any U.S. withholding tax applies to the contractor’s payment, Form 1042-S is used to report the income and tax withheld.
4. Form 8805 – Foreign Partner’s Information Statement
   If the Turkish contractor operates through a partnership, Form 8805 may be required to report income and withholding tax under Section 1446.

Turkish Tax Forms and Obligations

1. Turkish Tax Identification Number (Vergi Kimlik Numarası)
   Contractors must have a Turkish tax ID to issue invoices and comply with tax laws. U.S. companies may request this for their records.
2. Income Tax Declaration (Gelir Vergisi Beyannamesi)
   Contractors in Turkey are responsible for filing annual income tax declarations on all earnings, including payments from U.S. companies.
3. Value Added Tax (VAT) Declarations
   If the contractor’s services are VAT-applicable, they must file VAT returns and remit the correct amount to Turkish tax authorities.
4. Withholding Tax Returns
   In some cases, withholding tax may apply. Contractors must file related declarations to remain compliant with Turkish regulations.
5. Social Security Contributions (SGK Declarations)
   Many self-employed contractors in Turkey contribute to the social security system. They must declare and pay contributions regularly, depending on the nature of their work.

Why This Matters

For U.S. companies, the compliance burden doesn’t stop at issuing payments. To avoid penalties and misclassification risks, businesses must align with both IRS reporting and Turkey payroll rules. At the same time, Turkish contractors carry responsibility for their own taxes, VAT, and social security. Using a global payroll or EOR partner can make the process smoother, ensuring that both sides remain compliant.

Important Considerations

1. Tax Treaties

Check if there is a tax treaty between the U.S. and Turkey that could impact the withholding tax rate on payments to the Turkish contractor. The W-8BEN form can be used to claim any applicable treaty benefits.

2. Professional Advice

Seek advice from tax professionals or accountants who are knowledgeable about international tax regulations. They can provide guidance on compliance with both U.S. and Turkish tax laws.

3. Documentation

Maintain thorough documentation of payments, contracts, and any relevant correspondence to support tax filings and compliance efforts.

This overview is meant to provide general guidance, but specific requirements can vary based on the nature of the services, the contractual arrangements, and any changes in tax laws. It is highly recommended that companies consult with tax professionals experienced in international taxation to ensure compliance with all applicable regulations.

Minimum Wages for Contractors in Turkey

The Minimum Wage Determination Commission sets the minimum wage rates for workers in Turkey. The net minimum wage rate per month is TRY 8,506.00. Also, the monthly gross minimum wage per month is TRY 10,008.00. However, do note that, in Turkey, there is no specific minimum wage for contractors. Instead, the payment terms and rates are determined through negotiations and agreements between the hiring company and the contractor. However, it’s essential to ensure that the agreed-upon payment rates align with the fair market value and local industry standards.

Best Ways to Pay Contractors in Turkey

When choosing how to pay contractors in Turkey, businesses must balance efficiency, compliance with Turkish regulations, and contractor convenience. Below are the most commonly used and reliable methods for making payments:

1. Bank Transfers

Bank transfers are the most common way to pay independent contractors in Turkey. Funds are sent directly to the contractor’s local bank account in Turkish lira (TRY).

Advantages

• Secure and traceable
• Widely accepted across Turkey
• Simple electronic processing

2. Wire Transfers

Wire transfers move funds internationally between financial institutions, often used when paying contractors from abroad.

Advantages

• Globally accepted
• Fast and reliable
• Suitable for larger transactions

3. PayPal

PayPal allows cross-border digital payments. While availability in Turkey has been restricted in the past, some contractors may still use linked international accounts.

Advantages

• Quick and convenient
• Widely recognized globally
• Buyer/seller protection features

4. Local Payment Gateways

Platforms such as iyzico and PayU are popular in Turkey, especially for freelancers and e-commerce contractors.

Advantages

• Localized, trusted, and compliant
• Support for credit cards and bank-linked payments
• Easy integration with online work platforms

5. Mobile Payment Apps

Apps like BKM Express and Papara are gaining traction. They allow contractors to receive money directly on their smartphones.

Advantages

• Convenient for on-the-go payments
• Additional features like expense management and loyalty programs

6. Cheques

While less common today, cheques are still sometimes used for contractor payments.

Advantages

• Provide a physical payment record
• Useful in traditional business contexts

7. Cryptocurrency

Some contractors may be open to receiving payment in Bitcoin or other cryptocurrencies. However, businesses must consider volatility and regulatory restrictions.

Advantages

• Fast, borderless transactions
• Attractive to tech-savvy contractors

8. Cash Payments

Cash is not widely recommended for professional contractor payments due to compliance and security concerns, but it may be used for small, local engagements.

Advantages

• Immediate transfer of funds
• Tangible and straightforward for low-value projects

Also Read: Top Employer of Record Companies in India- Check Out Now!

Currency, Payroll & Benefits Context

• Payments to Turkish residents must be made in TRY, even if contracts use foreign currencies as a benchmark.
  
• Non-compliance with currency regulations can lead to penalties.
  
• Contractors do not automatically receive benefits like health insurance, paid leave, or severance pay.
  

Employees, by contrast, are covered by Turkish social security (SGK) and labor law benefits through formal payroll in Turkey.

Taxation & Payroll in Turkey

Taxes & Withholding

• When you pay independent contractors in Turkey, the company is not responsible for withholding income tax or social security. Contractors file their own tax returns.
  
• Contractors pay personal income tax on a progressive scale.
  
• VAT must be charged where applicable.
  
• Double taxation treaties may reduce withholding obligations for foreign businesses.
  

Payroll in Turkey for Employees

When you hire employees in Turkey, you must run payroll in Turkey, which includes:

• Withholding income tax from salaries
  
• Employer and employee contributions to social security
  
• Unemployment insurance contributions
  
• Compliance with minimum wage, paid leave, severance, and overtime rules
  

This distinction is why businesses must evaluate carefully whether to classify a worker as a contractor or to hire employees in Turkey.

Termination or Extension Terms for Independent Contractors in Turkey

Include termination and extension clauses in the independent contractor agreement to address possible scenarios. Termination clauses outline the rights and obligations of both parties in case of contract cancellation. Extension terms define the conditions and process for extending the contract’s duration if desired.

Also Read: Terminating a Contractor- Know How to End an Agreement Politely 

Payment Methods for Contractors in Turkey

How you pay contractors in Turkey directly impacts cost, speed, and compliance. Below is a comparison of the most commonly used methods:

Important Note: Payments to Turkish residents are generally required to be made in Turkish lira (TRY). While contracts may reference foreign currencies, actual disbursements must be in TRY, with exchange rates documented for compliance.

How to Convert an Independent Contractor in Turkey to an Employee

Converting an independent contractor in Turkey into a full employee requires careful planning and strict compliance with local labor laws. Businesses must follow a structured process to avoid penalties, ensure smooth transitions, and align with Turkey payroll requirements. Below are the key steps:

1. Assess the Employment Relationship

Review the existing contractor agreement and the nature of the working relationship. If the role involves fixed hours, direction from the company, and integration into business operations, it should be reclassified as employment.

2. Notify and Reach Agreement

Communicate openly with the contractor about the change. Discuss salary, benefits, and the advantages of becoming a full employee, such as job security and social security coverage.

3. Draft a Compliant Employment Contract

Prepare a new employment contract under Turkish labor law, covering terms such as:

• Salary and payment schedule
• Working hours and leave entitlements
• Benefits and allowances
• Termination and severance provisions

4. Provide Employee Benefits and Social Security

Employees in Turkey must be enrolled in health insurance and the Social Security Institution (SGK). Employers are responsible for contributing to social security, unemployment insurance, and other statutory benefits.

5. Register with the SGK

File the necessary paperwork to register the new employee with the SGK, ensuring contributions begin immediately.

6. Terminate the Contractor Agreement

Close out the contractor agreement formally, in writing, to avoid overlap or confusion. Clearly document the transition to employee status.

7. Check Work Permits (If Foreign National)

If the contractor is a foreign worker, secure the required work permit before officially converting them into an employee.

8. Address Tax Implications

Employees are subject to payroll in Turkey, meaning income tax withholding, social security contributions, and employer obligations change significantly compared to contractor status.

9. Notify Relevant Authorities

Update records with the Turkish tax office and social security institutions to reflect the employee’s new status.

10. Employee Onboarding

Ensure a smooth transition with onboarding activities such as training, orientation, and introductions to company policies and systems.

11. Seek Legal Consultation

Always work with a local labor law expert to confirm compliance. Employment regulations in Turkey can change, and professional guidance helps reduce risks.

Contracts & Compliance Checklist

To reduce risk, use this checklist when hiring contractors in Turkey:

1. Independent Contractor Agreement
   
   • Clear scope, deliverables, payment terms
     
   • Explicit statement of independent status
     
   • Termination clause, confidentiality, IP assignment
     
   • Currency and FX clause
     
2. Contractor Documentation
   
   • Turkish tax ID or registration proof
     
   • Invoice templates aligned with VAT rules
     
   • Delivery and acceptance records
     
3. Compliance Safeguards
   
   • Avoid excessive control over work
     
   • Ensure contractor has autonomy and multiple clients
     
   • Do not provide employee-style benefits
     
4. Record Keeping
   
   • Store contracts, invoices, payment proofs, communications
     
5. Cross-Border Compliance
   
   • Confirm reporting obligations in your home country
     
   • Collect necessary tax forms if applicable

Hiring Contractors vs Hiring Employees in Turkey

When contractors make sense:

• Short-term or project-based roles
  
• Flexible workforce needs
  
• Lower cost, no payroll or benefits obligations
  

When to hire employees:

• Core, long-term roles in your business
  
• Risk of misclassification
  
• Need to provide benefits, social security, and stability
  

Using an EOR in Turkey

An Employer of Record (EOR) lets you hire employees in Turkey without setting up a legal entity. The EOR manages Turkey payroll, benefits, compliance, and local labor law, giving you a compliant way to scale operations with minimal admin burden.

Why Asanify is the Best Way to Pay Contractors in Turkey

While the above methods each have pros and cons, the easiest and most compliant solution is Asanify’s Global Contractor Management platform.

• Automates the entire contractor payroll in Turkey
• Offers competitive FX rates for international payments
• Provides a built-in HRMS to track attendance, projects, and leave requests
• Ensures all payments comply with Turkish labor and tax rules
• Includes 24/7 customer support for both employers and contractors

With Asanify, you can seamlessly manage compliance, payments, and HR processes—making it the smartest choice to pay independent contractors in Turkey.

Conclusion

To pay independent contractors in Turkey compliantly, you must follow local tax laws, currency rules, and contractor documentation standards. If your team grows or roles shift toward permanence, it may be safer to hire employees in Turkey, often through an EOR.

By using a trusted partner like Asanify, you can manage Turkey payroll for both contractors and employees, reduce compliance risks, and focus on scaling your global business with confidence.Ready to expand into Turkey? Book a demo with Asanify today and simplify hiring, payments, and compliance in one platform.

FAQs

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.