In recent years, as the number of refugees has increased, there has also been a significant rise in the employment of undocumented workers. Although employers know that hiring undocumented labor carries administrative fines, many continue to employ such workers because of lower labor costs. This practice, however, also leads to the cancellation of premium discounts.
Premium Discounts Removed for Employers Who Hire Undocumented Workers
With the growth in the refugee population and the lack of social protection for many of them, cases of employing undocumented workers have risen. Despite awareness that this practice is subject to administrative fines, some employers view undocumented workers as cheap labor and use them extensively. What many employers do not realize is that, beyond fines, detection of undocumented workers can result in the loss of premium incentives.
When inspections or employee reports reveal that a workplace employs undocumented workers, the five-point premium discount normally available for regular insured employees is revoked. In such cases, the premium discounts claimed by the employer for all employees are not only cancelled but can be reclaimed with interest. Under the relevant legislation, employees covered by 4A are subject to a total social security premium rate of 34.5%. Of this total, 20.5% is paid by the employer and 14% is deducted on behalf of the employee. Since 2008, under Law No. 5510, the 5-point premium discount for all employers has been covered by the Treasury. In certain cases, such as workers sent abroad, different discount arrangements may apply. Practically speaking, instead of the full 34.5% rate, employers benefit effectively from a 29.5% premium burden due to these discounts.
Conditions for Benefiting from Premium Discounts
According to data from the Ministry of Family, Labour and Social Services, 7,320,000 people benefited from this discount in 2020. There are specific conditions for the Treasury to cover the 5-point share of the premium. Employers must submit their insured employees’ premium and service declarations to the Social Security Institution (SGK) within legal time limits, and must present their withholding and premium service declarations to the Ministry of Treasury and Finance. Premium payments must also be made within the legal deadlines. Employers must not have outstanding administrative fines, delay penalties, or delay interest debts to SGK. Employers who have restructured or deferred their debts can benefit from the discount provided they make their installment payments on time.
Although the five-point premium incentive was originally introduced only for employees under 4A, subsequent changes extended the benefit to those under 4B as well. Thus, self-employed persons registered with Bağ-Kur can also benefit from the reduced premium on their own contributions.
Reclaiming Discounts from Employers Who Hire Undocumented Workers
Employers found to be hiring undocumented workers lose their right to premium discounts. During inspections or following complaints, if it is determined that workers have not been registered as insured, are being paid below the legal minimum wage, or are denied basic social rights, the employer loses the premium discount for all insured employees. The reclaimed amount is sought back with delay interest and statutory interest, meaning the employer must repay the total discounts they received for the period they unlawfully benefited.
Individuals who worked without social insurance, or who were employed without being registered, may later, if they have work permits and rights, file a service determination lawsuit to claim the premiums for the days they were employed uninsured. Periods established by such a court decision are added to the employee’s service record.