Employer of Record or Your Own Turkish Company? A Payroll and Tax Decision Checklist

Hiring in Türkiye does not begin with a payroll quotation. An overseas company first needs to decide whether it is only testing access to Turkish talent or building an operation that will sell, contract, manage customers and create lasting commercial substance in the country. That decision determines whether an employer of record (EOR) can be a limited bridge or whether a Turkish company should become the actual employer.

An EOR arrangement may reduce the overseas company’s initial administrative workload because a Turkish provider signs the employment contract and handles local payroll. It does not automatically eliminate corporate tax, permanent-establishment, employment-control, work-permit or regulatory questions. Forming a Turkish company requires more setup and recurring compliance, but it also creates a clear platform for local invoicing, contracting, management, hiring and expansion.

Start with the activity, not the headcount

“We only have one employee” is not a complete structure analysis. One senior employee may negotiate customer terms, habitually conclude contracts, run a fixed local office or direct the Turkish market. Ten software developers may work on an internal global product without customer authority. The tax and employment risk depends on what people do, where they do it, who controls them and how the activity connects to revenue.

Map the first 12 to 24 months before comparing provider fees:

• Will the Turkish team contact or onboard customers?
• Will anyone negotiate prices, terms or contracts?
• Will the foreign company invoice Turkish customers?
• Will employees use a dedicated office, coworking space or home office placed at the company’s disposal?
• Will the team hold stock, equipment or demonstration products?
• Will local licences, tenders, bank accounts or payment services be needed?
• Who will approve leave, working time, performance, discipline and termination?
• Are any employees foreign nationals who need employer-sponsored work permits?
• Is the hiring plan temporary, or is a continuing Turkish operation expected?

EOR and Turkish company compared

When an EOR may fit

An EOR may be commercially useful where the overseas company needs a narrow and reversible hiring test. Typical indicators include one or a few employees, no Turkish customer contracts, no local invoicing, no stock or regulated activity and a defined review date for deciding whether to establish an entity.

The arrangement should still answer four questions:

1. Who is the actual legal employer? The employment contract, payroll registration and provider agreement should tell the same story.
2. Is the model lawful for the work performed? Türkiye regulates private employment agencies and temporary employment relationships. A commercial “EOR” label does not override mandatory labour rules.
3. Who controls employment decisions? Hiring, work location, hours, leave, performance, discipline and termination responsibilities must be allocated clearly.
4. What does the employee do for the foreign company? Revenue activity, local premises and contract authority can create consequences beyond payroll.

When your own Turkish company is usually clearer

A Turkish LLC or JSC is normally the more coherent route when the business is entering the market rather than merely testing a hire. It gives the operation a registered employer, local contracting party, tax profile, bank account and accounting framework.

Indicators for an entity include:

• Local customer acquisition, contract negotiation or account management
• Turkish customer invoices or local payment collection
• A dedicated office, warehouse, equipment or other fixed operational base
• Multiple functions such as sales, support, operations and management
• Local licences, tenders, imports, inventory or sector registrations
• Long-term hiring and a management hierarchy in Türkiye
• Employee equity, benefits or retention programmes requiring a stable employer
• A plan to admit investors, build a local brand or sell the Turkish business

The legal vehicle must still match the activity. An LLC often suits a closely held operating business, while a JSC may be considered for more formal governance, investment or share-planning needs. A branch keeps the foreign parent directly connected to the Turkish operation. A liaison office is limited to approved non-commercial activities. The site’s LLC, JSC, branch and liaison-office comparison explains those choices separately.

Payroll control: outsourcing the calculation is not outsourcing responsibility

Whether payroll is processed by an EOR or by a Turkish company’s accountant, the monthly file needs consistent inputs. The responsible employer must control the employment agreement, salary, working time, leave, bonuses, benefits, expenses, deductions, bank payment and starter/leaver dates.

Minimum monthly control file

• Signed employment agreement and current employee master data
• Approved gross salary, bonus, commission and benefit inputs
• Attendance, overtime, leave, sickness and unpaid-absence records
• Gross-to-net payroll and employer-cost calculation
• SGK occupation code, workplace and employee notifications
• Payroll tax and social-security declaration evidence
• Net salary payment and provider-funding reconciliation
• Work-permit data where the employee is a foreign national
• Termination calculation and exit notifications for leavers

SGK’s employer guidance states that the employee start declaration is generally filed before work begins, subject to specific exceptions, and that workplace registration rules apply when insured employees are first engaged. A company’s incorporation notification may trigger automatic workplace registration in some cases, but the operational employer still needs to confirm that the correct workplace file is active before onboarding.

For current payroll components and evidence, use the site’s payroll taxes and social security guide. Ongoing employer reporting can be coordinated through payroll and HR compliance services in Türkiye.

Permanent-establishment risk does not disappear with an EOR

An EOR addresses the employment contract and payroll administration. It does not decide whether the overseas company has a taxable presence in Türkiye. That analysis depends on the facts, domestic law and the applicable tax treaty.

Risk indicators may include a fixed place available to the foreign company, continuing local business activity, senior personnel habitually negotiating or concluding contracts, or a team that performs the core revenue-generating functions of the overseas business. A personal home-office arrangement, short visit or support role may present different facts, but payroll, work-permit and employment obligations must still be tested separately.

Document the conclusion before the first hire and repeat the review when the employee’s authority, location, customers or team size changes. The site’s permanent establishment guide for Türkiye provides a dedicated fact pattern checklist.

Work permits: match the sponsor, workplace and real role

A foreign national generally needs a valid Turkish work permit or an applicable exemption before starting work. The Ministry of Labour and Social Security explains that ordinary work permits are issued for a specific employer, workplace, occupation and period. An employee cannot simply use the same employer-specific permit for another legal employer.

This matters in an EOR comparison. If the provider is the sponsoring employer, the contract, workplace, occupation, salary and actual working arrangement must remain consistent with the permit. If the business later forms a Turkish company and transfers the employee, a new employer-specific application may be required before the person starts with the new entity.

A Turkish company also does not receive automatic approval merely because it has been incorporated. Current Ministry evaluation criteria, corporate financial information, employee ratios, salary criteria and role-specific rules should be checked for the relevant application. For employer-side coordination, see residence and work permit support in Türkiye.

Cost comparison: use a full 24-month model

Comparing an EOR monthly fee with a company’s incorporation invoice produces a misleading result. Build a 24-month cost model around the intended operation.

Do not insert unverified future salary, tax or social-security rates into a long-term model. Use a scenario column for annual increases and refresh statutory inputs before each budget cycle.

Plan the conversion from EOR to entity before hiring

If an EOR is used as a bridge, set measurable conversion triggers in the original decision paper. Examples include a second or third function, first Turkish customer contract, local office commitment, management authority, regulated activity or a defined month of operation.

Conversion checklist

1. Select and incorporate the Turkish vehicle.
2. Activate tax, accounting, bank, payroll and SGK processes.
3. Review whether employee termination and rehiring, a tripartite transfer or another lawful route will be used.
4. Protect accrued leave, seniority and agreed benefits in the transition documents.
5. File new work-permit applications where the legal employer changes.
6. Move equipment, data access, insurance, benefits and expense policies.
7. Reconcile the final EOR invoice, payroll liabilities and employee balances.
8. Update customer, supplier and intercompany contracts to reflect the new operating model.

A last-minute conversion can create a gap between the old employer, the new employer and the work-permit record. Build the transition timeline before the commercial trigger is reached.

Decision checklist

Conclusion

An EOR and a Turkish company solve different problems. An EOR may support a narrow hiring test, but it does not create a local sales vehicle or automatically shield the foreign company from Turkish tax presence. A Turkish company requires more setup and recurring administration, yet it aligns the legal employer, commercial activity, payroll, accounting and long-term market plan in one structure.

The safest decision is based on activity and control rather than employee count. Document what the team will do, who will direct it, where it will work, whether it will generate revenue and when the model will be reviewed. Then price the full setup, recurring and exit scope over the same time horizon.

Official sources

• Invest in Türkiye — Establishing a Business in Türkiye
• Social Security Institution — Employer Obligations
• Ministry of Labour and Social Security — Work Permit Frequently Asked Questions
• Ministry of Labour and Social Security — Work Permit Evaluation Criteria
• Official Gazette — Regulation on Private Employment Agencies
• Revenue Administration — Corporate Tax Law No. 5520