ANNUAL INCREASE RATES AS OF JANUARY 2022
As you are aware, as per the mandatory Article 344 of the Turkish Code of Obligations, the rent increase of the business premises is also limited by the consumer price index (hereinafter referred to as “CPI”) (in Turkish, “TÜFE”) as the rent increase of the residence premises. In accordance with the aforementioned article, which is mandatory as per Turkish Code of Obligations, the agreements of the parties regarding the rent increase to be applied in the renewed lease periods are valid provided that the parties’ agreement for the rent increase amount/rate does not exceed the annual CPI of the previous lease year. Even if a higher rate is stipulated in the lease contract, the limit will be directly applied, thus, the rate of increase will not exceed the CPI.
In the light of this, we hereby inform you that according to official data released by Turkey Statistical Institute (“TÜİK”), the 12-month average rate of increase in CPI of the year 2021 is 19.60%. Thus, for the rent agreements to be renewed on January 2022, this rate shall be taken into account as an upper limit and no matter what is the type of the lease agreement (residence lease or business premise lease), the increase rate should not be above 19.60%, provided that the rent fee is determined in TRY.
It should be noted that the consumer price index (in Turkish, “TÜFE”) is lower than the producer price index(hereinafter referred to as “PPI”) (in Turkish, “ÜFE”). The 12-month average rate of increase in PPI of the year 2021 is 43.86%.
Besides, as mentioned in our Newsletter of 28 December 2021, we also kindly remind you that, as per the Minimum Wage Determination Commission’s Decision dated 16 December 2021 and numbered 2021/1, published in the Official Gazette dated 17 December 2021 and numbered 31692, it has been announced that the minimum wage in Turkey has been increased by 50.40% as of 1 January 2022. It has been unanimously decided to determine the daily minimum wage of the employees between 1 January 2022 and 31 December 2022 as gross TRY 166.80.
In this respect, your company may kindly take into consideration these rates while determining the annual increase of the business place’s rents or as a reference for the fees payable to your company’s suppliers or the annual increase of the salaries of the company’s employees, if the relevant employment agreement stipulates an annual salary increase. In case the employment agreement does not stipulate such salary increase, considering the devaluation of currency due to the inflation in Turkey, although it is at your employership’s own discretion, it is advisable to keep the salary of the employee up-to-date according to inflation within equitable principles in order to maintain the conditions determined at the establishment of the employment contract. As a matter of fact, pursuant to the decision of the 22nd Civil Chamber of the Court of Cassation numbered E. 2017/5909 K. 2017/5823 and dated 23 March 2017, in cases where the fight against inflation continues, as in Turkey, the fact that the salary of the employee is not increased with the thought that it is not below the minimum wage is incompatible with the objective goodwill rules. Otherwise, the salary determined at the establishment of the employment contract will inevitably be reduced due to inflation which will cause a steep decline in living standards of the employee. Kindly note that any such practice of non-applying the inflation rate for the employees’ salary increases may lead to legal disputes with possible claims of unilateral change by the employer of the employment conditions and also termination with just reason basis for the employees of the employment agreement.
While determining the annual salary increase rate in the workplace, other criteria that the employers should take into account is the equality principle between the employees occupying similar positions and having similar seniorities and qualities. In this respect, save for acceptable and provable objective reasons, it is advised to the employers to apply the same increase rate for the employees. To avoid any disparity and disputes that may arise between employees with seniority and the employees working for minimum wage (for whom the increase has been of 50.40% by law), the increase to be made for the employees with a certain seniority having salaries which are slightly above the minimum wage may be determined equitably considering the seniority, performance and efficiency basis of the relevant employees. Consequently, we advise our valuable clients to consider and apply the acceptable objective criteria in performance reviews as also recognized by Turkish Labor Law.
Our Law Firm remains at your disposal for any further clarifications you may need.