Bulletin Details

Is It Obligatory For The Employers To Make Wage Increase?

As we come close to the end of January, the employees are wondering whether any wage increase will be made over their salaries for the new business year and application of wage increase becomes questionable for the employers at the beginning of each year. 

We encounter many Court of Appeals decisions in this matter where the lawsuits are finalised in favour of the employers by stating that that the wage increase is not mandatory as per the applicable legislation. However workplace practice bears importance in applying wage increase. Recently, in a case, a former employee requested severance payment and discrimination compensation claiming that he did not receive his severance payment although he terminated his employment contract based on just cause as no wage increase has been made in January 2013 while all other employees of his former employer were provided with a wage increase. The employee further stated in his lawsuit petition that such act of the employer constitutes discrimination against him among other employees and therefore he shall be entitled to discrimination compensation which is 4 months’ wage at maximum as per the Labour Law.

As a response to the employee’s abovementioned claims, the employer defended itself by stating that the employment contract of the respective employee does not stipulate that he shall be entitled to wage increase every year and employee’s performance was not found adequate for a raise upon Human Resources Department’s objective evaluations throughout the year. 

Upon evaluation of the lawsuit, the local labour court accepted the claim of the former employee and ruled for severance payment and a partial discrimination compensation in favour of the former employee. Following the ruling of the local labour court, the employer appealed against the decision and the Court of Appeals reversed the local labour court’s decision. Under the justified decision of the Court of Appeals, it is stated that the former employee shall not be entitled to terminate his employment contract based on just cause if no wage increase is applied by the employer since such exercise was not regulated under the employment contract of the former employee.

As a conclusion, the recent precedents indicate that if the wage increase is not regulated under the employment contract or the collective bargaining agreement, the employer is not obliged to make any wage increase. Therefore, not receiving any wage increase does not give the employee the right to terminate the employment contract based on just cause and be entitled to severance payment accordingly. However, if the employer has decided to make a wage increase, the amount of the increase shall be determined by taking into account the employee’s performance, promotable status, inflation, precedent wage amounts for the specific position among the sector and the company provided that the wage ratio is not specifically stated under an employment contract or collective bargaining agreement. Consequently, the employers who are currently evaluating making a wage increase may consider the recent precedents and decide upon above stated criteria. However, such discretion granted to the employers by the Court of Appeals shall not be approached in a bad-faith manner which may result as a discrimination among the employees.