What Is Payroll? How to Calculate Net Salary from Gross

The short answer to the question “what is payroll?” is this: payroll is the official record that shows, for each employee, the wages an employer pays its staff in a month, the additions to those wages, and the premiums and taxes deducted from them. Under the Tax Procedure Law (VUK), every employer that pays wages must keep this record every month. Payroll also answers two questions: how much will the employee take home, and how much will the employer pay in total that month?

In this article, we look at the topic from the employer’s desk. Using a fictional example, we show the legal basis of payroll, the seven core items on a payslip and the steps of the gross-to-net calculation with 2026 rates. In the last section, we cover the employer cost added on top of the gross wage and common calculation errors.

What is payroll, and what rules does the employer follow when preparing it?

Payroll is the document of a wage payment for tax, social security and labor law purposes alike. A single table answers the questions of three separate bodies of legislation. That is why treating payroll merely as a “salary list” opens the door to errors that are hard to correct later.

Article 238 of the Tax Procedure Law requires the payroll to include at least the following: the employee’s full name, unit wage (monthly, daily, hourly or piece rate), working time and the taxes calculated on the wage. The payroll for a month is prepared and dated by the twentieth day of the following month and signed by the business owner or manager and by the person who prepared it. The Law allows flexibility in form; the employer may prepare the payroll in any layout, provided it contains this minimum information.

The retention period is also set by law. Under Article 253 of the Tax Procedure Law, businesses that keep books retain their documents for five years starting from the calendar year following the year to which they relate. Payroll is one of these documents and is among the first records requested in a tax audit or SGK inspection.

Are a payroll and a payslip the same thing?

The payroll is the consolidated record kept by the employer, whereas the payslip (ücret hesap pusulası) is the personal statement given to the employee. Article 37 of Labor Law No. 4857 requires the employer, when paying wages, to give the employee a signed statement or one bearing the workplace’s stamp. The statement shows the payment date, the relevant period, additions such as overtime and holiday pay, and deductions such as tax, insurance premiums, advances, alimony and enforcement deductions, each separately.

The Law exempts this statement from stamp tax and all fees. In practice, most companies use the individual output generated by the payroll software as the payslip. The answer to an employee’s question “why is my salary different this month?” is usually found in this document.

Article 32 of the Labor Law requires wages to be paid at least once a month. The payroll calendar is therefore monthly: the month closes, the timesheet is finalized, the payroll is calculated, payment is made and the deductions are declared the following month.

Payroll items: the 7 core items on a payslip

Regardless of the number of lines, a payslip is built around seven core items. The order below is also the order the calculation follows; each item determines the base of the next.

• Gross wage and additional payments: overtime, bonuses, premiums and similar payments are added to the monthly wage in the contract.
• SGK employee premium: 14% of earnings subject to premiums (9% disability, old-age and survivors’ insurance, 5% general health insurance).
• Employee share of unemployment insurance: 1% of earnings subject to premiums.
• Personal income tax: calculated using the progressive schedule on the base remaining after employee premiums are deducted from the gross wage.
• Stamp tax: 7.59 per mille of the gross wage.
• Minimum wage exemption: the personal income tax and stamp tax corresponding to the minimum wage are deducted from the calculated tax.
• Other deductions: non-statutory or individual items such as advance offsets, enforcement and alimony deductions, or automatic enrollment private pension deductions.

The amount remaining after these seven items is the net wage. The first five depend on rates and the tax schedule, the sixth is calculated based on the year’s minimum wage, and the seventh varies with the employee’s personal situation.

Where do the premium rates come from?

Employee premiums are set out in Article 81 of Law No. 5510. The disability, old-age and survivors’ insurance premium is 21% of earnings subject to premiums; the employee pays 9% and the employer 12%. The general health insurance premium is 12.5%, of which 5% is borne by the employee and 7.5% by the employer. The unemployment insurance premium, under Law No. 4447, is collected as 1% from the employee, 2% from the employer and 1% from the State.

The amount on which premiums are calculated has a lower and an upper limit. According to SGK, in 2026 the monthly lower limit of earnings subject to premiums in the private sector is 33,030 TL and the upper limit is 297,270 TL. Article 82 of Law No. 5510 sets the upper limit at 9 times the daily lower limit; for employees whose gross wage exceeds this amount, premiums are calculated on the upper limit.

Payments not included in earnings subject to premiums

Not every payment enters the premium base. Article 80 of Law No. 5510 excludes in-kind benefits, death, birth and marriage allowances, travel allowances, and severance and notice pay from earnings subject to premiums. According to the current text of the Law, where meals are not provided at the workplace, the portion of the daily meal allowance for days worked up to 300 TL is also not subject to premiums.

The same article also excludes from the premium base the portion of private health insurance premiums and private pension contributions paid by the employer for the employee that does not exceed 30% of the minimum wage in total per month. The personal income tax treatment of these exemptions may differ; a payment being exempt from premiums does not mean it is also exempt from tax. Each fringe benefit on the payroll requires two separate checks.

How is the gross-to-net salary calculation done?

The gross-to-net salary calculation is the process of arriving at the net wage by deducting, in order, employee premiums, personal income tax and stamp tax from the gross wage. For wages above the minimum wage, the minimum wage exemption is deducted from the calculated taxes. The order matters: the personal income tax base is determined after premiums are deducted.

The payroll calculation steps are as follows:

• Add up the gross wage and that month’s additional payments; separate out amounts not included in the premium base.
• Calculate 14% of earnings subject to premiums as the SGK employee premium and 1% as the unemployment insurance premium.
• Deduct these two premiums from the gross wage to find the personal income tax base.
• Tax the base according to the schedule, taking into account the employee’s cumulative base from the start of the year to that month.
• Calculate stamp tax at 7.59 per mille of the gross wage.
• Deduct the personal income tax and stamp tax amounts corresponding to the minimum wage from the calculated taxes.
• Subtract all deductions from the gross wage; leave any advance, enforcement or private pension deduction for last.

Under Article 103 of the Personal Income Tax Law, the wage income tax schedule for 2026 is 15% up to 190,000 TL, 20% up to 400,000 TL, 27% up to 1,500,000 TL, 35% up to 5,300,000 TL and 40% above that. The bracket amounts were set by General Communiqué on Personal Income Tax Serial No. 332. We also explain how the schedule works on the return side in our article what is the muhtasar (withholding) return as well.

Sample payroll calculation: 60,000 TL gross wage (January 2026)

The example below is fictional. Assume an employee who started work in January 2026, with a monthly gross wage of 60,000 TL and no additional payments or incentives. The figures were calculated with 2026 rates, taking only statutory deductions into account.

The 28,075.50 TL on the exemption line is the base remaining after the employee premium and unemployment premium are deducted from the gross minimum wage. Article 23, subparagraph 18 of the Personal Income Tax Law exempts the wage corresponding to this amount from tax. The same amount equals the 2026 net minimum wage, because no personal income tax or stamp tax is deducted from a minimum wage employee.

Cumulative base: why does net salary fall during the year?

Personal income tax is calculated not monthly but on the annual cumulative base. Since the employee in the example has a monthly base of 51,000 TL, the cumulative base reaches 153,000 TL at the end of March and 204,000 TL in April. In the April payroll, the 14,000 TL portion of the base exceeding 190,000 TL is taxed at 20%.

In this case, the personal income tax calculated in April rises to 8,350 TL, the personal income tax payable rises to 4,138.67 TL and the net wage falls to 46,656.63 TL. Although the gross wage has not changed, the employee takes home about 700 TL less. Since the exemption amount is also calculated on the cumulative base of the minimum wage, it may change in the second half of the year; the payroll must be closed each month with up-to-date cumulative values.

For employees who start mid-year, the cumulative base is carried over based on information from the previous employer. If this information is entered incompletely, too little tax is withheld in the first months and too much in later months. If the net wage is being discussed at the first meeting with the employee, we recommend explaining this effect from the outset.

Payroll calculation and the employer’s real cost

The gross wage is not the total amount the employer pays. The employer adds its own premium shares on top of the gross wage and pays them to SGK together with the employee premiums. The right figure for the budget is this total cost.

Subparagraph (ı) of Article 81 of Law No. 5510 provides that 2 points of the employer’s disability, old-age and survivors’ insurance share are covered by the Treasury for private sector employers that meet the conditions. According to SGK’s current incentive list, this reduction is applied as 5 points in the manufacturing sector until the end of 2026. For the employee in the example, the 2-point reduction amounts to 1,200 TL and lowers the monthly cost to 73,050 TL.

The reduction has conditions. Notifications and returns must be filed on time, the employee share and the employer share not covered by the Treasury must be paid on time, and there must be no premium debt to SGK. The same SGK list shows the minimum wage support for 2026 as 42.33 TL per day and 1,270 TL per month; the conditions for benefiting from the support should be checked before the first payroll.

Why is the question “what is payroll?” answered wrongly in practice?

When asked what payroll is, most employers say “the table where salaries are calculated.” Yet payroll is the record that simultaneously determines the employee’s insurance history, the employer’s tax withholding and its entitlement to incentives. The errors we encounter most often in our clients’ files also stem from overlooking this difference:

• Agreeing on a net wage without reflecting the cumulative base effect in the contract
• Assuming premium and tax exemptions for fringe benefits such as meals, transport or private health insurance follow a single rule
• Miscalculating premium days and the pro-rated wage for an employee who starts or leaves during the month
• Closing the first payroll of a mid-year hire without obtaining their previous cumulative base
• Making payment before the payroll is finalized and carrying the difference over to the next month

Some of these errors resurface when the employee leaves. If the final month’s wage, premium days and termination code are not reported correctly together, the chain of corrections grows longer; we have gathered the notification rules for the termination process in our article on the employment termination notification . For other filing and withholding obligations, you can browse our tax legislation category.

At Akal CPA, we see payroll not as a calculation program run at the end of the month but as a process that manages the employer’s staff cost and legal risk. In our payroll services we run each month’s cycle on a single calendar, from timesheets to the gross-to-net calculation and from payslips to SGK and tax notifications. For companies with foreign shareholders, we also adapt payroll data to the reporting format required by the parent company.

Sources: SGK: 2026 earnings subject to premiums · SGK: Current social security premium incentives, support and reductions · Personal Income Tax Law No. 193 (mevzuat.gov.tr)

Last updated: 17.10.2026