Under Turkish Law, the principal rule is that an employer is expected to perform work using their own employees. Accordingly, the establishment of a principal–subcontractor relationship is an exception and can only be valid under certain conditions. Subcontractors may only be employed in auxiliary services related to the employer’s main business or, in some cases, in segments of the core business that require expertise due to operational and technological necessities.

However, misinterpretation or misuse of subcontracting may lead to significant legal and administrative issues. Given the broad scope of the issue, it is typically examined under the headings of the concept of subcontracting, the scope of work to be performed by subcontractor employees, and sham (disguised) subcontracting.

The Concept of Subcontracting – Scope of Work – Sham Arrangement

According to Article 2(6) of the Turkish Labour Law No. 4857:

“A relationship established between an employer and another employer who undertakes work at the primary employer’s workplace either in auxiliary services related to the production of goods or services, or in a part of the core business which requires expertise due to operational and technological reasons, and who employs their workers solely in the workplace for the said task, shall be deemed a principal–subcontractor relationship.
In such a case, the principal employer shall be jointly liable with the subcontractor for obligations arising from this Law, the employment contracts, and any applicable collective agreements toward the subcontractor’s employees with regard to the workplace.
The rights of the principal employer’s existing employees cannot be restricted by employing them through the subcontractor. Nor can a former employee of the principal be made into a subcontractor. Otherwise, the relationship shall be considered a sham, and the employees of the subcontractor shall be deemed, from the beginning, to be employees of the principal. The core work of the employer cannot be divided and subcontracted unless technological expertise or business necessity justifies it.”

Accordingly, for a valid subcontracting arrangement to arise, the assigned work must either fall under auxiliary services (e.g. catering, security, cleaning, transportation) or constitute a distinct segment of the core business that genuinely necessitates specialization due to technological or operational reasons.

From this perspective, a principal employer may not delegate work directly related to their core business to a subcontractor’s employees.

The phrase “due to the requirements of the business or work” lacks a statutory definition, but according to prevailing academic opinion, it refers to objective and necessary structural changes such as reorganizations or strategic restructuring—not arbitrary decisions. Enhancing operational efficiency, competitiveness, or product/service quality may, depending on the facts of the case, also justify subcontracting under this principle.

It is important to note that even in cases where genuine business needs exist, subcontracting should not become a permanent arrangement. Once economic difficulties are resolved or competitiveness is achieved, the justification for subcontracting disappears, and such arrangements must be terminated.

If these principles are disregarded and a subcontractor is employed for core business tasks in violation of the law, the relationship is considered sham (muvazaa), and the subcontractor’s workers will legally be treated as employees of the principal employer from the outset pursuant to Article 2 of Law No. 4857.

In practice, such sham relationships may be identified during inspections by labor inspectors. A reasoned report by the inspector is served to the employer, who may challenge the findings before the competent labor court. If the employer fails to object in time or the court upholds the inspector’s findings, the legal consequences for both the principal and subcontractor will be triggered.

Legal Consequences of a Sham Subcontracting Arrangement:

• Administrative fines imposed on both the principal and subcontractor.

• If social security contributions for subcontractor employees are found to be underpaid, the outstanding amounts—plus late payment penalties—will be collected from the principal employer.

• If such noncompliance is determined, the principal employer may also be fined the equivalent of twice the statutory minimum wage for each monthly social security declaration.