Labor Relations
by Levent Koç & Lider Kara
The enactment of the EYT law caught many companies off guard, despite being a process they had been anticipating. While this process presents both potential problems and opportunities, companies can leverage it to maximize returns on potential improvements by focusing on identifying and mitigating issues that may arise in the medium and long term.
The recently enacted Law Regarding Retirement Age Victims, which was designed to address the concerns of over 2 million retirement age advocates, passed on 03/03/2023, has had a profound impact on numerous businesses. In addition to the financial burdens that arise from the early payment of employee legal rights, organizations also had to navigate the process of parting ways with eligible retirement-age employees and rehiring some of them. Thus, the EYT law may give rise to critical short, medium, and long-term talent and employee management problems, but also opportunities. Given these circumstances, how should businesses manage the challenges posed by the EYT law, and which specific issues require special attention? Let us explore these questions together.
The EYT law presents companies with the potential for improvements, including rejuvenating their employee composition, introducing new workplace culture, shifting to a more dynamic staff, hiring at lower wages, and reducing labor costs. Thus, it may be feasible to transform the short-term financial burdens associated with EYT into long-term advantages. However, it is also critical to manage potential consequences such as the loss of competent and experienced employees, work accidents during the transition process, quality-related problems, and productivity declines. In light of these considerations, we recommend that companies focus on the following issues that they will likely encounter with EYT:
- Orientation of New Hires and Transfer of Competence: A relatively inexperienced and young group of employees will be recruited to replace the employees who will retire under the EYT law. While this change may present benefits, it also carries the risk of losing organizational memory, existing competencies, and experience. To mitigate these risks, a practice enabling retiring employees to transfer their competencies and knowledge seems necessary. Such a process is also crucial for the transfer of corporate culture to newly hired employees.
- Managing The Separation Process: The management of employee lay off is a vital indicator of a company’s culture. A well-managed separation process that concludes the business relationship without animosity is as essential as beginning the employment process on a positive note. Acknowledging the long-lasting efforts and contributions of the colleagues who have served the company for many years with various gifts and a clear appreciation of their efforts will strengthen the bond that remaining employees establish with the company.
- Relationships and Integration Between Experienced and New Employees: Employee turnovers are a natural process in companies. However, with the EYT law, many employees will leave simultaneously, followed by a mass hiring stage that may pose potential problems in the medium and long term. Firstly, there will be a distinction between the new hires and the old guard within the company, leading to high tensions between these groups. If the company hires new employees at different salary levels, financial conflicts of interest will be added to generational differences, and income disparities among employees performing the same job will result in further disputes. The hierarchical relationship that may occur between new and experienced employees may lead to the former employees not accepting their new supervisors, and the supervisors’ inability to exercise sufficient authority. Finally, it may cause long-term problems depending on the stance of the labour union representatives in the collective bargaining agreement negotiations regarding the gains and interests of these groups.
- Establishment of New Culture: The change in employee composition resulting from the law may lead to the loss of existing corporate culture, while creating an opportunity for a new one with new norms, improved workplace peace, increased productivity, and better occupational health and safety sensitivities. It is crucial to identify the areas of the current culture that should be maintained, abandoned, modified, or developed and to determine the implementation steps necessary to support these decisions. Successful execution of the cultural transformation process, with the participation of union representatives and employees, if applicable, is vital for achieving the desired outcomes.
The enactment of the EYT law caught many companies off guard, despite being a process they had been anticipating. While this process presents both potential problems and opportunities, companies can leverage it to maximize returns on potential improvements by focusing on identifying and mitigating issues that may arise in the medium and long term. In the current period of economic fluctuations and uncertainties, every step towards improvement carries significant weight in ensuring the sustainability and competitiveness of companies.
