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Switching jobs? 10 personal finance tips

Switching jobs? 10 personal finance tips
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First Published: Sun, Aug 02 2009. 01 23 PM IST

Updated: Sun, Aug 02 2009. 09 39 PM IST
1. Higher salary shouldn’t be the only reason
Often, the stimulus to move jobs is a higher salary, with little regard for the quality of work, the employer’s brand name, future career prospects, the potential for enhancement of skill levels and the opportunity to assume more responsibility. Don’t ignore these soft issues completely just because you are getting a higher salary offer.
2. Timing
Candidates often argue, “I am just about to get my annual appraisal and my salary is expected to go up by 20%, so if I move to your organization, it will be for at least a 25% salary hike.” If you are so confident about a salary hike, and are happy with your current job, why move at all?
If you do want to move for other reasons, time your move so that you have your increment in the bag, and better negotiating ability during an interview.
3. Negotiating your cost to company (CTC)
Even if the actual CTC is the same as your previous job, structure it so that the cash in hand can be higher than it was in the previous job. This might be particularly important given the new rules announced in the budget, under which fringe benefits offered to you will now be taxable in your hands as perquisites. Understand how you can maximize your take-home pay, because that is what matters at the end of the day.
4. Pricing yourself out of the market
Today there are several junior employees in organizations with very little experience but with high CTCs because they have moved numerous jobs in rapid succession. They don’t realize that the high salaries they are getting are not usually because of their performance, but often because the base level has gone up every time they have changed jobs.
But without a commensurate increase in their experience or skill level, there will come a time when they could find themselves at a dead end or priced out of the market. Employers want employees who can add value to the organization, and not just get paid a high salary because that is the expectation from that industry.
5. Performance evaluation criteria
Understand the basis of your performance evaluation in your new job and preferably, have the key performance targets given to you in writing so that there is no ambiguity during the year-end review at the time of your bonus payment.
Don’t make job change decisions in haste, without understanding whether what is expected of you is realistic or not. Stretch yourself in the new job to develop skills and gain experience, but don’t set yourself up for failure.
6. Notice period
Respect the notice period owed to your current employer. Don’t make a short-term decision to abandon your current job without any notice—it can come back to hurt you if you acquire the reputation of someone who does not respect common professional courtesies. See if you can buy out your notice period from your employer.
7. Form 16 and tax issues
At the end of the financial year, take your Form 16 from your previous employer and share that with your new employer, so that the right amount of tax is being deducted and you are not getting more deductions than you are entitled to.
Also remember to take a no-dues certificate, relieving letter and salary slips for the duration you have stayed.
8. Shifting your PF balance and superannuation
This can be a big administrative issue for you if you have not moved over your retiral accounts to your new firm. Take care of the necessary paperwork to facilitate a smooth transition of your account to your new employer.
9. Esops
Don’t leave a lot of value on the table if you have worked hard to earn incentives. If your current employer gave you employee stock ownership plans (Esops), understand whether you are eligible to encash these at all. If you are giving up a lot of value because not all your shares have been invested, you might want to ask your new employer to offer you a similar upside as an incentive to move to the new job.
10. Insurance
If your current employer was offering you and your family life and health insurance coverage, recognize that you might need this from your new employer as well. Do not remain uninsured during the transition period from one job to another. Accidents and emergencies come unannounced. Don’t put yourself or your family at risk by not having appropriate insurance coverage. Additionally, understand the insurance benefits you will be eligible for at your new job and whether you will have to serve for a minimum of a few months before your coverage kicks in.
Bonus
Understand your key result areas and the formula for your bonus calculation, what benchmark is being used to arrive at your bonus—sales, productivity, profitability, controlling attrition, etc.
Notice period
It can be typically one–three months, depending upon seniority. In many cases, you might be able to pay the equivalent of your monthly salary in lieu of serving your notice period.
PF
Use Form 13 to transfer your account to your new employer.
Insurance
Always maintain 5–10 times your life cover, and for a family of four, maintain a minimum of Rs2 lakh floater health insurance coverage.
Salary
Don’t always expect 20% hikes. Put together a business case for yourself that shows you deserve an increment to move.
Esops
Encash all vested options that are “in the money” and understand your tax liability at the time of encashing.
CTC structuring
Understand that you will now pay taxes on fringe benefits (or perquisites) paid to you by your company at the marginal tax rate.
CONNECT
Do not invest anywhere and everywhere
The initial public offering (IPO) market is beginning to show signs of life, but that does not mean you should invest in any and every issue. Investors often see IPOs as offering guaranteed price appreciation and profits. This is not always the case. Do your research to understand and segregate the good companies from the poor performers. Don’t speculate and put your hard-earned money at risk. Read the offer documents and analyse why the company ought to be a part of your long-term stock holdings. If you cannot make sense of the business or don’t see any value, then it’s best to stay away.
Negotiate fees with your mutual fund advisor
Starting 1 August, under the new rules for mutual funds, you will have to negotiate fees with your mutual fund adviser for help on mutual fund investments. Clarify the terms of engagement and level of service that you expect from your adviser. Ensure that they have certification from the Association of Mutual Funds in India (Amfi). Ask for an explanation of why they are making a certain fund recommendation and how it fits into your financial plan.
Build your credit score
Start building your credit score through good habits when taking and repaying a loan or using your credit cards. Recently, Reserve Bank of India issued guidelines to banks and financial institutions to start sharing the data on an individual’s credit score with that person on demand. This will raise the relevance and awareness of these scores in the eyes of the consumer. If you have loans or balances outstanding on your credit card, recognize that your activities are being tracked and it’s best if you maintain a good credit score and sustain your creditworthiness.
Did you know?
Did you know that if you make a gift in kind or cash to your spouse, it is not taxable in their hands? However, any income generated by the gift, either in kind or in cash, shall be treated as your income. But if you transfer a house property to your fiance, and get married soon after the transfer, then even after your marriage, any income accruing on this asset shall not be taxed as your income. This is because the marital relationship did not exist at the time of transfer of the asset.
Dhruv Agarwala and Kartik Varma graduated from Harvard Business School and are co-founders of New Delhi-based iTrust Financial Advisors.
Content provided by iTrust Financial Advisors
Write to us at businessoflife@livemint.com
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First Published: Sun, Aug 02 2009. 01 23 PM IST