Who knew job switches were more than just comparing salary and number of paid leave.
So your work days feel long and numbing, and your job has lost its lustre. On the upside, you have other opportunities waiting. Before you take the plunge however, there are some financial considerations you need to make. Never assume your new job will allow you just pick up where you left off:
1. How reliant are you on your current group insurance?
Don’t just compare salaries when changing jobs. Consider the health benefits (group insurance) of your current employer. For example, your current employer may have group insurance that covers everything from dental needs, to serious conditions such as stroke and heart disease. If you’re jumping from a big corporation to a small start-up, it’s improbable that your new employer has such comprehensive group insurance.
If your new employer would have limited health benefits, you should make sure your own health insurance is in order. Speak to your financial advisor for a quick policy review, and mention that you’re losing your group insurance.
2. Build an emergency fund before switching jobs
Never assume this won’t happen. There have been instances of employers deciding against hiring you, even after the offer letter is sent (they know that many people cannot afford the time and cost of trying to take legal action). This can be disastrous, given you’ve quit your previous job to join them.
In some cases, people have left to join a company, only to be made redundant a year or two later.
The only way to prepare for such eventualities is to have savings. Ensure you have about six months of expenses saved up in an emergency fund (if you don’t have one now, get started as soon as you can). When you have an emergency fund, you can move between jobs with confidence.
3. Examine the new costs of your job, and factor it into your budget
Sometimes, the new costs of a job are obvious – such as a lower initial pay during training. However, there are also hidden costs to look for.
Don’t forget to factor in travel time and the associated costs. If you need to take a cab from time to time, or your children need a babysitter because you’ll be home later, these are all costs that must go into the budget.
Another subtle cost to consider is your apparel. Switching to a more formal job may require investment in a more upmarket wardrobe, with tailored jackets and suits. Some positions also require you to dine out more often, to entertain clients (check if there is an entertainment budget) or even to go out with colleagues. Don’t neglect the financial costs of keeping up appearances, and building social networks.
If you have to take loans to cope with the initial costs, be sure to find the lowest interest rate on the market. You can compare between the lowest rates at SingSaver.
4. Check the education benefits of your new employer
Sometimes, it’s hard to raise your income without raising your skill set. If this is a priority (e.g. you need a diploma or degree to get further in your career), then look beyond the immediate pay cheque.
Will your new employer provide skills training, or scholarships, to ensure your long term success? A S$500 raise now is nothing compared to a S$3,000 or S$5,000 raise (or even higher) for the rest of your working life. If your current employer provides room for further education, but your new employer won’t, then it may not be worth leaving just for a small pay bump.
Besides looking for grants and scholarships, don’t neglect to consider time. Some employers may be willing to give you time off to study (e.g. you can take an unpaid month off for your finals, and still come back later), whereas others won’t.
5. How much does time off “cost” in your new job, compared to your current one?
Consider how your new employer handles vacation days, maternity / paternity leave, and sick leave. For example, some employers will give you an extra week or two of paid leave, after your child is born. Some are not too calculative about sick leave, and are okay to let you stay home even without a Medical Certificate (thus saving you the doctor’s fee).
Be clear on your new employer’s policies, so you can make a comparison. Sometimes, a slightly higher pay cheque doesn’t justify the draconian hours that will be demanded of you.
This article was first published on SingSaver.com.sg