Switching Employers

Changing employers can be a very stressful time, especially if it’s not of your own accord. In today’s episode, I’ll provide some insights on what you should think about from a financial aspect to reduce that stress.

The first thing to focus on is your Emergency Fund.

This step comes well before any job change. In order to put some money aside for emergencies and continue to keep up with your bills, you will likely have to have started an emergency fund months before deciding to switch employers, or worse, being forced to change employers. According to a survey by the Canadian Payroll Association, 47% of working Canadians said it would be difficult to meet their financial obligations if their pay cheque was delayed by a single week. That’s pretty scary. If you’re one of these people, losing your job may make it impossible to meet your obligations without going into debt. Even having your paycheque delayed as a result of different employer pay schedules could cause issues, so make sure you have some sort of emergency fund to cover any delays.

The next item to think about is your life and disability coverage.

Many people rely on their employer’s life and disability insurance, including me. If you start a new job, you may not be eligible for their new benefits for 3 months or more. Meaning if you don’t make arrangements, you could be uncovered for that time. While the probability of you dying or becoming disabled during those three months might be small, don’t take the chance, especially if you have people depending on you. Many plans have conversion privileges and will allow you to get individual coverage that replaces your group coverage, often without having to show medical evidence of insurability. This can be especially beneficial for individuals that are currently sick, or are higher risk due to lifestyle choices, such as smoking. Once you start new employment, assuming your new insurance is sufficient, you can simply cancel your personal insurance.

Next is health benefits.

Similar to life and disability coverage, there may be a window where you are not covered for health benefits. In the case where you are planning to leave your employer, you can schedule dentist appointments, get new glasses, and refill your prescriptions in advance before you resign, so you don’t need to pay for anything out of pocket while you’re waiting for new benefits to kick in. If you are let go, your benefits may continue for a couple weeks which will allow you to get those expenses in. There may be an opportunity to negotiate this in a severance contract if it is not offered. Getting private health coverage can be expensive, so if you don’t have any new work lined up, you will have to decide whether you want to pay for health coverage, or self-insure, in other words, simply pay for health expenses out of pocket. If you’re married, you may be covered or have the option to be covered under your spouse’s plan.

If you are let go from your current employer, there are some benefits available to you.

The first is employment insurance, or EI. This is something that you pay into on an ongoing basis and is available to individuals who lose their jobs through no fault of their own. It’s important to apply for this immediately, since it can take a while, and you may lose benefits if you delay. The Government of Canada suggests you apply within 4 weeks of losing your job. Depending on what you’ve earned previously and paid into EI, you can receive up to $547 per week for a maximum of 45 weeks. I’ve included a link to Employment Insurance benefits in the description below if you want more information. The second benefit available to you if you are let go is a severance payment. When you are let go without cause, you may be legally eligible for a severance payment depending on where you work in Canada, for how long, and certain attributes of your employer. If you have questions about your specific severance payment, I’d suggest talking with a lawyer. If you are receiving a large severance payment, that could drastically impact your taxes, especially if you find new employment quickly. You may want to discuss this with a financial advisor or tax specialist to ensure you aren’t paying more taxes than necessary.

Finally, if you currently have an employer pension plan, which I’ve outlined in my videos here, you will have to decide what to do with those when you leave your employer. Your decision will depend on the type of pension you have.

Links: http://www.cbc.ca/news/business/payroll-salary-survey-1.4276782
https://www.canada.ca/en/services/benefits/ei/ei-regular-benefit.html