Most people prepare carefully for a new job — the negotiation, the notice period, the first week. Very few treat changing jobs as a financial event, although it usually is the largest one of the year.
This checklist covers the six things that most often go wrong, roughly in the order they arise.
1. The provident fund: transfer, do not cash out
When you leave an employer, the provident fund balance becomes visible as something you could withdraw. For somebody a few years into a career, it can be a substantial figure.
Consider what withdrawing actually costs. Say the balance is three lakh at the age of twenty-eight. Left to compound for thirty years at a modest rate, that single balance could grow many times over by retirement. Withdrawn for a car or a holiday, it is gone — and the next job starts retirement saving from zero. Repeat that at three or four switches and the loss runs into large sums.
The alternative is a transfer. Your universal account number stays the same across employers, and the balance can be moved to the account linked with the new job, keeping the whole history in one place. Check that your details are correct and your identity documents are linked, because mismatches are the most common reason transfers get stuck.
There are also tax considerations: withdrawal can be taxable depending on how long you have been in continuous employment, and tax may be deducted at source. These rules have specific conditions and have been revised over time — check the current position before making any withdrawal.
Gratuity is separate. It is paid by the employer when you leave, generally only after a minimum period of continuous service with that employer. If you are close to that threshold, it can be worth knowing exactly where you stand before choosing a leaving date.
2. The health insurance gap
Most employer health cover is a group policy tied to your employment. It generally ends when employment ends — often on the last working day. The new employer's cover may start on joining, or after a waiting period, or not cover your family in the same way.
The result is a gap. It might be a week, it might be two months, and it often goes unnoticed until somebody needs a hospital.
Two actions remove the problem:
Before resigning, check what your current cover ends and when. Ask HR directly, including for dependants.
Hold a personal health policy of your own, separate from any employer. Even a basic one means switching jobs no longer switches off your cover. Buying it when young and healthy is considerably easier than later, when pre-existing conditions and waiting periods come into play.
Some group policies offer conversion to an individual policy on leaving. Where available, it is worth comparing with a fresh personal policy, but neither should be left until after the last working day.
3. Tax when two employers pay you in one year
This catches a very large number of people who switch mid-year.
Each employer calculates your tax as though its salary were your only income for the year. Each one applies the lower slab rates and standard benefits to the income it pays. Added together, too little tax has been deducted, because those benefits should only have been applied once.
The shortfall appears when you file your return, as tax payable — sometimes with interest if it is large enough.
The fix is simple: give your new employer details of the salary paid and tax deducted by the previous one in the same financial year. Most employers have a form for this. They will then deduct the correct amount from the remaining months.
At filing time you will receive a salary certificate from each employer. Report income from both, check the tax credited against both, and confirm the totals match what appears in your tax statement.
4. Unvested stock, bonuses and clawbacks
If you hold employee stock options or restricted stock units, check the vesting schedule before choosing a leaving date. Unvested units typically lapse on resignation. A few weeks' difference in leaving date can mean a meaningful difference in what you keep.
For options already vested, there is usually a limited window after leaving in which to exercise them. Exercising has tax consequences, and the decision depends on the company, your cash position and your view of its prospects. Know the window before resigning.
Also check joining bonuses and retention bonuses from the current employer. Many carry a clawback — repayment is required if you leave within a set period. Discovering this in the full-and-final settlement is an avoidable surprise.
5 and 6. The raise, and the gap month
Direct the raise before it arrives. A new job often comes with a significant increase. Unless some of it is redirected before the first new salary is credited, it will be absorbed by rent, a car loan or simply by spending more. Increase your regular investments by a fixed share of the increment the week you accept the offer. Half is a common choice that still leaves a visible improvement in take-home pay.
Treat a joining bonus as savings by default. It arrives as a lump, which makes it feel like a windfall. Put it into your cushion or investments first, and spend from it deliberately rather than by default.
Keep a month of expenses liquid. Notice periods, full-and-final settlements and first salaries rarely line up. The last salary from the old employer may be delayed, and the first from the new one may be partial. Without a buffer, the gap is filled by breaking investments or using a credit card.
Update the paperwork. If you close the old salary account, change the bank account linked to your demat account, mutual funds and any automatic payments. Check nominees and contact details at the same time.
An account that does not change with your job
Shares and funds in your own name, whoever pays your salary. Free to open
Provident fund, gratuity, taxation and employee stock rules have specific conditions and are revised from time to time — confirm the current position with your employer, the relevant authority or a qualified professional. This is educational material, not advice. We run no tips group and no signal service, we manage nobody's money, and no return is promised.
Disclosure: the account-opening link on this page is under Atul Shrivastava's Zerodha Authorised Person registration (NSE AP Reg: AP2516003481; Zerodha Broking Ltd. SEBI Reg: INZ000031633) and earns a revenue share. TheFinBaba is not a SEBI-registered Investment Adviser — this content is educational, not investment advice.
Frequently Asked Questions
What should I do with my PF when changing jobs?
Transfer it to the account linked with your new employer rather than withdrawing it. Your universal account number stays the same, and a transfer keeps the compounding history intact. Withdrawal can also be taxable depending on your length of continuous employment.
Does my health insurance continue after I resign?
Employer group cover usually ends when employment ends. Check the exact end date with HR, including for dependants, and consider a personal policy that does not depend on any employer.
Why do I have to pay extra tax after changing jobs?
Both employers applied the same slab benefits as if each paid your only salary, so too little tax was deducted in total. Declaring the previous salary and tax deducted to the new employer lets it deduct correctly.
What happens to unvested ESOPs or RSUs when I resign?
Unvested units typically lapse. Vested options usually have a limited window for exercise after leaving. Check your vesting schedule and exercise window before choosing a leaving date.
What should I do with my salary hike?
Redirect a fixed share of it to your regular investments before the first new salary arrives. Anything not redirected in advance tends to be absorbed by higher spending.
Related Reading
- The beginners course, for Noida
- How stock compensation is taxed
- The buffer between two salaries
- Where the gap-month money should sit
- Investing a joining bonus
- Investing alongside a salaried job
Disclaimer: TheFinBaba provides educational content only - this is not investment advice. Trading involves risk of loss.
