Changing jobs is an exciting time – new challenges, new experiences and, hopefully, an increased salary. But the process of moving from one employer to another comes with a few small but necessary financial administrative tasks that shouldn’t be avoided.
From checking your superannuation and insurance to ensuring your budget stays on track, here are some of the things to consider when starting a new job.
One of the major admin tasks on your list should be to check what’s happening with your superannuation, as a job change is a good trigger to review your fund, contributions and goals.
“Your new employer will no doubt hand you a form to nominate which fund you would like your super paid into, take time to consider your options and their implications carefully” says Elise Michelmore, Senior Financial Adviser at Australian Unity.
While your new employer will have a default fund, you can usually nominate a different fund if you’re happy with the one you’re with, or considering a different fund altogether. Either way, if you’ve still got super stashed in a handful of funds from the last few jobs you held, it’s time to consider consolidating your super into one fund. “There can be strategic reasons for holding multiple accounts, but for the most part you want to reduce your accounts to the smallest number possible, that way you’re not paying unnecessary administration fees,” says Elise.
Super forms the basis of your retirement savings and is usually people’s largest asset behind their house – so it’s important you know what you’re entitled to, and make sure you are receiving it. Currently, the guaranteed contribution is 9.5 percent of your salary, but there are legislated increases to this amount over the coming years.
Where you are lucky enough to have negotiated a higher salary, you’ll receive more super from your new employer too. This can be a welcome boost to your balance and trajectory, but it is important to check in with your goals and make sure your super can support the retirement you want. Sometimes this can mean making extra contributions to your super account.
“If you plan on salary sacrificing into your super, you’ll need to review the amounts so you don’t go over the concessional contribution cap of $25,000 per annum, as your employer contributions count towards this cap too. And, if you’re taking a pay cut, you may also want to think about increasing what you’re contributing into super if your budget allows it, so that you maintain your previous level of contribution,” says Elise.
Your super fund is also likely to give you access to the default insurances held through the fund, so if you’re thinking of switching funds, make sure you check what’s included. “For some people, that's really important because they may not have been able to access insurance in the past, so this might be a good opportunity to get adequate coverage,” says Elise
Life, total permanent disability and income-protection insurance can provide you with peace of mind when you’re starting out in a new role. “The insurance that we like to see everyone have at a minimum is income-protection insurance. It is the most important one because it's really about protecting the worker, particularly for younger or single people,” says Elise.
If your income has risen or fallen from your last job, it’s worth taking the time to check if your tax bracket has changed.
Bear in mind that your income is taxed based on how much you earn. “This could impact on the cost of your private health insurance premium. It could also affect how much you’re required to pay back on your HECS repayments,” says Elise.
“Understanding your position from a tax perspective is important because if you have investments in your own name, you may also be bumped into a new tax bracket, which can affect how efficient those types of investments may be.”
The ATO has a handy calculator to work out the tax on your gross income, which takes into account the Medicare levy, tax offsets, higher education loan scheme repayments or tax credits.
It’s worth checking the frequency of your pay dates. If your new employer pays monthly instead of fortnightly, for example, you need to ensure you have enough funds in your account for any automatic transfers or direct debits.
As Elise says: “You don’t want to be slapped with a dishonour fee for overdrawing on your account, so make sure you know exactly when your pay will hit your bank account next.”
An income change will impact on your budget. If you are getting a pay increase, don’t fritter away those extra dollars week after week – make sure they’re being put to good use.
Conversely, if your income has dropped, you may need to revisit your weekly budget and potentially drop any little luxuries.
Either way, make sure you make conscious decisions about your salary and how you spend it, so that all those hours at work are helping you meet your lifestyle and savings goals.
If you’re lucky enough to work for an employer that offers a few fringe benefits as part of your package, it’s worth making sure you’re making the most of them.
For example, if your employer offers a free gym membership, you could consider cancelling your own membership and using the money saved to put elsewhere. Or, perhaps you’re lucky enough to be reimbursed for parking expenses. “Something like free parking can be a welcome boost to your budget, or you might choose to use the savings to salary sacrifice into your super, so you can save on tax and boost your super contributions,” says Elise.
The best way to make sure you’re not missing out on any workplace perks is to take a few minutes to carefully read over your new employer’s welcome pack, preferably in the first week of the new job. These perks can really add up over time.
One last tip? If you’re getting a pay increase, divert the extra funds into savings, investments or paying extra off the mortgage or debt. If you’re already used to living on your current salary, you’re unlikely to miss the money and these funds can grow significantly over time, or help to reduce the interest you’re paying when in debt.
Changing jobs is a great time to review your financial position. The key is to make the most out of it by getting your financial admin out of the way early.