Employee Benefits & Personal Finances

If you’re thinking about leaving your job, you’re not alone! Quitting a job and moving on to a new one happens with everyone and is very common.

About a decade ago, if a person had shifted jobs more than twice in the last five years, he would be considered an unreliable person.

Today, this is just not true. The industrial trends show that people stay in jobs for much shorter times (especially in hi-tech & private companies) these days than they did back in the last century.

For example, the Indian IT industry recorded 25.2 per cent employee attrition in Financial Year 2022. The overall Attrition rate in India stands at 20.3% in the year 2022.

You may have a job offer(s) in hand and may be confident about your financial position. But before you resign or atleast after submitting your resignation paper, it is prudent to check your financial status, savings and details regarding the employee benefits, before you leave the company.

Most of the companies ask their employees to serve notice period for 1 to 3 months. Some companies make Full & Final settlement before you leave the company and some after leaving the company.

I have observed many employees just ignore calculating the Leave encashment, gratuity, EPF amount etc., before they leave their companies. It is very important to check about various employee benefits applicable to you, about Form-16s or continuity of health insurance benefits, applicability maternity benefit (if any, for female employees) etc., before your move out of the company.

Lucrative job offer with a better pay scale, or an opportunity to grow higher, whatever the reason may be, making a job switch requires a bit of planning.

Job Resignation Checklist : Employee Benefits & Personal Finances

Here are the 10 most important things to check before leaving a job after resigning, with respect to your Personal Finances.

Employee Provident Fund (or) General Provident Fund : 

• EPF scheme is applicable to most of the private sector employees. Employees of the central government and certain state government employees are eligible for GPF.
• Before your leave the company – make a note of your EPF a/c no, UAN, save the Human Resource / Finance team’s contact details and save a copy of the latest EPF account statement. Also, cross check if your personal details like full name, PAN no, Aadhar no, bank account etc., are updated correctly in EPF database. In case you find any discrepancies, get them rectified with the help of your current employer at the earliest.
• You can cross-check if your employer has been depositing EPF correctly or not through EPF portal. (Read : How to check if my Employer is depositing EPF amount with EPFO / Trust?)
• If you are contributing to Voluntary Provident Fund (VPF), you can easily get it transferred from your old employer to new employer (if any).
• Please note that an employee can have only one UAN id and its linked to employee’s Adhaar number. So, do not hide your current employment details with your new employer (if taking up a new job offer & they have an EPF option).
• If you are not joining any new company then you can withdraw EPF amount but be aware of new TDS rules & tax implications. You can submit withdrawal application online through EPFO portal. If you are joining another company, you can transfer your EPF amount to your new EPF account through UAN / OTCP. (Make a note of your employee id too.)
• In case of NPS – if you change job and join an organization not registered under NPS, you can continue the PRAN (Permanent Retirement Account Number) under the All Citizen of India sector. You can submit an Inter Sector Shifting (ISS-1) Form to the POP-SP with whom he or she wants to be associated in NPS. If the subscriber changes job and joins an organisation registered under NPS, the subscriber can continue the PRAN under the new Corporate by submitting the CS-S3 form.

Employee Pension Scheme or National Pension System :

•  If your total service is less than 9.5 years, you are not entitled for EPS pension. You can apply for Withdrawal benefit. Once, the service period crosses 10 years, the money withdrawal option ceases. You can only get Scheme Certificate and can get pension from the age of 50 years. You have to submit Form 10c for withdrawal and Form 10D for pension.
• In case, you resign from a job and join a new employer who does not offer EPF scheme then you can either withdraw EPS balance (if service history is less than 10 years) or apply for Scheme Certificate from EPFO.
  • You can submit this certificate when you join an EPF-covered organisation in future. If you do so, your service history gets carried forward.
  • If you don’t join an organisation and reach 50 or 58 years of age, you can submit these certificates (if employed with multiple employers) to the EPF field office under whose jurisdiction your last employer was covered and apply (Form 10D) for monthly pension.
• In case, you resign from your current job and join a new organization where EPF scheme is offered, you can just submit Form-11 form to your new employer. Under this scenario, your EPF and EPS get transferred.

Leave Encashment:

• Most of the companies allow their employees to encash the unused balance of leaves during their service or after resignation / retirement. Encashing your leave balance is known as ‘Leave Encashment’.
• If you are a Govt employee, LE received at the time of retirement or separation or resignation, is fully exempted from Income Tax.
• For Private Sector employees, Leave encashment is either fully or partially exempted at the time of retirement or resignation.

Comprehensive article on Leave encashment @ Latest Leave Encashment Taxation rules | Increased Tax Exemption Limit

Gratuity Benefit : 

• Gratuity Benefit amount is similar to a bonus, meaning that it is a portion of your salary provided to you, by your employer, for the services rendered on the company’s behalf. Gratuity is a reward for your long and meritorious service.
• It is mandatory for all the employers with more than 10 employees to pay gratuity benefit. After completing five years of continuous service with the same company, you are eligible to receive the gratuity benefit. Gratuity shall be payable to ‘you’ (employee) on the termination of your employment / after resignation or after rendering continuous service for not less than five years.
• The Gratuity Ceiling limit was increased from Rs 10 Lakh to Rs 20 Lakh w.e.f 01-Jan-2016.

Comprehensive article on Gratuity Benefit @ 13 FAQs on Gratuity Benefit Amount & Tax Implications

Form 16 & Investment Proofs :

• Form 16 is the ‘Salary / Income Certificate’ that is issued by your employer. This document is issued by the employers every year. Make sure you save copies of all your previous financial years Form-16s or forward them to your personal inbox. I have observed that many of us face challenges in accessing old Form-16s. If you keep these documents handy, they may become useful when you are resolving any income tax issues in future.
• If you are changing your jobs during the financial year, it is advisable to submit your income from previous employment or form-16 or Final settlement document to your new employer. If you do so, the form 16 which is released by your new employer can have all the required details and TDS will be deducted accordingly. (Read my article on ‘Form 16 – Multiple Form 16s – other tax related forms‘.)

Employer’s Medical Insurance :

Check with your employer if your company’s mediclaim policy benefits are available to you after resignation or during notification period (notice period). Else, make sure you make alternative arrangements. Some insurance companies allow employees to convert ‘employee group policy’ into a ‘personal mediclaim policy’ even after the employee leaves the company. The premiums though would be much higher, as the policy no longer falls under the purview of a group policy, but is now an individual one. You could ask if your company lets policy continuity.

Applicability of Maternity Benefit (for Female Employees) :

•  Maternity leave may be granted to a woman member of the Service with less than two surviving children on full pay up to a period of 182 days (26 weeks).
• If you are on maternity leave and planning to resign from the job, you may resign either after completion of your maternity leave or even during the maternity leave. You are still entitled to receive the applicable maternity benefit.
• However, you need to serve the notice period in terms of your letter of appointment or to pay the equivalent sum in lieu of the notice period. 
• Do note that the maternity benefits can be revoked by the employer in case a women employee changes the job during that maternity leave period. 

Have a Contingency Fund :

A contingency fund is an emergency fund that would act as a cushion, in case of an emergency, and it should be able to meet your expenses in case things are not fine. When you switch over your job, it may be a while before your salary may start ticking in or maybe there is a waiting period of one month or so before you join your new company. In case you are starting your own new venture, your contingency fund should be at least 6 to 12 months of your expenses, to handle the uncertainty involved. Prepare well in advance and build a buffer for unforeseen expenses.

Salary Account : 

You may no longer get the special privileges or reward points or discounts linked to your salary account. The rules applicable to ‘average minimum monthly balance’ and linked credit card, may also change. So, do check out this with your banker.

Allowances, Dues & Advances :

• Make a note of all the allowances (HRA, Car, accomodation etc.,) and exemptions that you have claimed with the current employer. Also, check out if you are eligible for any bonuses or rewards.
• Clear off all the dues or re-pay salary advances (if any). Make sure you are out of your ‘employment bond’ or ‘training period bond’.
• In case you have an agreement executed with your employer and has mutual rights been assigned w.r.t copyrights, patents or royalty, check the scope of this before you move out of the Organization. If needed, take help of a legal consultant.

Your finances are very important, check your savings and other benefits before you leave the company. Make sure to sort it out with your employer or with your financial planner as to what is the best path to take before leaving your company. Cheers!

Suggested Reads :

1. My First job interview experience | A life-long memorable one!
2. What happens to EPS on Transfer of EPF account (or) when you switch Jobs?
3. 13 Strategies / Tips for dealing with Layoffs (or) Job Losses

(Post first published on : 20-Jul-2023)