People often find themselves at a crossroads: stay loyal to a single company and build a career over a number of years, or embrace more rapid package growth by moving frequently when the chance arrives.
It is not that simple. Both companies and candidates need to keep a few factors in mind when considering the issue of jumpy resumes, according to Advaita Naidoo, Africa MD at Jack Hammer, an African executive search firm.
Naidoo said that moving to a new role in a new company often comes with a financial boost, while negotiating a competitive package becomes easier when you are in demand, and the allure of exponential financial gains can be tempting.
“But while job-hopping may seem advantageous initially, there’s a tipping-point, and you can soon find that too many frequent moves have made you unhireable, and unattractive for the important roles,” Naidoo said.
One of the major concerns of hiring a candidate with too-frequent moves from a company’s point of view, is the issue of on-boarding cost.
According to Naidoo, companies invest significant time and resources in the process of searching, signing and on-boarding new hires.
“When a candidate has a history of quick departures, employers will rightly be concerned about whether their investment in a candidate will ultimately be futile if the chances are good that the employee may leave after a short stint,” Naidoo said.
Candidates should consider whether long-term stability may be compromised by short-term gains.
While job hopping can lead to immediate financial gains like higher salaries and better benefits, it may come at the expense of long-term stability, as employers value employees who contribute meaningfully and grow within the company.
“A track record of short-term moves suggests a narrow focus on personal gain over meaningful contribution and growth,” Naidoo said.
The financial aspect of changing jobs
The cashing out of pension funds when switching jobs is one of the reasons that people don’t have enough money saved up in their retirement funds.
Siphamandla Buthelezi, head of Platforms and Retirement Fund Administration at NMG Benefits said there are a couple of options available to employees leaving and changing jobs.
Here are you options when you change jobs:
Move your benefit to a preservation fund
With this option, you move your retirement fund benefit into a preservation fund without paying any tax on the benefit. You can choose where your retirement benefit is invested, and can switch investment portfolios when you need to.
Preservation funds allow you to make one withdrawal which will reduce your retirement savings, and you will have to pay tax on any cash that you take out of the fund.
Buthelezi said: “If any deductions are made before you transfer to a preservation fund, that deduction will count as your once-off withdrawal.“
Move the benefit to your new employer’s pension fund
Another good option is to transfer your retirement savings to your new employer's fund without paying tax – with the proviso that you don't transfer your benefit from a pension fund to a provident fund.
Check with your new employer's fund where your retirement fund benefit would be invested, and whether that fund allows you a choice of where to invest your benefit.
Transfer your benefit to a retirement annuity
You can transfer your benefit in the fund to a retirement annuity (RA) fund tax-free. With an RA, you can’t withdraw any money before the age of 55, and you can take up to one-third of your benefit in cash when you retire.
The other two-thirds can be used to buy a pension from an insurer. You can also continue to make further contributions to the RA and you have full control of your investments.
Talk to a financial adviser
Before making any big decisions about your options when leaving your employer's fund, it's a good idea to get advice from a registered financial adviser. A financial adviser can help you determine which options are best for your personal goals and circumstances.
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