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27 Jul 2017

Banking dos and don’ts while changing jobs

While shifting jobs, there is a need to consider certain financial and banking matters in order to ensure a smooth transition. Many people have found themselves in some sort of financial mess for failing to address some financial and banking issues.
According to www.business-standard.com, here are the financial issues you need to examine when changing jobs:

Bank accounts
With each new job, you are likely to have a new salary account. However, holding multiple salary accounts is not advisable. When you change jobs, your earlier account gets converted into a regular savings account after three to six months. Typically, banks are supposed to track salary accounts for salary credits during this period. Once converted, you will lose the perks attached to a salary account.

For instance, it will no longer be a zero-balance account and you will have to maintain a minimum average quarterly balance, at par with other savings accounts. Banks will levy charges for non-maintenance. These differ for each bank. You will also have to routinely use the account to keep it active.

According to a Central Bank of Nigeria directive, an account automatically gets classified as inoperative or dormant if there are no customer-induced transactions for a certain period, usually six months.

What to know about your salary account

Many years ago, salaries were paid to employees by cash or through cheque. Payroll department used to be held responsible for calculating salaries, arranging sufficient cash from the finance department, distributing salaries in proper currency denominations and maintaining records. But with the advent of plethora of banking services, the only change that has been brought in the function of the payroll department is that they do not have to arrange for the different denominations of coins and naira notes.

The salaries for all the employees are calculated and a collective sum is transferred to the bank along with the salary sheet. And from there, the bank credits the salary accounts of individual employees.

What is salary account?

A salary bank account or as simply termed as salary account is nothing much different from a regular bank account wherein your employer credits in the amount due to you as your salary.

What you get in a salary account?

Just like a normal savings account, you will have to fill a form with the bank, according to www.simplypaisa.com. Don’t worry, it is your employer’s responsibility to tie up with the banker and arrange for opening your account. However, while filling the form, you will also be required to attach self-attested photocopies of your identify proof, address proof and your passport size photograph. You will be given an account number. In your welcome kit by the bank, you will receive a cheque book, ATM card and PIN number. There are few banks who offer free credit cards with the salary accounts.

Charges of a salary account

Since a salary account has same terms and conditions as what are applicable for a normal savings bank account, it carries the same kind of charges. Though the salary account is a zero balance account, but it converts to a normal savings bank account if the salary in the account has not been transferred by your employer for a consecutive period of three months. The situation, however, differs from one bank to another. But in certain circumstances when your employer can pay salary for some months, the salary account still retains its status with the understanding of the banker.

If your salary account is converted to a savings account for some reasons, other charges of savings bank account will apply throughout like charges on exceeding certain number of transactions, charges on loss of PIN or PIN renewal, ATM charges, SMS charges, etc.

What to do at the time of leaving your organisation?
When you are leaving your organisation, then it becomes important for you to take care of your salary account with the same level of seriousness that you handle your pension account.

In such a situation, you have two choices to make:

Let your salary account continues. It will automatically be converted to a normal savings account. All you need to do is maintain a minimum monthly/quarterly average balance as required by the bank.

If you do not feel the necessity of continuing with the account and expect that you will not be able to maintain the minimum monthly/quarterly average balance, then it is better to take prompt steps to get it closed. This way, you will be able to save yourself from unnecessarily paying penalties. While closing the account, do remember to close all associated accounts with it like term deposit account, etc.

You must inform the bank if you continue your salary account with a new employer
Changing jobs can be a difficult task. Not only does it involve a lot of paperwork before or on the date of joining, many documents also have to be submitted to the new employer. Apart from this, opening a salary account is another important task.

However, if you plan to continue the same salary account with the new employer (assuming they have the same bank), do not think your work is done by just handing over your account details to your new workplace. The bank, too, has to update the new employer’s information in its records. How this is done may differ across banks.

Ways to update these records vary across banks. For instance, some bank ask its customers to visit the nearest branch with a letter or email from the corporate ID of the new employer. The text must mention the complete name, account number and state that the customer has joined the company. Some banks ask the customer to submit a government-approved identity document, along with a proof of employment from the new employer. This can be done by getting in touch with the respective bank’s relationship manager or by going to the nearest branch.

Continuing a salary account usually makes matters easy since you don’t have to close an account and open a new one. Many people don’t close their previous accounts, which leads to holding an account unnecessarily. Following a small procedure will help the bank as well as you be served better. However, if you are asked to open an account with a different bank at your new workplace, you must choose between closing the previous salary account and maintaining the minimum required balance. Weigh your needs for multiple accounts and act accordingly.

Transferring your RSA account
You need to handle your Retirement Savings Account domiciled with your Pension Fund Administrator carefully when changing jobs. You need to fill necessary documents to ensure your new employer continues from where the former one stops.

Transferring the account should not take time. It is taken care of by the human resources departments of your previous and current employers.

Tax matters
Your employer computes your tax liability for the year (deducted on a monthly basis) after factoring in the basic exemption limit applicable under the relevant Income Tax Act. If you switch jobs midway through the year and do not declare the earlier deductions to your new employer, he will use the same calculation to compute your tax liability. So, your tax benefits will be calculated twice and, as a result, your tax liability will fall. However, while filing returns, this anomaly will be taken into account. And, the actual liability will be higher.

Source: Punchng

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