Quitting your job: Financial impact

15 January 2019 by National Bank
Things to consider before you quit your job

No longer motivated by your work? Before quitting your job, it is important to reflect on the consequences such a course of action will have on your financial situation. Here are the questions you need to ask yourself in order to make an informed decision. 

Will you be eligible for employment insurance benefits?

If you are the one terminating your job, and not your employer, the departure is deemed voluntary. In this case, you are not entitled to employment insurance benefits, unless you can demonstrate that your voluntary departure was the only reasonable course of action open to you.

In such a case, your file will then be processed by Service Canada and a decision will be rendered. Just cause for voluntarily quitting your job may stem from circumstances related to the workplace environment (harassment, discrimination or illegal practices by your employer), working conditions (substantial change in wages or excessive overtime) or your personal situation (need to care for a child or a family member).

In the case of a voluntary departure, you will be required to provide an explanation and information regarding the motive behind your departure. You will also have to show that you tried to resolve any issues before quitting your job. Did you discuss your problem with your employer or union? Did you use the conflict resolution mechanism provided for under your employment contract or labour agreement? Did you ask to be assigned to other functions?

Employment insurance: what are your particular circumstances?

A number of factors may affect your eligibility for employment insurance benefits. Here are examples of particular situations, which may make you eligible to collect employment insurance.

Staffing cuts

If your employer offered you the possibility of quitting your job to protect a colleague's job, the motive for your voluntary departure may be deemed valid. However, the employer will have to show that your layoff is permanent and that your departure did indeed help safeguard someone else's job.

Before you accept your employer's offer though, it is worth your while to consult a Service Canada agent, who will confirm whether your particular case meets all eligibility requirements. 

Layoff with notice

What if your employer informs you that you will be laid off within three weeks, but you decide to quit before then? Unless just cause for your voluntary departure is established, employment insurance benefits will be payable to you only as of the announced layoff date.

Authorized leave of absence

If you take a leave without pay with your employer's authorization, the motive for your departure must be deemed valid if you are to receive employment insurance benefits. Depending on your particular situation, you may be entitled to benefits for maternity, parental, sick or compassionate leave.

What other amounts will you be entitled to?

If you quit your job, your employer must pay you all amounts due to you, namely wages, overtime pay, and vacation pay for your vacation time earned. If you took vacation early, your employer may set terms for reimbursement.

Do you contribute to a pension plan? Following a voluntarily departure, you are entitled to the amounts contributed by you and your employer and their appreciation. You then have several options available:

  • keep those funds in your pension plan and withdraw them upon retirement;
  • transfer the funds into a locked-in RRSP or retirement account;
  • transfer the funds into your new employer's pension plan.

Your investment advisor can explain the pros and cons of each of these options and their impact at retirement.

Have you taken into account all possible financial consequences?

Other factors will have an impact on your personal finances. For one, when you quit your job, you will lose your group insurance coverage. Will you take out a personal insurance policy? If you are eligible for employment insurance, you need to take into account the waiting period for benefits. As well, you could incur expenses in the course of your job search, such as for travelling or updating certain documents.

In short, if you decide to quit your job, it is recommended that you sit down with your investment advisor, who will see to it that you don't lose sight of the financial goals you've set for yourself.

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