Accepting a new position and changing companies is not an easy task.
There are many things you must consider, including the new company’s culture, pay, benefits, and location, to name a few. When you are a highly compensated professional or corporate executive, there are additional considerations which warrant your attention. In my experience assisting corporate executives with the evaluation of potential career changes, I have identified 5 key mistakes to avoid:
1. Not confirming non-compete status: One of the biggest risks in switching companies is not being aware of the details in your non-compete agreement. Reviewing your non-compete should be the first thing you do before even entertaining a role at another company. Have an attorney look over your non-compete, to give you a better idea of the types of roles you could accept that would be allowed, as well as the actions to avoid if you do make the switch. Depending on your non-compete, you may be allowed to compete in the industry, but you may owe compensation back to your current company if you join a competing firm. Understanding the details of your existing non-compete is essential to making a smooth transition to your next opportunity.
2. Forgetting to negotiate to “make whole” during compensation discussions: Most executive compensation packages include a number of election choices. These can include stock options, restricted stock units, and pensions, among others. Many of these types of compensation must vest before you get ownership of them. When switching jobs, you must consider all of the unvested positions that you are losing. When negotiating terms for a new position, it is important to know what you are giving up by leaving your current firm and to discuss a way that your new company can compensate you for those lost benefits. This can be accomplished in a number of ways, including a one-time bonus, or providing additional benefits equal in value to what you are giving up.
3. Ignoring current compensation and benefit decisions: There are certain types of compensation that you must make decisions on when leaving a company. Vested stock options may be required to be exercised within a certain time period or risk forfeiture. You must make decisions about what you are going to do with your pension, 401k, supplemental savings plan and so on. Common options are leaving them at the old company, rolling them into other plans, or taking lump sum distributions. It is important to know your options and to plan around them before announcing your move.
4. Leaving unused vacation days: This is an often-forgotten benefit that many people leave on the table. Some companies may pay out unused vacation days, but for the ones that don’t, you may want to consider taking a vacation before announcing your departure.
5. Ignoring tax opportunities to lower your bill: In the year that you switch jobs, chances are you will be in a higher tax bracket due to the many benefits exercising and paying out. Because of this, you may want to investigate planning strategies that help to lower your tax liability. Making a charitable contribution to help offset the taxes is one of the more common strategies. There are many ways to do this, but one of the more popular options is putting money into a donor advised fund so that you have more control over the timing of the distributions.
When you are preparing to make a move to a new company, make sure that you avoid these 5 mistakes by doing your research and constructing your plan ahead of the move.