As a pharma employee, you reap the rewards of strong compensation, benefits, and wealth-building opportunities. But what happens if you change employers?
The career change aspect is certainly a big part of making this kind of move, but have you considered the financial implications?
Regardless of what the job change might entail, whether it’s moving into a leadership role, joining a biotech firm, or simply making a lateral move to another company, your financial picture may change significantly. Salaries are not the only thing to consider here; equity compensation, retirement benefits, and taxes can vary quite a bit, and you need to know what you’re in for so you can be prepared.
So, before you sign off on a new offer, it’s worth taking the time to understand how such a move can impact your financial plan.
Financial Checklist for Pharma Employees
Not sure where to start? We’ve got you covered. Use the following as a checklist to help you focus on the most consequential financial aspects of your big decision.
1. Review your compensation package
The new job’s base salary only tells one part of the story. You need to consider the total compensation package to evaluate the opportunity properly.
Here are a few things to factor into the big picture:
· Signing bonus
· Annual bonuses (what are they based on?)
· Long-term incentives
· Stock options
· Restricted stock units (RSUs)
· Deferred compensation plans
· Pension benefits
· Health benefits
Reviewing all these points will help you better understand what lies ahead. Sometimes, a salary increase won’t mean much if the benefits are less generous. By the same token, a job with lower base compensation may still offer better long-term potential through incentives and stock options.
Do a side-by-side comparison to get the whole picture.
2. What happens to existing equity awards?
Before you leave your job, you’ll need to learn a few things about your equity awards, if you have them:
· Which awards are vested? Are some still unvested?
· Will unvested awards be forfeited?
· Is there a post-termination exercise window for your stock options?
· What are the tax implications of exercising your options?
If you stand to lose years’ worth of future vesting when you leave, you may be taking a huge financial hit. In some cases, the new employer might offer a package that covers your forfeited awards, but you need to know what you’re up against before you can negotiate.
3. Compare retirement plans
Your current 401(k) might not be quite the same as what your new employer offers. Compare these features:
· Employer matching/contributions
· Profit sharing
· Vesting schedules
· Investment options
· Roth contribution capabilities
· Plan fees
Pay close attention to your contribution limits, as switching employers mid-year can confuse this point.
You may also need to decide what to do with your existing retirement account, whether to leave assets in the existing plan, roll them into an IRA, or roll them into your new employer’s plan.
Speaking with a qualified financial advisor can help you make sense of this, as each option has its pros and cons.
4. Review your healthcare coverage
Plans can vary significantly between employers, so it’s important to find out how the switch will impact your out-of-pocket expenses.
Here’s what to look at:
· Monthly premiums
· Family coverage and related costs
· Disability insurance
· Deductibles
· Out-of-pocket maximums
· Drug coverage
· HSAs
Deductibles may reset under a new plan, which would mean higher-than-normal health care expenses until the deductible is met.
5. Make a plan to cover income gaps
Any job transition carries a risk of cash flow disruption. There might be delays getting your signing bonus, changes in pay periods, and if relocating, you’ll need to plan for those expenses.
Additionally, you must consider how you’re being paid at the new job. For example, small biotech firms might rely heavily on future incentives over immediate compensation.
Either way, ensure you have a well-funded reserve to cover your costs until things level out.
6. What are the tax implications?
You may face unexpected tax implications. If the move involves relocating to another state, you might have to deal with multi-state filings. Reviewing your bonuses, stock options, deferred compensation, and equity vesting events with a financial advisor will help you avoid surprises at tax time.
7. Re-evaluate your insurance coverage
If you have employer-sponsored insurance, these benefits will likely change when you transition.
Review your coverage and policies for:
· Life insurance
· Long- and short-term disability
· Supplemental insurance
· Executive benefits, if you have them
In light of the changes, it’s an opportunity to review your financial goals and savings targets and determine whether your insurance strategy is still viable.
8. Review your portfolio
You likely have substantial investments in company stock. As you review your existing holdings, consider new equity compensation opportunities and how they will impact your portfolio. To avoid concentration risk, you might consider diversifying.
The transition period is an excellent time to review investment strategies and align them to long-term financial goals.
9. Review deferred compensation and executive benefits
Senior employees and executives may have non-qualified deferred compensation or executive benefit plans. Before you leave your old job, take the time to understand your distribution schedules, payout elections, tax implications, and how they may impact cash flow going forward.
Choosing not to do this might result in unexpected taxable income in the future and liquidity issues.
10. Align your move to the financial plan
Once you’ve gone through these steps, take a step back to consider the big picture and how it all fits with your financial goals. The results may or may not support the move, but either way, you’ll be informed and better positioned to make a confident decision.
A higher salary doesn’t always translate to a better financial future. The best moves are rooted in stability, stronger advancement opportunities, improved benefits, and long-term sustainability.
Is Changing Companies the Right Move for You?
Changing jobs in pharma is not a decision you should make lightly or without serious consideration for your financial future.
Review your compensation and benefits, and consider all the ramifications before you make the move.
Something else you may want to consider - what are professionals saying about the company's stock?
Would you want to move to a company with a stock rated 1 out of 5 stars?
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