The Truth About Financial Procedures After Resignation: Why You Lose Money If You Don't Act Within 14 Days

Many people have had the experience of thinking, "Once I submit my resignation, I'll just use up my paid leave and relax," only to find themselves hit by a barrage of paperwork starting the day after their resignation date.

What is truly scary after resigning is not the loss of a job, but the period of procedural limbo where you don't know what to do and by when. Furthermore, if you miss even one of these procedures, it leads directly to losses of tens of thousands of yen or troublesome back taxes later on.

In this article, we will organize the seven financial procedures that inevitably arise when resigning or changing jobs, complete with priorities and deadlines. We will explain information that you cannot simply excuse away by saying "I didn't know," but which surprisingly no one tells you, along with actual amounts and concrete steps to take.

Before you regret it after quitting your job, I want you to first grasp the overall picture.

From the moment you decide to resign, the protections you have as an "employed person" begin to peel away bit by bit. By the time you receive your final pay stub, employment insurance, health insurance, employees' pension, and income tax withholding—all of these will remain in a "stopped" state unless you handle the procedures yourself.

While you were a company employee, these were processed automatically via payroll deduction, but after resigning, you must go to the counters yourself, gather the documents, and apply within the deadlines. Moreover, different deadlines such as "within 14 days," "within 20 days," and "within 30 days" are set for each procedure.

What is important here is the priority of which procedure to tackle first. Trying to do everything at once will cause confusion, while putting them off will lead to irreversible situations.

For example, for the basic allowance of employment insurance (so-called unemployment insurance), the later you complete the procedures at Hello Work, the later your benefits will start. For health insurance, you become uninsured from the day after your resignation date, so you must make some choice on that very day. For resident tax, whether it is collected in a lump sum or paid in installments changes depending on the timing of your resignation, which can lead to surprising, unexpected expenses.

As a result of putting these procedures off by saying "it's a hassle, I'll do it later," there is no end to the number of people who miss out on receiving tens of thousands of yen in benefits, end up paying full medical costs out-of-pocket because they got sick without an insurance card, or are treated as tax delinquents and incur late payment penalties.

In other words, for post-resignation procedures, the key is not "whether or not to do them," but "when and in what order to do them".

Chapter 1: The Reality That Receiving Employment Insurance Is Premised on "Active Job Hunting," Not "Waiting"

After resigning, the point many people worry about first is "how much unemployment insurance will I get?"

Formally called the "Basic Allowance for Employment Insurance," this benefit is paid as a daily amount equal to 50-80% of your wages before leaving the job. However, there is a cap on the benefit amount; for example, it is set at a daily maximum of 6,845 yen for those under 30, and 7,605 yen for those 30 to under 45 (as of August 2024). If someone with a monthly salary of 300,000 yen resigns for personal reasons, the daily amount of the basic allowance is around 5,000 yen, or approximately 150,000 yen when converted to a monthly basis. The number of benefit days is determined by years of service and the reason for leaving, ranging from 90 to 150 days, but in the case of personal reasons, it is often 90 days at the shortest.

What you should be careful about here is that the timing for the start of benefits differs significantly between "voluntary resignation" and "company-initiated resignation". In the case of voluntary resignation, in addition to the 7-day waiting period after the procedure at Hello Work, there is also a 2-month benefit restriction period (since October 2020, it is 2 months for up to 2 times in 5 years, and 3 months from the 3rd time onwards). In other words, you will actually receive benefits about two and a half months after resigning. On the other hand, in the case of company-initiated resignation (bankruptcy, dismissal, solicitation for retirement, etc.), benefits begin immediately after the 7-day waiting period. This difference is decisive in planning your living funds.

Furthermore, receiving employment insurance is conditional upon "active job hunting." Specifically, you must appear at Hello Work on your certification day once every 4 weeks and report at least two instances of job-hunting activity (applying to companies, participating in seminars hosted by Hello Work, career counseling, etc.) during that period. Without this record, benefits for that period will be suspended. In other words, the system is designed so that you cannot receive benefits if your attitude is "I'll just take a slow break while receiving unemployment insurance."

Also, if you work a part-time job while receiving benefits, it is possible if it is less than 20 hours per week and less than 4 hours per day, but depending on the income amount, the basic allowance may be reduced or suspended. If you work 20 hours or more per week, you may be considered "employed," and you could lose your eligibility for benefits entirely.

As you can see, you need to recognize that receiving employment insurance is not something you are "entitled to get," but rather "something you can only receive after meeting the conditions".

[Procedure Flow]

1. After resigning, receive the "Separation Notice" from the company (it is often mailed about 10 days after the resignation date)

2. Bring your separation notice and apply for job seeking at the Hello Work office that has jurisdiction over your place of residence.

3. Once your eligibility is recognized, a 7-day waiting period begins.

4. Attend the employment insurance briefing session and receive your 'Employment Insurance Eligibility Certificate' and 'Unemployment Certification Form'.

5. Report your job-seeking activities at Hello Work on your initial certification date (about 3 weeks after the briefing session).

6. If certified, your basic allowance will be deposited into your designated account a few days later.

If you do not understand this sequence of events, you may end up in a situation where you 'received the separation notice but left it alone' or 'put off going to Hello Work because it was a hassle,' which will significantly delay the start of your benefits.

What you should be especially careful about is cases where the separation notice does not arrive or contains incorrect information. It is not uncommon for company procedures to be delayed, or for the reason for separation to be listed as 'voluntary' when it was actually a recommendation to resign. In this case, it is important to contact the company promptly and consult with Hello Work if necessary.

Chapter 2: Health Insurance has 3 options: 'Voluntary Continuation,' 'National Health Insurance,' and 'Dependent Status.' Choosing the wrong one can cost you 100,000 yen a year.

The day after your resignation date, you automatically lose your health insurance eligibility. You must return the insurance card you held during your time as an employee upon resignation. There are three options here.

• Voluntary Continuation Insured Person System: A system where you continue to use the health insurance you were enrolled in before resigning (Kyokai Kenpo, union health insurance, etc.) as an individual. Procedures must be completed within 20 days from the day after your resignation date. You are responsible for the full insurance premium (since the company paid half during your time as an employee, it effectively doubles). However, there is a cap on premiums; for Kyokai Kenpo, the cap is a standard monthly remuneration of 280,000 yen (as of fiscal year 2024). The maximum period you can continue is 2 years.

• National Health Insurance (Kokuho): Complete enrollment procedures at your local municipal office within 14 days after resignation. Since premiums are calculated based on the previous year's income, the first year immediately after resignation is often expensive (because you were working full-time the previous year). Premiums vary by municipality, but for someone who had an annual income of around 4 million yen, it can be around 30,000 to 50,000 yen per month.

• Becoming a dependent of a family member: If your spouse or parent is an employee or public servant enrolled in social insurance, you can become their dependent. In this case, you do not need to pay insurance premiums yourself. However, there are conditions to become a dependent, such as having an annual income of less than 1.3 million yen (less than 1.8 million yen for those 60 or older or with disabilities), and if you are receiving unemployment insurance, you cannot become a dependent if your daily rate is 3,612 yen or more (approximately 1.3 million yen annually).

Which one you should choose depends on your expected income after resignation, whether you have a spouse, and your plans for receiving unemployment insurance.

For example, if you have already decided on a new job and the gap period is 1 to 2 months, you will join either Voluntary Continuation or National Health Insurance for a short term. On the other hand, if you plan to look for a job for several months and have a spouse, you could become a dependent until your unemployment insurance starts, and then switch to National Health Insurance after you start receiving benefits.

As a note of caution, Voluntary Continuation has a rule that 'if you miss even one premium payment, you immediately lose your eligibility.' Also, since switching to National Health Insurance is applied retroactively, premiums are incurred from the day after your resignation even if the procedure is delayed (meaning you will be billed later even if you forgot to do the procedure). I strongly recommend that you simulate the premium comparison on each municipality's website or the Kyokai Kenpo website before you resign.

Also, if there is a period after resignation when you do not have a health insurance card, you will have to pay the full cost (100% burden) when visiting a hospital, but the difference will be refunded if you present your insurance card later. However, since you have to perform this procedure yourself, you should avoid visiting the hospital as much as possible immediately after resignation or rush to get your insurance card issued.

Chapter 3: Switching your pension has an absolute rule of 'within 14 days'; leaving it alone will result in a period of non-payment.

During your time as an employee, you were enrolled in the 'Employees' Pension,' and premiums were deducted from your salary. When you resign, you automatically lose this Employees' Pension eligibility. What is required here is a 'switch to the National Pension.' You must complete the procedure to change your status to a 'Category 1 Insured Person of the National Pension' at your local municipal office within 14 days from the day after your resignation date.

The National Pension premium is 16,980 yen per month for fiscal year 2024. Compared to the Employees' Pension premium during your time as an employee (about 18% of your salary, split with the company), the amount itself might feel cheaper, but you must be careful that it is entirely your own burden.

If you neglect this switching procedure, that period will be recorded as a 'period of non-payment.' If the period of non-payment continues, it will not only reduce the pension amount you receive in the future but also affect your eligibility for disability pension and survivor's pension. In particular, there are people who do not go through the procedure because they think, 'I'm changing jobs soon so I'll leave it alone' or 'National Pension is expensive so I don't want to pay,' but this is extremely risky.

On the other hand, if you join a spouse's dependent coverage immediately after resigning, you become a "Category 3 insured person of the National Pension," and you will have no insurance premium burden. However, this also requires procedures through your spouse's employer and does not switch automatically.

Also, if your income drops drastically and paying insurance premiums becomes difficult, you can use the "National Pension Insurance Premium Exemption/Payment Deferral System." Resignation (unemployment) is eligible for special exemption, and you can undergo screening regardless of the previous year's income. If a full exemption is granted, payment of premiums is unnecessary, and a certain level (one-half) of your future pension amount is guaranteed. This exemption application can also be processed at your municipal office or Hello Work. It is important to know the option of "applying for an exemption if you cannot pay" rather than "leaving it alone because you cannot pay."

Pension procedures may not seem as urgent as health insurance, but if a period of non-payment occurs, it becomes very troublesome to fill in later. It is most efficient to complete them at the municipal office within 14 days of resignation, at the same time as your health insurance procedures.

Chapter 4: How Resident Tax Payments Change Based on the "Month of Resignation," to Avoid Being Surprised by Lump-Sum Collection Amounts

Resident tax is a "post-paid" tax levied on the previous year's income. For company employees, it is deducted from their salary in 12 installments from June to May of the following year. When you resign, this deduction stops, so you need to pay the remaining resident tax yourself. What you should be careful about here is that the payment method changes depending on the month of resignation.

• Resigning between January and May: The remaining resident tax is collected in a lump sum from your final salary or retirement allowance. For example, if you resign in March, the three months from March to May are deducted in a lump sum, so your final salary may be lower than expected.

• Resigning between June and December: In principle, resident tax up to the month of resignation is settled via salary deduction, and the remainder is paid using a payment slip sent to your home (ordinary collection). However, lump-sum collection is also possible if you request it.

If it switches to ordinary collection, a payment slip will arrive some time after you resign. You can choose to pay this in a lump sum or in four installments per year, but if you accidentally forget to pay, a late fee will be incurred. Also, resident tax for the year following your resignation (taxation on income for the year you resigned) will be paid using a payment slip sent to your home. Since this amount will also be quite high if you were working full-time the previous year, you should definitely include it in your post-resignation living expense plan.

Resident tax is a tax that "arrives when you've forgotten about it," and it easily becomes a hidden factor that puts pressure on your living funds after resignation. I strongly recommend that you grasp your annual resident tax amount (which can be confirmed on your withholding tax slip or pay stub) before resigning and estimate how much you will need to pay after you resign.

Chapter 5: The Three Major Documents You'll Regret Losing: Separation Notice, Withholding Tax Slip, and Certificate of Loss of Health Insurance Qualification

There are several documents you receive from your company after resigning, but the following three are particularly important.

• Separation Notice: Essential for receiving the basic allowance of employment insurance. It is often mailed by the company about 10 days after the resignation date. If it does not arrive, check with your company or consult Hello Work. There are two types of separation notices: "Separation Notice-1" (containing My Number and account information) and "Separation Notice-2" (containing reasons for resignation and wage information), and both are required.

• Withholding Tax Slip: Necessary for year-end adjustment or tax return for the year of resignation. If you have already decided on a new job, submit it to your new company. If you do not find re-employment within the year, you must file your own tax return between February and March of the following year. Without a withholding tax slip, you may not be able to calculate your income tax accurately and may not be able to receive a refund.

• Certificate of Loss of Health Insurance Qualification: A document proving that you lost your health insurance qualification on the day after your resignation date. It may be required for National Health Insurance enrollment procedures or when joining a family member's dependent coverage. Since some companies do not issue it automatically, request it at the time of resignation if necessary.

If these documents are lost, it can cause delays in reissuance or stall procedures. In particular, the separation notice and withholding tax slip are directly linked to your post-resignation living funds and tax refunds, so it is important to store them in a file or similar immediately upon receipt so that you can retrieve them when needed.

Also, you may be returned your "Employment Insurance Insured Person Card" and "Pension Handbook (or Basic Pension Number Notification)" by the company upon resignation. Keep these safe as well, as you will use them for your next job and various procedures.

Chapter 6: The Priority of Procedures Changes 180 Degrees Depending on Whether You Have Already Decided on Your Next Job

The procedures explained so far are based on the premise that you will be job hunting for a while after resigning. However, if you have already decided on your next job and the gap period is about 1 to 2 months, the way you proceed is completely different.

■ Top priority when your next job is decided

• Health Insurance: If the gap period is about one month, choose voluntary continuation or short-term enrollment in National Health Insurance. If you can join a spouse's dependent coverage, choose that.

• Pension: If the gap period is short, you may be able to skip switching to the National Pension (however, if your start date at your new job is the following month or later, switching is mandatory).

• Employment Insurance: Since you will re-enroll at your new job, unemployment insurance procedures at Hello Work are unnecessary. However, you should still receive your separation notice, as your new employer may request it.

• Withholding Tax Statement: Submit this to your new employer to have your year-end tax adjustment processed.

In this case, the most important things to confirm are health insurance during the gap period and the payment method for resident tax. In particular, if your start date at your new job is the following month or later, you must decide immediately what to do about health insurance during that time.

■ Top Priorities When You Haven't Found a New Job Yet

• Obtaining the Separation Notice: If it hasn't arrived after 10 days have passed since your resignation, contact your company.

• Job Application at Hello Work: Complete the procedures as soon as the separation notice arrives. If you resigned for personal reasons, there is a benefit restriction period, so start the procedures as early as possible.

• Switching Health Insurance and Pension: Complete the procedures at the municipal office within 14 days of resignation.

• Confirming Resident Tax Payment Slips: If your payment method has switched to individual collection, wait for the payment slips to arrive and ensure you don't forget to pay.

If you haven't found a new job, you will be responsible for National Health Insurance and National Pension premiums in parallel with receiving unemployment insurance. Anticipating this double burden, it is desirable to save at least 3 to 6 months of living expenses (including rent, food, utilities, insurance premiums, and taxes) before resigning. Also, do not forget that if you work part-time while receiving unemployment insurance, you must keep it to under 20 hours per week.

Conclusion: The 'Order of Action' Becomes Clear When You List What to Do in the First Month After Resignation by Deadline

Finally, let's organize the actions for the first month after resignation in chronological order.

By following this, you can complete the necessary procedures without panic.

■ From the Day of Resignation to Within 3 Days

• Confirm documents to receive from the company (return of health insurance card, confirmation of when you will receive the separation notice, confirmation of when the withholding tax statement will be issued)

• Since your health insurance becomes invalid the day after your resignation date, decide whether to choose voluntary continuation, National Health Insurance, or dependency

■ Within 1 to 14 Days After Resignation

• Health Insurance Procedures: Voluntary continuation must be done within 20 days, National Health Insurance within 14 days

• Pension Switching: Change of category to National Pension (within 14 days)

• *Both can be processed together at the municipal office

■ 10 days to 2 weeks after resignation

• Receive the separation notice by mail from your company (contact the company if it does not arrive)

■ Immediately after the separation notice arrives

• Apply for job seeking and unemployment insurance benefits at Hello Work

• Receive the "Unemployment Insurance Eligibility Guide" and confirm the date of the information session

■ 3 to 4 weeks after resignation

• Attend the unemployment insurance information session

• Receive the "Unemployment Insurance Eligibility Certificate" and "Unemployment Certification Application Form"

• Confirm the date of the first certification appointment

■ 1 to 2 months after resignation

• Receive the resident tax payment slip (if you resigned between June and December)

• First unemployment certification (if you resigned for personal reasons, you are still within the benefit restriction period at this point)

As you can see from this schedule, the first two weeks after resignation are the most important.By completing the switch for health insurance and pension during this period, and heading to Hello Work as soon as the separation notice arrives—just by following this flow, you can significantly reduce the risk of missing procedures. Conversely, if you leave it for two weeks thinking, "I'll just rest and think about it later," you may lose the option for voluntary continuation, incur periods of unpaid national pension, or delay the start of your unemployment benefits.

The first month after resigning is a time when you are physically and mentally exhausted, which is precisely why you need to create a "to-do list" in advance and adopt a mindset of mechanically checking things off.Quitting a job is a preparation period for a new start. If you neglect that preparation, you may run out of funds before you reach the next stage. The procedures are tedious, but if you take solid action here, you can focus on your subsequent job search and new life.

"Things to do after resigning" are actually "things you should know before resigning."

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