What is a salary account and what are its benefits?
A salary account is a type of savings account offered to salaried-class people. This account is specifically used to credit the employee's salary in the bank account by the employer.
Apart from the employee's regular payroll, employers also issue reimbursements, bonuses, perks, and other monetary compensation via these accounts.
Having a dedicated bank account for the employees yields benefits in two ways:
• An employee has a single account to receive the monthly salary and other payments
• An employee gets additional benefits like zero balance requirement, free debit card, discount vouchers, and more.
Individuals cannot open a salary account under their name if they are not employed.
A company can open corporate salary accounts on behalf of the employee.
The company has to tie up with a bank and create salary accounts for all the employees. The HR department then transfers the individual amount to each bank account every month.
Companies are adamant about creating salary accounts for each employee even though they have their bank accounts.
Creating and maintaining multiple accounts is a big task for companies, along with demanding high costs.
So why exactly do companies insist on creating individual salary accounts for employees?
Mentioned below are the benefits of a salary account for employers:
Maintaining individual bank accounts for every employee helps maintain and oversee them altogether.
They can quickly credit the salaries all at once because having funds in a single bank allows them to instantly receive the amount without any transfer charges.
Using a common bank to manage payroll allows speedy and transparent reconciliation of the company accounts.
The accounts department can keep track of the payments made through a single bank window instead of downloading and reconciling the statements of multiple banks.
Corporate salary accounts in a common bank make it easier to attend to and resolve queries. A company can contact its bank relationship manager to know more about it.
On the contrary, having multiple banks poses difficulty in settling the matter, as every bank has its unique way of handling customer grievances.
The salary accounts enable employees to use online banking services like mobile/phone banking and net banking.
The employees can use these services to transfer their salary into their bank accounts.
The bank account lets your employees use fund transfer methods to transfer locally.
There can be certain restrictions with an international transfer, but this varies as per the plan selected by the company.
Employees get to create their Demat account to start their journey towards investment and trading.
Because the company sponsors the account, employees are not required to pay for annual maintenance charges. But, this also varies from one bank to another.
However, not all salaried bank accounts offer Demat services.
Many people think salary accounts are not eligible for loans; in reality, these accounts enable employees to apply for personal loans.
The bank will decide the sanctioned amount according to the employee's net salary.
And the amount will get auto-debit on a pre-decided date of every month until the end of the tenure.
The employees are also eligible to apply for a credit card. The amount of credit granted depends on the employee's credit score.
Employees can use their salary accounts for utility payments like electricity bills, mobile recharge, WiFi charges, and other daily expenses.
Having an all-rounder salary account increases employee satisfaction by providing convenience in using its services.
Bank account holders must maintain a certain level of balance all the time to avoid additional charges.
However, almost all salary accounts are exempted from holding a balance. These accounts are referred to as Zero balance accounts.
Employees are not supposed to maintain any minimum balance and can withdraw their full salary without paying fees.
Since every salary account is a saving account, it happens to carry a fixed interest rate with it.
Salary accounts attract a specific rate of interest that varies from one bank to another. The interest is paid either quarterly or annually.
Hence, before selecting the bank account, inquire about interest rates and other charges.
Certain banks offer loan facilities to employees with salary accounts. It's always advisable to take up a bank that sanctions easy loans to them with a reasonable interest rate and paperwork.
Banks that offer online customer services and support have the upper hand compared to those that continue physical interaction.
If employees face issues related to their bank accounts, they should be able to approach their relationship manager easily and resolve the matter through an electronic medium.
Salary accounts that offer reward points, cashbacks, and vouchers help employees save a significant chunk of money annually.
A company creates salary accounts to credit the employee's salary. This account has a zero balance requirement and other benefits limited to the salaried-class people.
Any individual can create a savings account to deposit and save earnings and should not be necessarily employed.
If salary and savings accounts have almost the same features, how do they differ?
Salary accounts are created to transfer payroll and additional money-related transactions.
Companies maintain all the corporate accounts in a single bank to streamline the transfers and keep them unified.
Saving accounts are created to deposit the savings on an individual, allowing them to earn interest on it.
The main objective of this account is to encourage the habit of savings among people and allow easy management of finances.
Employers create salary accounts to allot them to their employees. Employees are given their bank accounts upon joining.
Any individual above the age of eighteen can open a savings account to manage their expenses and income. Individuals below the required age can have joint accounts with a major like parents or siblings.
Salary accounts do not have any minimum balance requirement. After receiving the salary, employees can withdraw the entire amount without penalties.
Commercial banks have a minimum balance requirement for their savings account holders. The balance changes from bank to bank and gets penalized if it's not maintained.
A salary account is automatically converted into a savings account in a case where no salary has been deposited for three months.
Once the account is converted, all the savings account features will be applicable, such as the minimum balance requirement.
A savings account can be converted to a salary account if it fits within the bank's norms.
If your savings and salary accounts happen to be in the same bank, the bank can consider converting them.
Human Resource Management (HRM) is a challenging task for companies, primarily if they rely on manual employee management methods.
Since the HR department deals with employee-related activities directly, any error in these processes impacts employee satisfaction.
With low levels of employee satisfaction, the business operations become slow to deliver.
One way out of this clutter is to adopt an integrated HRM software that leverages automation to deliver high-quality results.
Payroll management is often a chaotic task for the HR department.
Employees become intolerant of the unstructured payroll process if the salary deposits are delayed regularly.
Sometimes, there might be incorrect tax deductions or reduced salaries. Inefficiency in managing payroll increases employee dissatisfaction and willingness to contribute their best.
With an automated payroll management system, the HR department can trigger the salary payout beforehand, which will get automatically deposited in the respective bank accounts on the due date.
The software calculates tax deductions independently without having to enter them manually.
The HRM software allows the creation of individual accounts on the platform for every company employee.
With access to this account, employees can download their salary slips, know their allowances, perks, and benefits, enter additional leaves, and maintain a comprehensive database of their activities in the company.
The HRM software makes it easy to add or edit employee details without affecting other processes.
The system quickly adapts to changes like updating employees' personal and account details and payroll and tax slabs modifications.
This whole process is conducted without the involvement of pen and paper.
The HR software is designed to integrate with accounting software seamlessly.
With integrations between the two systems, employees can easily sync data sets of one software with another.
The accounting department is not required to enter the data manually. The integrations smoothly transfer the information without mixing it up.
HRM automation makes managing employee benefits -- like salary, pensions, provident funds, and others uncomplicated.
The software automates employee payroll calculation as per the data inserted in it.
Based on each employee's gross salary, the net pay is calculated after tax deductions like TDS based on each employee's gross salary.
The software stores the final amount to be paid against each employee's name and shoots it on the last working day of every month.
Related read - 7 steps to setting up payroll for your small business
The HRM system allows the HR department to generate reports like employee absenteeism to performance, monthly salaries paid, department-wise payroll, and benefits break-up, including customizable reports.
Based on these reports, the management gains insights into the company's payroll management system and how efficiently the departments handle employee benefits.
Protecting employee information is one of the core functions of the software. With layers of encryption and coding, the software is secured completely to prevent data phishing.
The HRMS software takes to following steps to ensure data security:
• Authorized user access to the software
• Sensitive data is stored encrypted in a secure data center
• Regular penetration and safety tests of the software