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.
Who can open a salary account?
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.
Why does a company give a salary account to their employees?
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:
Uncomplicated 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.
Quick reconciliation
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.
Easy to resolve queries
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.
Benefits of a salary account for employees
1. Online banking services
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.
2. Online fund transfer
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.
3. Demat account/services
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.
4. Loan 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.
5. Credit cards
The employees are also eligible to apply for a credit card. The amount of credit granted depends on the employee's credit score.
6. Utility payments
Employees can use their salary accounts for utility payments like electricity bills, mobile recharge, Wi-Fi charges, and other daily expenses.
Features to consider before choosing a salary account
Having an all-rounder salary account increases employee satisfaction by providing convenience in using its services.
Minimum balance requirement
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.
Rate of interest
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.
Loan facility
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.
Electronic availability
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.
Rewards program
Salary accounts that offer reward points, cashbacks, and vouchers help employees save a significant chunk of money annually.
Difference between a personal savings account and a salary account
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?
The purpose of creating
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.
Created by?
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.
Minimum balance requirements
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.
Convertibility
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.
- Purpose
- Created by
- Minimum balance requirement
- Conversion
How do HRM integrations make payroll management easier?
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.
Benefits of the HRM software for your business
1. Automate payroll
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.
2. Individual accounts for each employee
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.
3. Ease in updating employee account details
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.
4. Integration with your accounting systems
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.
5. Automate payroll calculation and tax computing
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
6. Customize reports
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.
7. Security
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