What is a Salary Account ?
Salary Accounts are a handy way for the employer to pay the employee’s monthly salary. It not only simplifies the process for the business, but it also provides ‘Salary Account’ advantages to the employee. It is a form of Savings Account in which the account holder’s employer puts a specified amount of money as’salary’ every month.
Salary accounts are a form of special savings account available to employees. It is a convenient method for the employer to pay the employee a monthly compensation. Having a salary account simplifies things for employers while also providing unique advantages and amenities to employees. Furthermore, employees will have easy access to innovative mobile banking and net financial services.
To open a salary account for its employees, an organisation (company) must partner with a bank. The employers transfer the employees’ pay as a lump sum amount to their separate bank accounts once a month. If the employees do not already have an account with the bank with which their employers have a relationship, the employer will assist them in creating an account with the corresponding bank.
Benefits of a Salary Account
Salary Account benefits may differ from one bank to the next. However, there are several perks that all banks provide –
- Account with no minimum balance: All Salary Accounts allow you to have a functioning account without needing to keep a minimum amount in it.
- Debit Card: Payroll Accounts provide debit cards with a variety of perks.
- Cheque book, Passbook, and e-statements are all free services provided by banks.
- Access to web banking: In today’s environment, having access to your money over the internet has become a basic requirement, and every Salary Account includes this feature.
- Phone Banking: All banks provide this service.
- SMS Alerts: Receive SMS notifications of all activities in your Salary Account, such as salary credited, etc.
- Cash withdrawal: You have access to free ATM cash withdrawals, however the number varies based on the bank and the kind of Salary Account that your boss has selected.
- Access to ATMs from different banks: You have a limited amount of withdrawals per month from ATMs of other banks.
- Online fund transfer: online banking allows you to transfer money to and from your Salary Account.
- Utility Bill Payment: You may quickly pay your utility bills using the Salary Account.
- Mortgage offers: As a Salary Accounts holder, you can take advantage of numerous loan offers made available by your bank. It is referred to as ‘preferential pricing offers’ on loans.
- Debit Cards: According to the type of Salary Account used by your company, the purchase limit and other benefits connected with owning a debit card may vary.
- Banks provide credit cards with additional incentives to Salary Account holders.
- Salary Account Holders may also be offered the opportunity to open a free Demat account in order to trade on the stock market or put money into mutual funds and other products.
- Insurance: According to the type of Salary Account, you could be offered coverage for accidental death, flying, checked baggage, fire and burglary, and even protection against fraudulent debit card transactions.
- Account for Family: A free zero-balance account with similar features for the Salary Account holder’s family members.
- gasoline Surcharge: Use debit cards to save on gasoline surcharges.
- Discounts and cash back deals
- A personal relationship manager has been appointed to assist with any issues.
- Account for reimbursement
- Free airport lounge access, etc.
Why does a corporation provide their employees with a pay account?
Companies insist that they set up salary accounts for each employee, even if they have bank accounts. Creating and managing several accounts is a time-consuming and costly effort for businesses. So, why do businesses insist on creating separate its for their employees? The following are the advantages of an account for wages for employers:
Employers will find it simple.
Maintaining separate financial accounts for each employee aids in their overall maintenance and oversight. They can rapidly credit all of the wages since holding funds in one financial institution allows them to get the amount without incurring any transfer fees.
Rapid reconciliation
Using a standard financial institution to conduct payroll enables for quick and transparent account reconciliation. Instead of downloading and reconciling several bank statements, the accounting department can maintain track of transactions made through a single bank window.
Simple to answer questions
Corporate salary accounts with a single bank make it easier to respond to and address issues. To learn more, a corporation might contact its bank account manager. On the other hand, having many banks complicates matters because each bank handles consumer complaints differently.
Considerations when selecting a salary account
Having an all-purpose salary account boosts employee satisfaction by making it easier to use its services.
Minimum required balance
To avoid additional charges, bank account users must maintain a particular level of balance at all times. Almost all its, however, are excluded from carrying a balance. Zero balance accounts are what they’re called. Employees are not required to keep a certain amount of cash and can withdraw their entire paycheck without incurring any fees.
Interest rate
Because every pay account is a savings account, it has a fixed interest rate. its have a variable interest rate that varies from bank to bank. The interest might be paid quarterly or annually. As a result, before choosing a bank account, learn about rates of interest and other fees.
Credit facility
Workers with salary accounts can get loans from certain banks. It is usually wise to seek out a bank that grants them simple loans with acceptable interest rates and paperwork.
Electronic accessibility
Banks that provide online customer service and support have an advantage over others that continue to rely on physical interaction. If employees have problems with their financial accounts, they should be able to simply contact their relationship manager and fix the issue using an electronic means.
Programme of Rewards
Employees who have salary accounts which provide reward points, refunds, and coupons save a large amount of money each year.
Difference between Salary Account and Savings account
A salary account is a form of savings account, however it is not identical as a traditional savings account. Read on to learn about some of the most important distinctions between the two. Most folks are introduced to banking and finance through a savings account. Similarly, opening a pay account is typically the initial step in beginning a career as an employee with a salary. While it is a form of savings account, it is not the same as a conventional savings bank account. There are considerable distinctions between these accounts in terms of it perks, purpose, balance requirements, and who is eligible to open the account. The following are some of the most significant differences between the two:
1. Account Purpose
A salary account is often opened by a company or a salaried employee for the purpose of deposit or receiving monthly pay. Employers have agreements with particular banks to open employee salary accounts. When an employee is recruited, the company usually opens a salary account for him or her. A savings account, on the other hand, is a bank account into which individuals can put their money. Its primary goal is to promote savings and make financial management easier for account members.
2. Minimum Balance Requirements
A pay account often has no minimum balance requirements. As a result, an employee’s entire income in the salary account can be taken without regard for a minimum balance restriction or penalty. In many private banks, there is a minimum balance that you must keep in your savings account. The bank may punish the account holder if the amount in the account falls beneath the minimum balance.
3. Account Convertibility
If no pay is credited for a specified period of time (usually three months), the account turns itself into an ordinary savings account. When the account is converted into a standard savings account, the person who holds it is expected to maintain a minimum balance as specified by the bank’s terms and conditions. You can change a savings account to a salary account if your bank allows it. For example, if you have an account for savings in a bank and your new company has a relationship with the same bank, your ordinary savings account can be transformed into a pay account.
4. Account Opening and Interest Rates
As previously stated, a salary account is formed in a bank that is affiliated with the company by an employer or an employee. A ordinary savings account, on the other hand, can be opened by anyone. These are both interest-bearing accounts. In most institutions, the interest rate on pay and savings accounts is the same. However, in order to better meet the financial needs of its customers, most banks today provide a wide range of pay and savings accounts. Interest rates might range between banks and even between various kinds of salary/savings accounts provided by the same bank.
