What are the Features and Benefits of Salary Account?

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If you, like me, have to pay your employees a salary each month, you may want to consider opening a salary account for them. This specialised savings account has been a game-changer as it has simplified how I can pay my employees their salaries. Further, I have noticed many unique salary account features myself. Among the many benefits of salary accounts, my employees and I can enjoy seamless access to comprehensive net banking and mobile banking services. 

Continue reading to understand all that a salary account entails and the benefits it provides me, my employees and the bank. 

Defining a Salary Account

Salary accounts allow employers to pay their employees their monthly salaries seamlessly and conveniently. This account is classified as a kind of savings account wherein the employer is responsible for depositing a fixed amount of money each month in the form of a salary. Apart from the ease with which funds are transferred, these accounts provide their account holders, i.e., employees, with other banking benefits. 

It isn’t unusual for companies and corporations to open salary accounts for their employees at large banks. As these accounts are also classified as interest-bearing accounts, they help their accountholders earn interest on the balance they maintain within their account. This interest is ordinarily calculated daily and is deposited into one’s account each quarter. 

If you join a company today, one of the first things your employer is likely to do is help you with opening a salary bank account. This account is provided after you fill out an application form that your employer then deposits with their bank.

Examining Salary Account Benefits

There are several ways in which salary accounts benefit the employers, their employees and the banks where these accounts are held. Some of these have been discussed below. 

  • Employee Benefits
  • Accessories Galore – Employees who hold salary accounts are provided with a debit card that they can use to withdraw cash and make online and offline debit card payments. A personalised cheque book is also made available to account holders to make cheque payments.
  • Balance Maintenance Isn’t a Must – Ordinarily, most salary accounts tend to be zero balance accounts. This means that account holders needn’t worry about maintaining a certain balance in their accounts, nor do they have to risk facing any penalty for not maintaining the balance. Employees that hold such accounts can take advantage of the flexibility they provide. They can manage their money as they see fit.
  • Enjoy Online Fund Transfers and Phone Banking – With a salary account, account holders can send and receive funds online from anywhere in the world. Cumbersome cash withdrawals and cheque deposits are therefore not needed when transferring funds. Most banks also provide account holders with phone banking facilities that make it possible to manage transactions from their mobiles. 
  • Make Investments if you Wish – Account holders of salary accounts can ordinarily invest in government bonds, mutual funds and insurance products, among others, with ease. Further, if an account holder wishes, a Demat account can be linked to their salary account such that they can make stock investments and trade hassle-free. 
  • Take Out a Loan with Ease – Salary account holders can access several loans from their banks. Further, if you already have a salary account with a bank, the documentation needed to avail of a loan with the same bank is reduced, making the process faster and simpler. Existing account holders tend to enjoy more competitive interest rates in comparison to those that don’t hold accounts with the concerned bank.

B. Employer Benefits 

  • Hassle-Free Account Creation - Employers who open salary accounts for their employees get to enjoy seamless account creation. They can onboard their employees swiftly and can open their accounts instantly. 
  • Opening Fees – Most banks do not levy an opening fee each time a salary account is opened for an employee by an employer. 

 

C. Understanding How the Bank Benefits

Salary accounts are often viewed far more profitably than savings accounts by banks. This is because salary accounts are set to receive a fixed amount of money each month from the account holders’ employer. This makes it a fixed stream of CASA (or current account savings account), which bodes well for the bank’s business. 

Exploring Additional Salary Account Features

While salary accounts allow monthly salaries to be credited, they also allow account holders to carry out the following tasks.

  • Accountholders can deposit cash and cheques into their salary account. In case large sums of cash are deposited, a declaration of the source is required.
  • Money can be transferred from and to a salary account.
  • Account-holders can withdraw their money from this account at any point in time.

Key Aspects to Consider When Selecting a Salary Account 

A large number of companies open salary accounts on behalf of their employees. That said, a few companies provide their employees with the right to choose the bank where they’d like to open their salary accounts. If the latter applies to you, you should consider the following factors before selecting.

  • Assess the Bank’s Reputation – Consider the bank’s reputation and select a reputed bank so that your money can be safe.
  • Understand Whether Digital Banking is Available – Make it a point to understand whether or not the bank you opt for has seamless digital banking services. These services will benefit you down the line. 
  • Consider Customer Support – Take a look at the bank’s customer support and opt for one where the customer service is good, as you never know when you might need help. 

 

Account Conversion

Suppose there is a situation where your salary isn’t credited into your salary account for three consecutive months. In that case, your account will be converted to a regular savings account. This would mean that the services and benefits enjoyed would also convert from those associated with a salary account to those linked with a savings account. 

On the flip side, if you join a company that holds salary accounts with a bank where you already hold a savings account, then the bank can convert your existing savings account into a salary account after obtaining a letter from the company.

 

Final Thoughts

Salary accounts benefit accountholders in several ways. That said, the precise advantages they offer may vary across different banks. If your employer offers to pay your salary via this account, you should consider availing of it. On the other hand, if you are an employer looking for a means to pay your employees their monthly salary, consider opening salary accounts at a reputed bank. Do so after comparing the services, benefits, and facilities they provide. The perks provided under salary accounts can go a long way in making your employees happy. 

Fi offers its users various financial services to simplify finance as they save. You can visit the website or download the app to know more. 

Frequently Asked Questions

What are the benefits of a salary account over a savings account?

Consider the following benefits that help set apart salary accounts from savings accounts.

A salary account benefits the holder as it doesn’t require a minimum balance to be maintained, while savings accounts might require account holders to maintain a minimum balance.

Salary account holders get to enjoy several benefits that aren’t linked to any fees. In contrast, benefits offered under savings accounts are fewer and tend to be linked to fees. 

Does a salary account have a minimum balance? 

There is no minimum balance linked to salary accounts. Owing to this very fact, they are called zero balance accounts. 

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