What is a payroll account? Know its benefits (2023)

What is a payroll account?

A salary account is a type of savings account that your employer has opened and into which you receive your monthly salary. Salary accounts have a minimum balance of zero and certain features and benefits such as free withdrawals. The best advantage of a salary account is that you are assured of timely and hassle-free salary payment and a smooth transaction facility. So you can easily use your salary for your daily expenses if you deposit your salary into this account.

Linked to your PAN card, a salary account can be converted into a savings account when they stop receiving salary for a certain period.

How does a salary account work?

A salary account offers features and benefits aimed at regular income earners, such as direct deposit and automatic bill payment. It has a simple working process.

  • First, open a salary account in a bank of your choice. This will usually be a bank that has a relationship with your employer
  • Your employer will then credit your monthly salary to this account
  • You can use money from this account with a debit card or online banking to pay bills, transfer money and other financial transactions


A salary account has the following advantages:

(Video) What is Payroll? Introduction to Payroll | QuickBooks Payroll

  1. No balance: The limit for the minimum balance requirement is set to zero. Employees are not forced to adhere to any limit. Even if the payroll account runs out or falls below the limit, employees do not have to pay a penalty or extra money to maintain the account.
  2. Access to loans: If your employer has a relationship with the bank, you can more easily access loans with a lower interest rate. Professionals are offered competitive interest rates and faster documentation loans. The bank provides the account holders with car loans, home loans or personal loans or any other service they want.
  3. Debit card facilities: Salary account holders get free debit card facilities. Individuals can use the card for online and offline cash withdrawals. From time to time, the bank also offers special offers for purchases by payment card.
  4. Personal check book: Account holders get a check book after opening a salary account in an accredited bank. The personal checkbook function helps you pay easily and quickly.
  5. Online geldovermakingen: Salary account makes sending and receiving money a breeze for its members. Supports online and telephone banking. Account holders can make payments, receive money or shop their favorite offers without compromising on the good things in life.
  6. Reduced rates: Some banks offer lower interest rates for on-demand transactions, NEFT/RTGS transactions and salary account cash withdrawals.
  7. Current account facility: Some banks offer overdrafts where the account holder can withdraw more money than is in the account, but only up to a certain limit.
  8. INSURANCE: Account holders of this account can also avail the free insurance cover offered by some banks. Some banks may cover hospitalization, accidents and other unlikely events in this policy.
  9. Rewards and Cashbacks: Some banks even offer exciting cashback and reward points on purchases made with this account's debit card.

Who can open a salary account?

Everyone can have a salary account. The only criterion for this is the relationship between the bank and the organization. Employers cooperate with a bank where they can open a salary account for all their employees. If employees do not have a bank account, the organization helps them with the process. The salary account is therefore for everyone who has an allowance from a company or organisation.

He metJupiter's money, this can be easily doneopen a salary accountand enjoy all the benefits that come with it.

Difference between salary account and savings account

People often confuse a salary account with a savings account.

However, it must be understood that a savings account is for individuals to save and earn extra money, while a salary account is a savings account for white-collar workers. It saves money for professionals and helps them get interested in it.

The painting highlightsmain differences between a salary account and a savings account.

Salary accountSavings account
AppropriatenessYou must work for a company that has an account relationship with the bankAnyone over the age of 10 who meets the nationality requirements is eligible to open a savings account.
Minimum balance requirementThere is no minimum balance required to open a salary account.Individuals must have a balance in their savings account.
GoalThe primary purpose of a payroll account is to record employee wages.The savings account exists to promote savings among individuals.
Benefits offeredSeveral benefits are offered to salary account holders.Savings account benefits usually come with a fee.
frozen baseBanks must have a relationship with the organization.There is no such requirement to open a savings account.

Account conversion

Can I convert a salary account to a savings account and vice versa?

(Video) Payroll and Benefits #withGusto: Loved by HR admins, employees, and more

The answer is yes!

Conversion is possible in both directions.

If you have a savings account in the same bank with a link to the organisation, the bank will convert it to a salary account at the request of the employer. Similarly, some banks can evenconvert a salary account to a savings accountif you do not receive compensation in your salary account for three consecutive months.

Therefore, the conversion process is less time-consuming and extremely easy. You can use it anytime for any of the above situations.

Why Choose Jupiter Pro Payroll Account?

  • No minimum balance:Jupiter is a completedigital bankwith a minimum balance requirement of zero. It simplifies all your transactions and frees you from costs such as fines and fees for not maintaining a minimum limit.
  • Free health insurance: Having a salary account with Jupiter money entitles you to many other benefits. neo bank offers you 2 Lakh free health cover with cashless cover. The health cover operates at more than 5,000 network hospitals and supports account holders' mental and physical well-being.
  • Salary on request: Jupiter Pro salary account has an exclusive 'Salary on Demand' feature. This means that you can now make a salary every day. There are no interest or processing fees. It also offers direct payday loans.
  • Rewards on expenses:Digital bank has a reward for all your spending. Jupiter helps you earn 1% rewards up to250 Rsevery month. Rewards are applicable on all UPI debits and charges and are valid indefinitely.
  • No Forex fees: There are no fees for foreign expenses. Jupiter Money bypasses the extra 3.5% fee normally charged on international spend.

Last reason

A salary account acts as a balance between employer and employee. It is a no minimum balance account that works best for all professionals. Salary account and savings account are similar, but have different functions. Banks make it possible to switch accounts in case of disasters. However, you should choose the best bank for salary account after thorough research. If you choose the top option, you are entitled to various services.

Frequently Asked Questions (FAQ)

  1. What is the meaning of a salary account?
    The salary account is used to credit salary. The bank opens the account at the company's request and deposits a fixed monthly income into the employee's account.
  2. How much money can I have in my salary account?
    You can keep up to ₹ 2 Lakh in your salary account. Details may vary from bank to bank.
  3. What type of account is a salary account?
    A salary account is a type of savings account.
  4. Can I convert my savings account to a salary account?
    Yes, you can convert your savings account to a salary account and vice versa.
  5. What is the interest rate on a salary account?
    Interest on your salary account varies from 3% to 4% annually. Different banks have different interest rates, but this is the average.
  6. What is the minimum balance required for a payroll account?
    One of the biggest advantages of a salary account is that it is a zero balance account. Therefore, there is no limit to maintain a minimum amount to avoid maintenance costs.
  7. What happens to your paycheck after you're fired?
    A salary account is converted to a regular savings account if it has not received money within the last three months.

What is a payroll account? Know its benefits (1)

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What is a payroll account? Know its benefits (2)

(Video) Payroll Deductions & Benefits

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What's a payroll account? ›

A payroll account is a type of checking account that businesses can use solely to pay employee wages. It can make the separation of business funds clear, and ensure there's always money in the business to pay employees.

What are the benefits of being on payroll? ›

Budget benefits: Earning a salary makes budgeting easier. You can plan your finances better because you know your exact take-home pay for each month. Higher income: Salaried jobs often pay more. You could earn a higher income, and you may have a higher net income thanks to benefits like company-paid health insurance.

What is payroll and why is it important? ›

It can also be defined as the process of providing compensation to employees for the work they perform on behalf of their organizations. Payroll is one of the most important aspects of business. It affects employee morale and reflects a business's financial stability and reputation.

Are benefits part of payroll? ›

An employee benefit is any benefit provided or paid by the employer for the benefit of the employee or the employee's family. Benefits are generally included in the employee's wage for tax purposes, except those benefits that qualify for exclusion.

What is the payroll account in Quickbooks? ›

Payment Account: This account is often called the "payroll clearing" account and is used to reconcile the net payment amount of the payroll to the transaction from your bank account. Wages Expense Account: This account is used to record the gross wages expense for the pay run.

What is a payroll example? ›

A document that details the employee's gross wages, taxes, and deductions; employer contributions and taxes; and the employee's net pay. Forms employers must file with tax agencies (e.g., the IRS) that summarize employee pay information, such as wages and taxes. Examples include Form 941 and Form W-2.

What is the most important thing about payroll? ›

When learning how to do payroll, taxes are the most important thing to remember. Federal, state, and local taxes are withheld from an employee's paycheck. An employer must know the current tax rates and include income tax, social security, and Medicare fees so he can properly calculate what the payroll tax should be.

How does a payroll work? ›

It involves calculating total wage earnings, withholding deductions, filing payroll taxes and delivering payment. These steps can be accomplished manually, but an automated process is usually more accurate and efficient and may help you comply with various payroll regulations.

What does payroll do for employees? ›

What Is Payroll Processing? Payroll processing is the method you use to compensate your employees for the work they perform. It includes calculating wages, withholding taxes and benefit premiums, and delivering payment—often through direct deposit.

Does total payroll include benefits? ›

Payroll includes all forms of compensation, such as salaries, wages, commissions, dismissal pay, bonuses, vacation allowances, sick-leave pay, and employee contributions to qualified pension plans paid during the year to all employees.

Are payroll taxes benefits? ›

Payroll deductions are wages withheld from an employee's total earnings for the purpose of paying taxes, garnishments and benefits, like health insurance. These withholdings constitute the difference between gross pay and net pay and may include: Income tax. Social security tax.

Is payroll and benefits part of HR? ›

Changing employee pay rates, tracking termination dates and start dates, and entering or changing benefits information falls under the human resource umbrella.

What accounts do I need for payroll? ›

Essentially, payroll-related accounts include a mixture of expenses and liabilities.
  • Employee compensation (expense)
  • Employer taxes and insurance (expense)
  • Benefits (expense)
  • Payroll taxes payable (liability)
  • Employee deferrals payable (liability)
Sep 10, 2020

What is the difference between accounts and payroll? ›

Accounting is the process of recording, organising, measuring and evaluating a business and its financial information. Payroll accounting relates to the process of recording, organising measuring and evaluating employees salary, holiday pay, sick pay, paternity, and maternity pay.

What account does payroll come from? ›

While payroll is a current liability that has to be paid out, it is recorded separately from the accounts payable entries. Recording payroll involves the usage of both expense and liabilities accounts.

Why is it called payroll? ›

Simply put, payroll is a list of employees to be paid, with the amount due to each of them. The word came into use around the 1750's as a combination of the words Pay (a verb) and Roll (a noun) referring to a list of periodic payments made to employees as salary.

What are the payroll items? ›

There are payroll items for compensation, taxes, other additions and deductions, and employer-paid expenses. QuickBooks uses payroll items to track individual amounts on a paycheque, and accumulated year-to-date wage and tax amounts for each employee.

What is the most common payroll? ›

The biweekly pay period is the most common, followed next by weekly, then semimonthly, then monthly.

What are three important objectives of a payroll process? ›

The key objectives for any payroll system are to produce payroll accurately, on time, and in compliance with all legislation.

What is payroll process in simple words? ›

In simple terms, payroll can be defined as the process of paying a company's employees. It includes collecting the list of employees to be paid, tracking the hours worked, calculating the employee's pay, distributing the salary on time, and recording the payroll expense.

Is payroll easy to learn? ›

As we've seen, payroll is something that can be difficult and challenging for beginners, but it's not something that necessarily has to be like this. If you want to stick to manual methods, you'll want to first break down each aspect of payroll into its necessary parts, and make your way through one at a time.

How is payroll accounting done? ›

Payroll accounting consists of filing and tracking employee compensation data like money withheld from each paycheck and taxes and benefits the employee receives. Payroll accountants use financial journal entries to summarize an organization's transactions and total cash flow.

What's the difference between salary and payroll? ›

The net net salary is the net salary minus the employee income taxes. It represents the net amount that the employee really earns once all the payments for social and income taxes have been made. Payroll, by contrast, is the process by which salary is paid to employees.

What are payroll expenses? ›

Payroll expenses are what employers pay to hire workers.

To pay workers, start with gross pay and deduct withholdings to calculate net pay. Processing payroll requires collecting and managing data, and your payroll expenses may change frequently.

How much per hour are benefits worth? ›

Average costs of employee benefits

According to the U.S. Bureau of Labor Statistics, benefits account for 29.6% of the average cost per private industry employee, or $11.42 per hour.

Do you get payroll taxes back? ›

Typically, if you overpaid your taxes during the year, you may be entitled to a payroll tax refund. This refund is issued by the Internal Revenue Service (IRS) and is based on the amount of taxes that were withheld from your paychecks.

Who pays payroll taxes employee or employer? ›

An employer generally must withhold Social Security and Medicare taxes from employees' wages and pay the employer share of these taxes. Social Security and Medicare taxes have different rates and only the social security tax has a wage base limit. The wage base limit is the maximum wage subject to the tax for the year.

What payroll expenses do employers pay? ›

Social Security and Medicare taxes

The total due every pay period is 15.3% of an individual's wages – half of which is paid by the employee and the other half by the employer. This means that each party pays 6.2% for Social Security up to a wage base limit of $160,200 and 1.45% for Medicare with no limit.

Who prepares the payroll? ›

1. A finance or HR staff person prepares the Payroll Calculation Sheet two or three days before pay day. He or she signs the sheet to certify that he or she has prepared it.

Who runs payroll in a company? ›

Sometimes payroll is part of HR, sometimes it's part of finance — and occasionally it's a stand-alone department reporting directly to the CEO.

What is another word for payroll? ›

What is another word for payroll?
72 more rows

What do I need for a payroll account? ›

Registration Process
  • Name and Social Security number. ...
  • Name and Social Security number. ...
  • Physical business address and mailing address.
  • Business phone number.
  • Valid email address (contact person and business).
  • Date of first payroll when wages exceed $100.
  • Nine-digit federal employer identification number (FEIN).

Is payroll the same as direct deposit? ›

There are situations where direct deposit might not be the best form of receiving payment. Payroll cards make it possible for those who do not have a bank account or local banks near them to receive a paycheck. Printing out checks can be expensive, and some banks even charge extra for direct deposits.

Can I deposit to a payroll account? ›

In general, payroll accounts come with a BDO ATM debit card and can accept cash deposits or fund transfers.

Do I need to have a payroll account? ›

If you operate a business and employ one or more employees, you must register as an employer with us when you pay more than $100 in wages in a calendar quarter. If you are a household employer of one or more household workers, you must register with us when you pay cash wages of $750 or more in a calendar quarter.

What accounts are used for payroll? ›

Expense accounts such as salaries or wages expense are used to record an employee's gross earnings and a liability account such as salaries payable, wages payable, or accrued wages payable is used to record the net pay obligation to employees.

How do I set up a payroll account? ›

How to set up payroll
  1. Step 1 – Apply for an EIN. ...
  2. Step 2 – Obtain your local or state business ID. ...
  3. Step 3 – Collect employee documents. ...
  4. Step 4 – Choose pay periods. ...
  5. Step 5 – Purchase workers' compensation insurance. ...
  6. Step 6 – Offer optional benefits to employees. ...
  7. Step 7 – Open a payroll bank account.

How does payroll work? ›

It involves calculating total wage earnings, withholding deductions, filing payroll taxes and delivering payment. These steps can be accomplished manually, but an automated process is usually more accurate and efficient and may help you comply with various payroll regulations.

What does payroll need for direct deposit? ›

Each employee needs to provide the following information: bank name, account type, account number and routing number. Some states also require employees to sign a consent form before their employer can switch them to direct deposit.

How do I direct deposit payroll? ›

Steps for Direct Deposit Setup
  1. Choose A Payroll Service Provider. ...
  2. Establish A Company Payroll Account. ...
  3. Send A Direct Deposit Authorization Form To Employees. ...
  4. Verify Correct Account Information. ...
  5. Run standard payroll process.
Apr 10, 2023

Is payroll account considered cash? ›

The cash in bank set aside for payroll is included in cash because it is for the payment of current liability.

Does payroll account have Maintaining balance? ›

Generally, a payroll account will be converted to a Regular ATM Savings account with a maintaining balance of Php 2,000.00. To know the status of your account, you may coordinate with your branch of account or call BDO Customer Care through our 24/7 hotline at (+632) 8631-8000.

Can I use my payroll account as savings account? ›

How can I convert a payroll account to a savings account? For some companies, they will require you to surrender your payroll account ATM to them. This means that your account will also be canceled by the company. Some companies will also ask you to go to the bank and close your payroll account.


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