Salary Disbursements / Payment – Choosing Methods of Payment

Once the salary sheet is prepared, the Net amount of Salary or Wage payable can be disbursed to employees and/or labourers using any of the following modes of payment:

  • Credit to employees' account
  • Direct Debit Statement
  • Cheques
  • Demand Draft (DD)
  • Cash payments
  • Digital wallets
  • Unified Payments Interface (UPI)
  • National Electronic Fund Transfer (NEFT)
  • Immediate Payment Service (IMPS)
  • Real-Time Gross Settlement (RTGS)

Credit to employees' account

Small Organizations adopt this form of payment where the employee count is a handful (less in number). The accountant or person in charge directly transfers the salary to the employee's bank account through an account transfer.

Direct Debit Statement

This salary payment method is the most commonly adopted forms of salary payments across midsized and large organizations. Today, with the advancement of technology, most organizations follow the direct debit system. Under this, a Statement of amounts payable to employees is drawn and sent to the company's banks for disbursal. Banks also have tie-ups with companies, which extend salaried accounts to employees. This method ensures quick and hassle-free salary payments.

Cheque payments

Organizations not opting for the above two facilities prefer cheque payments to keep a trail of salary expenses. This method is also adopted for the first month's salary payments to newly joined employees, where formalities relating to the opening of salaried accounts are time-consuming. The delay in time could be in reasons ranging from inadequate proofs submitted for opening accounts, or mismatch in employees' details. Cheques can be sent to the company's bank account for payment or handed over to the employees in person to be deposited in their bank accounts.

Demand Draft

Payment to outstation employees with no salaried account is made with Demand Draft (DD). DD's are also issued during emergencies when the employee needs cash, and cheque clearances could take more time.

Cash payments

Cash payment is a preferred way of salary disbursement in the unorganized sector. Mostly where contract workers, semi-skilled or unskilled workers are employed. Employees working in unorganized sector prefer cash payments over other methods. Cash Payments enables these employees to meet their daily needs instantly. The salaries range around the minimum wage prescribed or a little more than that. Employers ensure to get the signature or thumb impressions of workers in a salary register, as proof validating the salary payment made in cash.

Digital wallets

Facilities of secured and encrypted Digital wallets are available today. Various service providers develop applications. Services by many banks offer facilities of National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and Immediate Payment Service (IMPS). Other examples of Digital wallets are Unified Payments Interface (UPI), Paytm, Phonepe, Google pay etc.

Unified Payments Interface (UPI)

Unified Payments Interface (UPI) is an instant real-time payment system facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform. The UPI system powers multiple banks account into a single mobile application (of any participating bank), merging several banking features.

National Electronic Fund Transfer (NEFT)

National Electronic Fund Transfer (NEFT) is a countrywide electronic fund transfer system for sending money from one bank account to another. Amounts up to Rs.2,00,000 can be transferred via National Electronics Fund Transfer (NEFT) facility.

Immediate Payment Service (IMPS)

Immediate Payment Service (IMPS) is an instant payment inter-bank electronic funds transfer system in India. IMPS offers an interbank electronic fund transfer service through mobile phones. The service is available 24x7 throughout the year, including bank holidays. Amounts up to Rs.2,00,000 can be transferred via Immediate Payment Service (IMPS). The transfer happens instantly and is faster compared to National Electronics Fund Transfer (NEFT).

Real-Time Gross Settlement (RTGS)

Real-Time Gross Settlement, abbreviated as (RTGS) are specialist fund transfer systems where the transfer of money or securities occurs from one bank to any other bank on a 'real-time' and a 'gross' basis. Transfer of funds over Rs.2,00,000 are done through this method.