Standing instructions in Payroll - Meaning & different types

Hello, in this post we will discuss all about Standing instructions in Payroll.

We will cover the following:

• Meaning of Standing instruction in payroll
  • Standing instructions issued by the employer
  • Standing instructions issued by the employee
  • Loans that can be linked to Salary and their conditions
  • Eligibility
• Banks that offer to pay telephone bills, electricity bills etc for the employees
• Salary Saving Scheme

What are Standing instructions in payroll?

Standing instruction is an order to a person/bank/organization for making payment on behalf of any other person. According to the payroll perspective, standing instructions comes as an order to the banker for paying the bills on behalf of the employee. In simple words, standing instruction/order means authorizing a person to pay some amount on behalf of somebody else.

This facility makes repaying the loan/advance or any payment very simple. Through a written declaration, your bank / financial organization is instructed to withdraw the sum of your EMI every month from your account and automatically deposit it in the HFIs’ EMI account.

As the process is automatic, it saves time and effort for everyone. Standing instructions can be issued for:

• Salary payments for the employee on behalf of the employer
• Payment of bills on behalf of an employee
• Repayment of loans/advances etc.,
• Payment of insurance premium
• Transfer of funds between the bank accounts

Standing instructions issued by Employer:

The employer can issue a standing instruction to the banks / financial institution for making the salary disbursements and other amount disbursements to the employees.

Standing instructions issued by the employee

The employee may issue a standing instruction to the banks / financial institutions for paying the recurring bills like telephone bills, electricity bills, premium payments, EMI’s for repayment of the loans, etc., to the respective organizations.

Loans that can be linked to Salary and their conditions:

A loan linked to employees’ salary is not necessary towards the personal loan. But in some cases, personal loans given by banks are linked to the employee’s salary. It depends on every individual bank as some banks only give personal loans linked to salary but some banks grant the same loan for buying a car, house, etc.

Banks and private financial organizations are competing at their highest pace by offering the best, cheapest, and most convenient financing option to the employees. A personal loan is the most preferred option by salaried people to meet any unforeseen incidents. Some banks allow the employees to club their spouse income and lend more money.

Eligibility criteria

The eligibility depends on the banker as to what is the minimum salary an employee should possess to have a loan linked with the salary. Some banks may restrict that employees must have a minimum take-home salary as Rs.10,000/- and must have completed 2 years of service in any organization. The eligibility criteria vary from bank to bank.

Banks that offer to pay the utility bills of employees

• ICICI Bank
• Indian Bank
• HSBC Bank
• Syndicate Bank
• State Bank of India
• Citi Bank
• ING Vysya Bank
• Central Bank of India
• Dena Bank
• Axis Bank
• Bank of India
• Standard Chartered Bank
• Canara Bank
• Corporation Bank
• HDFC Bank
• Union Bank of India
• IDBI Bank

Salary Saving Scheme

Salary Saving Scheme is a saving scheme where the employer deducts the premium from the salary of the employee and remit it to the insurance company. Premium has to be remitted only by the employer or a LIC Agent for this kind of saving scheme.

Salary saving scheme policies have been offered by

• Life Insurance Company (LIC)
• Reliance Life Insurance
• HDFC
• Max New York life
• Birla Sun Life Insurance
• ING Life insurance etc.,

Benefits of issuing a standing instruction for payment of insurance premiums:

• The policy holder having accounts authorizes the bank to deduct the premium from their account.
• The bank will deduct the premium at a pre-decided date and remitted to LIC.
• Time-saving.
• An easy and automated way of remitting the premium.
• This one-time instruction will remit the premium regularly on a pre-decided date.
• There is no chance of missing the payment of any premium.

Related:

Payroll Reimbursement and different types