Why Do Companies Require New Bank Accounts and Insurance for Short-Term Employees?

I am a retired person and would like to get clarification from HR or insurance companies. Of late, many employees are leaving organizations within months due to various factors such as better opportunities, work environment, or as a stopgap until they secure admission for further studies. Many companies promptly facilitate personnel by opening bank accounts and providing group insurance for their family members.

Is It a Necessity?

Even if employees have bank accounts elsewhere, they are required to open another account. Upon leaving the organization, employees often leave a balance, which renders the account inoperative, incurring penal charges that are squared off later. This constitutes unearned income.

The same issue applies to insurance premiums collected for a full year. Upon leaving their organization, employees may find it challenging to claim hospitalization expenses even in genuine cases, as the insurance coverage tied to the organization ceases to exist once the employee departs. Insurance companies should refund the premium amount accurately calculated to the respective individual since they possess all necessary details of the insured. It is essential for someone to highlight these shortcomings.

Facilitating Salary Disbursement Through Bank Accounts

The opening of bank accounts may be due to the reason that it facilitates the Salary Disbursement Department or Accounts Department to credit the salaries into employees' accounts maintained at one branch of a particular bank. This is instead of crediting them to a number of branches in different banks, which later poses a lot of reconciliation problems among the company, banks, and employees.

Employee Benefits and Insurance Premiums

The motive behind the insurance premium is employee benefits. However, you need to inquire with the concerned insurance company whether there is any provision to refund the premium thus far paid after some deduction towards a penalty in case of premature discontinuance.

Regards, B. Saikumar
HR & Labour Law Consultant