Payroll giving is a scheme that enables employees to give to a charity straight from their gross salary (before tax is deducted). Any UK, EU, Norwegian or Icelandic charity that is recognised by HMRC for tax purposes can receive gifts this way.
Payroll giving allows UK employees to give more for less as the tax that would normally be paid to the government can be gifted to the charity too. It allows the charity to receive reliable income to enable them to plan for the future and for employers to contribute to sustainable corporate social responsibility initiatives. It’s also something that charities can do themselves - your fundraising team has the perfect opportunity to practice their approach with other employees before reaching out to new ones.
The individual (who must be on PAYE) decides on the amount and the charity/charities that should receive it, and informs their payroll department. The employer must have set up a relationship with a Payroll Giving Agency (PGA). PGAs are registered charities, regulated by HMRC, who receive the donations and transfer donations from employers to charities. For all information on how the tax relief works and how to set up a scheme go to HMRC.
The Institute of Fundraising’s Payroll Giving Special Interest Group exists to bring together all those involved with payroll giving to share information, best practice and new ideas, as well as debate current challenges. It also provides a great opportunity to network with other payroll practitioners whether from charities, professional fundraising organisations (PFOs), agencies or industry bodies.
Because the donation is taken from your gross pay, every pound you give will only cost you 80p, or only 60p if you are a higher rate tax payer. The cost of setting up the scheme to the employer is minimal, as is the continued administration of the scheme. The PGAs take a small amount out of the donation to cover this cost. This is generally around 4-5 per cent or 25p of the donation.
There are a range of benefits to all parties:
- Providing a reliable income stream
- Payroll donors are likely to continue giving for some time enabling charities to plan for the future
- Potential employer matching
For the donor:
- Tax effective
- No bank details required on sign-up
- Easy to set up and to maintain
For the employer:
- Improves Corporate Social Responsibility / raises Corporate Community Investment profile
- Boosts employee morale and sense of team-building (‘my company was responsible for donating a total of £xx to charity this year’) and, therefore, can aid staff retention
- Aids recruitment (increasingly, graduate applicants ask about the social responsibility and ethical profile of businesses)
- Any money the company gives is tax-deductible
- Can be awarded a Payroll Giving Quality Mark Certificate and become eligible to apply for the National Payroll Giving Excellence Awards
The Payroll Giving Quality Mark and Excellence Awards celebrate the achievements of employers that have adopted and successfully promoted payroll giving schemes in their workplaces, and have enabled their employees to give to the charities that matter most to them.
The Quality Mark provides a benchmark of achievement; it celebrates good practice and recognises employers who operate exceptional schemes. Every employer that offers a payroll giving scheme to their employees is eligible to receive a Quality Mark. Employers that achieve certain benchmarks are eligible to apply for a bronze, silver, gold or platinum Quality Mark.
Employers who achieve a bronze, silver, gold or platinum Quality Mark are eligible to apply for a National Payroll Giving Excellence Award.
There are a number of agencies known as Professional Fundraising Organisations (PFO) that are able to recruit donors on behalf of many different charities at the same time. They provide personalised materials, including websites and digital tools, promoting payroll giving for employers and charities, and have teams of expert fundraisers who can promote the scheme for employers across the UK. PFOs do charge the charity a fee for their services, but it may be worthwhile if they are able to tap into income streams that your organisation may not otherwise have access to.