Payroll giving: Charity begins at work

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CharityEven though payroll giving schemes have risen in popularity tremendously over the last few years, there could still be many more people signing up to it. Lucie Benson examines what HR can do to encourage uptake - and benefit the business, your employees and charities in the process.

The basic premise for payroll giving is relatively simple. It is a tax-efficient way for employees to donate to a charity of their choice, through a direct deduction from their wage. For employers, the benefits are clear - it is a way for you to show that you are committed to working with the community and the causes important to your staff, as well as demonstrating to employees that you care, hence improving the company image and enhancing your CSR policy. It can also help build good employee relations and attract the right kind of people to come and work for you. Plus, it is pretty easy and cheap to run.

The facts and figures are also proof of its worth - when payroll giving was first introduced in 1987, £1m was raised for UK charities. In 2006/07, that figure increased to £89m. Plus, according to recent research, 96% of employers that have a payroll giving programme in place thought it was something a good employer should offer; and 61% claimed it improved the company image.

"It allows employees to plan exactly how they donate to charity, and have their contributions taken at a time of least impact for them during the month - through their salary."

Nicola Quinn, Brabners Chaffe Street

However, currently only 2% of UK employees participate in payroll giving schemes (in the US, the participation rate is almost 35%), and 10,000 UK employers are signed up to it. This figure could be higher, but the barrier seems to come from the fact that not enough people know about payroll giving.

"This is a great shame for charities because payroll giving means that they receive regular donations, meaning that they can make financial plans for the future," says Peter Cafferkey, senior company relations manager at the Charities Aid Foundation.

For Nicola Quinn, HR manager at law firm Brabners Chaffe Street, the benefits to both the company and its staff are obvious. "It enables the firm to enhance work-life balance choices for employees by co-ordinating the facility to donate to a charity of their choice direct from payroll," she says.

"From an employee's perspective, it allows them to plan exactly how they donate to charity, and have their contributions taken at a time of least impact for them during the month - through their salary. It is also a cheaper option for them, as due to its tax-free status, a £5 donation will effectively only cost them around £4."

Almost a quarter of the law firm's 376 members of staff are involved in the initiative. The firm pays the administration charges of the distribution agent so that the full donation reaches the employee's charity of choice.

How it all works

HMRC-approved payroll giving agencies

  • Achisomoch Aid Company
  • BEN - Motor and Allied Trades Benevolent Fund
  • Charities Aid Foundation
  • Charities Trust
  • The Charity Service Ltd
  • The Embassy of Man Payroll Giving Agency
  • KKL Payroll Giving Agency
  • Northern Ireland Council for Voluntary Action
  • Scottish Council for Voluntary Organisations
  • South West Charitable Giving
  • Sovereign Payroll Giving (Stewardship)
  • United Way Payroll Giving Service
  • Working for good
  • Source: HMRC

    So, if it really is that beneficial, how can HR encourage take-up? Well, first let's briefly go over how the scheme works. It is actually quite simple, according to Payroll Giving in Action, which says that the deduction is made out of the employee's pre-tax pay, and the money is then paid to an Inland Revenue-approved payroll giving agency, which will do the rest by distributing the money to the charities nominated by the employees. Most of the administration is carried out by your chosen agency and there are no tax forms to complete.

    "Setting up the scheme is a relatively easy procedure and, once up and running, takes a minimal amount of time to process per month," comments Quinn. "Essentially, a deduction needs to be set up for those employees who want to take part, much like a pension deduction. The HR department then sends donations monthly to the chosen distribution agent, who forwards the donations to the charities chosen by staff."

    The payroll giving agency usually charges an administration fee, which should be no more than 4% of the donation or 25p per payroll deduction, according to Payroll Giving in Action. This can either be paid by the company, like law firm Brabners Chaffe Street, or can be deducted from the employee's donation. In any event, it adds, these kind of costs should be absorbed in your existing payroll costs.

    Aside from these small costs, many organisations also choose to implement employer-matched giving, when a company donates an equal amount to their employees. Any matched donations made are allowed as a deduction against your profits.

    This is something that telecoms firm BT does, says Beth Courtier, head of BT's charity programme. "We manage the payroll giving programme within our CSR team. As a company, we pay all the admin costs and we match employee donations by up to £1m on a pro rata basis."

    Around 11% of BT's employees are signed up to the scheme at present – and they donated just short of £2.6m last year. This was matched with £1m from BT. Courtier says that the programme is about BT being a responsible business, and it forms part of its employee support strategy.

    "It is a reason for our employees to be proud about BT. We know that we have employees who take our company's credentials seriously. The programme shows that we do care and we also know that if you give employees positive messages, they will tell other people – a good news story is something your employees will start telling others about and so they will help promote the company."

    Lack of awareness

    The main barrier to payroll giving, it would seem, is a lack of awareness amongst employees. It is therefore up to HR to try and communicate the benefits to the company. One way that HR can encourage uptake is to use a professional fundraising organisation, says Cafferkey. These organisations can promote payroll giving through various campaigns, usually at no cost to the company. "Employers that show the greatest commitment to payroll giving often think of the most inventive ways of engaging their staff and have the best results," he adds.

    "Companies need to ensure they communicate with staff as soon as a scheme is introduced."

    Pam Pindar, Payroll and Business Solutions

    Karen Thomson, associate director of the Institute of Payroll Professionals (IPP) policy and research, remarks that there are many ways to promote a payroll giving scheme. "Quite often the agencies can assist. One way would be through the promotion of the payroll department, for example during 'National Payroll Week'. The employer could ask the agencies to come along and show employees how easy it is to sign up and know that money is going to their favourite concern.

    "Each organisation would need to evaluate the best method for their workforce," she adds. "If there is a geographically split workforce, flyers on canteen walls or locker rooms might be the best way. However, for a more office-based function, email alerts or intranet posters may work better."

    Communication is key, advises Pam Pindar, managing director of Payroll and Business Solutions. "Companies need to ensure they communicate with staff as soon as a scheme is introduced. They could include an invitation in payslips, send an email alerting staff, post details on the company intranet and ensure it's mentioned in any internal newsletters."

    Courtier says that BT is currently looking at more creative ways to engage people in the programme. "We have had professional fundraising organisations come in to help us encourage people to sign up - we don't pay them to do this. We also do promotions, and target new recruits and graduates. But if you want the scheme to be successful, you do have to invest time because there are so many things happening in the business all the time, so you have to be proactive and think creatively."

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