How charities can encourage payroll giving

With increasing costs and reduced funding for charities, it’s important to look at different ways to bring in income. Payroll giving is one option. Payroll giving has raised more than £2 billion for charities across the UK since it was set up in 1987, according to Charities Aid Foundation.

This article looks at how charities can encourage businesses to set up payroll giving and increase their incomes.

What is payroll giving?

Payroll giving – also known as Give As You Earn – is a way for people to make regular donations to charities through their employers. All UK registered charities are eligible to receive donations through payroll giving. The donation is taken straight from someone’s gross pay.

Why charities should set up payroll giving

Charities Aid Foundation notes that payroll giving provides charities with a regular and dependable source of income. This can help them to plan their work more effectively and build their long-term resilience.

Also, charities don’t have to claim gift aid on funds earned through payroll giving. This is because it is taken straight from an employee’s gross pay, before income tax is deducted. So, a charity doesn’t need to claim the tax back from HRMC, which frees up time and resources for staff to focus on other work.

Here are some tips for how to encourage businesses to set up payroll giving.

Speak to existing corporate partners

Have a conversation with your current corporate partners about payroll giving. If they don’t already have a payroll giving scheme in place, you could help them to set it up and introduce it to their staff. It’s a chance to let their employees know about the work the charity is doing and how they can support it.

You could run a promotional campaign to encourage employees of the corporate partner to sign up to payroll giving. This could include, for instance, a prize draw – with prizes such as a free lunch or an extra day off from work – for people who sign up to payroll giving.

It’s a good idea to offer in-person assistance at the corporate partner’s workplace to help staff sign up to payroll giving. This could be delivered by staff working for the corporate partner (charity champions), or employees from your charity.

Promote the benefits of payroll giving

Charities should promote the benefits of payroll giving to both businesses and employees in their marketing materials. The benefits to businesses include:

• Employers can choose to match donations made by their staff. This will show people that they take an interest in charities and prioritise corporate social responsibility
• Research by the Charities Aid Foundation shows that almost half (47%) of employees would prefer to work for a business that donates to a charitable cause
• People who work for businesses that donate to charity said that it has a positive impact on their employee experience. More than half (54%) of people said that they had a sense of pride in working for their employer
•  A company can offset the payments against profits and reduce its tax bill

The benefits to staff include:

• Payroll giving is a tax-efficient way to give to charity. Donations are taken from someone’s gross pay. This is after their National Insurance contributions have been deducted, but before Income Tax is removed
• There is tax relief on the donation. The amount is different depending on the rate of tax someone pays. For example, making a donation of £5 a month through payroll giving would cost an employee £4 from their pay, if they pay 20% tax. If someone pays 40% tax, it would cost them £3
• There’s no effort involved for staff. The donation is automatically taken from someone’s gross income each time they are paid. The staff member can increase, reduce, or cancel their donation at any time by speaking to colleagues in their payroll team
• A person’s donations stop automatically if they change jobs or retire. This means the person doesn’t need to do anything

It’s also worth pointing out that payroll giving is not compulsory. Employees of businesses that have payroll giving set up can opt in to make donations

Share information with companies

There are a number of resources charities can share with corporate partners to help them set up payroll giving. These include:

• Charities Aid Foundation: ‘The basics you need to know about payroll giving’. This blog has quick answers to common questions businesses may have about payroll giving. This can be shared with staff working for corporate partners to increase their understanding and awareness of payroll giving
• UK government: ‘Payroll Giving’ This includes further information about how payroll giving works
• Payroll Giving Month: Resources and Directory. This includes payroll giving agencies, like CAF. Companies that want to run a payroll giving scheme have to register with a payroll giving agency