What is Payroll Giving?
Read our guide to find out what it is and the benefits for your company
Payroll giving allows your employees to give to good causes via their salaries.
Payroll Giving, also known as “give as you earn” is an easy and tax-efficient way to give to good causes straight from your salary.
It means you or your employees can make regular or one-off donations to charities and nonprofits, with the money automatically taken from their pay packet.
Giving straight from your salary has benefits for your company, your employees and for charities.
How is payroll giving tax-efficient?
Giving via the payroll actually has tax advantages for you or your employees.
The donation is taken from your salary after National Insurance contributions but before income tax is calculated and deducted.
This means the tax is calculated on a lower amount, which could mean you pay less tax, while the charity gets all the money you want to donate.
If you are a 20% taxpayer, for example, 80% of your donation will be taken from your salary and 20% will be from the tax which would otherwise have been deducted.
This means a £20 donation will cost you £16, but the charity will receive the extra £4 out of the money going to Her Majesty’s Revenue & Customs (HMRC) service.
If you're a 40% taxpayer, 60% of your donation will be taken from your salary and 40% will be deducted from the tax which would have gone to HMRC.
So, it’s cheaper and arguably more impactful to donate via your salary than it would be to put the money in a charity collection tin each month.
Equally, payroll giving can be used to give a one-off sum with potential tax advantages.
For example, an employee receiving a bonus might choose to donate a chunk of it via their salary, and this way they might avoid falling into a higher tax bracket.
What are the benefits of payroll giving for charities?
Payroll giving is more efficient for the beneficiaries of donations, too.
For example, other forms of direct donation involve charities claiming an extra 25% from the government in the form of Gift Aid.
Although Gift Aid is a brilliant system, it takes charity administration time and resources in order for the maximum amount to be received.
But with payroll giving, the full amount is delivered automatically without any effort on the part of the charitable organisation.
What are the benefits of payroll giving for businesses?
Payroll giving gives companies an opportunity to encourage employees to act positively towards a shared objective.
For-profit organisations will often have Environmental, Social and Corporate Governance (ESG) goals to work towards and report on.
Using software such as GivingForce, employers can get accurate data about employees’ payroll giving activity, and use this important information when measuring ESG impact.
As well as enhancing your ESG impact, studies have repeatedly shown that a workforce engaged in charitable activities is more likely to feel happy in their work.
Why not mark the annual Payroll Giving Week, held in the UK every February, with a celebration of your company’s payroll giving activity?
How does payroll giving work?
A company can decide if it wants to offer its employees the opportunity to donate to charitable causes via their salaries.
The employer will then need to set up a scheme via an approved payroll giving agency.
It is compulsory for all payroll giving agencies to be registered with HMRC so they can process payroll giving donations before tax is calculated. HMRC has a list of approved giving agencies on its website.
GivingForce works with its very own HMRC approved payroll agency, a charity called The Giving Force Foundation.
In most cases, an employee sets up a rule to give a specific amount regularly to the charity or charities of their choice.
For example, an employee might choose to donate £10 a month to a cancer charity and £15 a month to an environmental charity.
Their employer will pass these deductions on the employee’s behalf to the payroll giving agency within 14 days. They will also need to pass the Agency any matched sums too.
The giving agency must then pay that sum to the charities within 35 days of receiving the deduction (and matching amount from the employer).
How can company matching make a difference?
As well as encouraging employees to donate to charities via their salaries, some companies also offer to match those donations.
Company matching is where an employer offers to match the amount donated by their employees, usually up to a certain limit per employee per year.
Once an employee has made a donation via payroll giving, they can then request a match from their employer.
The GivingForce platform makes it easy for employees to both set up payroll giving and request matches from their employers.
Likewise, employers can use the platform to set rules and minimum and maximum amounts for charitable giving of this kind.
Find out more in our guide What is Company Matching?
What charities say about payroll giving
“Payroll giving is a really great, effective way of supporting your chosen charity
Given that’s been going on since 1987, it’s surprising how few people are aware of payroll giving. Only a relatively small number of employers in the UK offer it.
Around one million people currently give via their payroll, which is quite a big group. But there’s so much scope to raise awareness and drive more income for charities this way.”
— Mervi Slade, Product & Programme Manager - Payroll Giving at Cancer Research UK
“It isn't just the large household name charities that can benefit from payroll giving.
People can give to any cause with a registered number. We're only a really small charity and 90% of donors who give to us every month do it through payroll giving.
So it isn't just big charities that can benefit. It could be your local church or small animal charity like ours.”
— Caroline Gaskin, Development Manager at Together for Animals
How GivingForce can help companies to manage their payroll giving programmes
The GivingForce platform offers three key routes to charitable giving for employees, one of which is payroll giving.
Employees can set up payroll giving that is one-off or ongoing, and can select recipients from a list of verified and eligible charities. In the UK, HMRC only allows payroll giving to be made to charities registered with the UK Charity Commission, or those registered as exempt with HMRC.
They can also request verification for other charities and causes, which our due diligence team will then look into and confirm if they are suitable for payroll giving.
Employers can set up and apply rules about the amount of payroll giving they will match per employee, and the types of charities or causes which qualify for matching. For example, a company might match payroll giving up to £1,000 per employee per year, but will exclude religious and educational charities from this.
With our help, your payroll department doesn’t have to make lots of small payments to charities. Just send one sum to our payment management agency and they’ll do the rest. We work with a partner organisation, the GivingForce Foundation, who processes and distributes millions in charitable contributions each year to organisations worldwide.
Find out more about the GivingForce payroll giving module and book a demonstration for your company.
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