Payroll giving is an easy and convenient method for employees to donate money to a charity. An employer needs to set up the scheme, but each employee can decide how much they want to donate – this can be any amount. Payroll giving is flexible, and tax-efficient in that the money donated is not subjected to tax.
How does payroll giving work?
A payroll giving scheme works in a simple and efficient way. After the scheme has been set up, employees have the option to sign up and donate. Those who do will make donations directly out of their salary.
The donation amount is taken before tax, but after National Insurance has been deducted. This means that there is up to 45% tax relief – depending on the employee’s tax bracket. Payroll giving is a more tax-efficient method of donating money to charities than Gift Aid is.
How payroll giving tax relief increases donations
| Increased Donation Amount | |||
| Donation Amount | 20% taxpayer | 40% taxpayer | 45% taxpayer |
| £10 | £12.50 | £16.67 | £18.18 |
| £25 | £31.50 | £41.67 | £45.45 |
| £50 | £62.50 | £83.33 | £90.91 |
How to set up payroll giving
Payroll giving is free and simple to set up regardless of the size of your business.
Set up payroll giving by getting in touch with a Payroll Giving agency; the UK government provides this approved list of agencies.
When employees’ donations are sent to the agency each month via your company’s payroll department, it’s the agency that will orchestrate transferring the money to the chosen charity.
Some agencies will charge an administration fee. This is often taken out of the employees’ donations, however, an employer can choose to pay this instead so that the charities receive the entire donation. Any questions surrounding this should be directed to your payroll giving agency.
According to the Association of Payroll Giving Organisations (APGO), in 2019 around £134 million was raised for UK-registered charities using the Payroll Giving scheme. This was from around 1.1 million employees across the country.
What are the benefits of payroll giving?
There are many benefits to setting up a payroll giving scheme with an agency, to the charities, your employees, and your business as a whole.
Payroll giving benefits for charities
Aside from the fact that payroll giving facilitates the donation of millions of pounds every year for the UK’s charities, other benefits include:
- The fact that the donations are regular. A common problem for many charities is that the donations they receive can be sporadic. This can make it difficult when trying to forecast and plan ways in which funds can be spent.
- No gift aid administration is required. Ordinarily, to make the most out of donations, charity administrators must spend time processing gift aid requests. This is not necessary with payroll giving, however, due to the tax relief involved.
- Increased donation amounts. Because of the tax relief offered, many employees who take part opt to donate higher amounts than they ordinarily might. Also, in many workplaces, the employer adds an incentive of matching donations – which means more funds for the charity.
Payroll giving benefits for employees
As well as enjoying the heart-warming contentment that comes from doing a good thing, payroll giving has other advantages for employees.
- Simple way to donate. Payroll giving offers employees an easy way to donate to their chosen charity, that demands very little effort and administration. All they need to do is sign up.
- Charity donations that go further. An additional benefit is the fact that any donation an employee chooses to give will be added to because of the tax relief – even more than it would with gift aid.
- Sense of togetherness. Being part of a company scheme in which multiple employees make regular charitable donations can help make colleagues feel closer, as they realise they are among like-minded people.
Payroll giving benefits for a company
A company will see a number of benefits as a result of setting up a payroll giving scheme. These include:
- Improved team spirit. The combined effort of donating to charities, even if they are different charities, can be an uplifting way of uniting your team as it highlights the desire to do something good.
- A simple way to address corporate social responsibility. Business owners who wish to address their corporate responsibility will find that payroll giving is an easy way to do so, as it requires little administrative work or fees. Plus, any initial set-up and ongoing running costs that are incurred are deductible from your corporate tax liability.
- Recognition and reputation. By offering a payroll giving scheme, your company image is enhanced. This is because it illustrates your values as a business that wants to give back. Your commitment will also be recognised by The Quality Mark Scheme and National Payroll Giving Excellence Awards.
Payroll Giving FAQs
Can employee’s donate to any charity?
Yes, it’s up to the employee to decide which charity they wish to donate to. As long as the charity is UK-registered then the Payroll Giving Agency can arrange to transfer funds to them.
Can an employee choose to end donations at any time?
There is no obligation for employees to keep donating – they can do so for as long as they wish. If an employee wishes to stop donating, this must be communicated to the payroll giving agency via your payroll team.
Is it possible to donate to more than one charity?
Employees can choose to make regular donations to as many different charities as they wish, and the amounts can be different.
What happens if a donating employee leaves the company?
In the event that an employee who is part of the scheme leaves the company, their donations will end. Their last donation will be with their final pay.
