Payroll Giving is a simple way for employees to make regular gifts to charity directly from their pay before tax is deducted, thereby reducing the cost of them making regular gifts to charity.  It is also known as Give As You Earn (GAYE) or Workplace Giving.

The advantages of payroll giving include:

  • Once they have signed up most employees continue giving whilst they remain with their current employer, therefore it provides a regular, reliable, unrestricted source of income
  • It is easy for the donor to set up
  • As the gift is pre-tax it costs the donor less
  • It is good for employers to offer as part of their Corporate Social Responsibility

The amount donated by payroll giving is continuing to grow, with £114 million donated in 2010/11 by 720,000 employees.  Over 8,000 employers in theUKhave a payroll giving scheme in place.

How it works - Payroll Giving Agencies

For an individual to make a donation to charity by payroll giving their employer first of all has to sign a contract with a payroll giving agency (PGA).  Payroll giving agencies are themselves registered charities that are approved by HMRC to administer payroll giving.

Currently there are 14 PGAs to choose from across the UK.  Most PGAs make a small administration charge for carrying out this service, however WCVA has entered into partnership with one of these agencies, Charitable Giving, whereby WCVA will pay the administration charge meaning that all of an employee's donations will go to their chosen charity.  For more information on the charitable giving scheme see the Charitable Giving website where you can download an Employers Pack which includes the contract which needs to be signed. 

For an employer to get started with payroll giving the first step is to complete and return the contract.  In response to Clause 3 "It is agreed that the administration charge will be paid by ..." tick "Another organisation" and enter WCVA in the box.  Once the contract has been signed thePGAnotifies HMRC, this means that the employer can begin to deduct donations from pre-taxed income.

If you haven't already got a payroll giving scheme in operation in your own organisation then setting one up is one of the best ways of understanding how it works in practice.

How it works - Employees 

For an employee to sign up they simply complete a Donation Choice Form distributed by the employer and state how much is to be deducted each month.  Once completed the forms can be given to the payroll officer or if the employee would prefer to keep their instructions confidential they can send the form directly to Charitable Giving, in which case the employee simply notifies the employer of the total donation to deduct from earnings. 

The same form can be used to begin payroll giving, to cancel an instruction or to make alterations to their instruction. 

  • Employees can make donations to any recognised charity, church or charitable organisation. 
  • They can give to as many organisations as they wish. 
  • The minimum donation is £5/month or £1/week. 
  • Payroll givers give £7-10/month on average. 
  • Employees can choose whether they wish for their details to be passed onto their chosen charities.

How it works - the tax relief 

Since deductions are made before PAYE tax, employees receive all the tax relief for the donation at their top rate of tax.  For example, a £10 donation will cost a basic rate taxpayer £8, a higher rate taxpayer £6 and the highest rate taxpayer only £5. 

Promoting payroll giving

There are three broad options for promoting payroll giving:

  • Employ aprofessional fundraising organisationto promote payroll giving to employees on your behalf as one of a basket of charities that they promote;
  • Set up apayroll givingconsortiumof charities in your local community to appeal collectively to local employers;
  • Or Do-it-yourself

Do it yourself

You should make every effort to promote Payroll Giving yourself and make contact with employers where you have contacts, or who are likely to be interested in your work. The advantage of this approach is that you are promoting your own cause and a more direct, personal appeal is likely to be more persuasive.

Promoting payroll giving - Benefits for an employer

  • As part of an employer's Corporate Social Responsibility
  • Enhances the employer's public image
  • Demonstrates community involvement
  • Shows support for the causes that matter to employees
  • Aids in the recruitment and retention of staff, as employees like to work for a caring employer and the scheme is considered a 'benefit'
  • Boosts staff morale
  • Receipt of a Payroll Giving Quality Mark and, where target employee participation levels are met, an Award
  • Potential eligibility to enter the government supported National Payroll Giving Excellence Awards
  • Any costs incurred in setting up a scheme and promoting it to staff, may be offset against Corporation Tax as tax deductible expenses
  • Little administrative burden, low cost to set up and maintain

Payroll Giving Quality Mark

The Payroll Giving Quality Mark recognises and rewards organisations for making Payroll Giving available to their staff. Once organisations set up a Payroll Giving scheme, they will automatically receive a certificate as well as the Quality Mark logo for use on letterheads, websites and other company literature.

The Quality Mark acknowledges Payroll Giving has been implemented and demonstrates (both within the organisation and publicly) that the organisation is committed to the good causes its employees care about. 

Depending on the take up of the scheme, employers may be eligible for a Bronze, Silver, Gold or a Platinum Quality Mark Award. For more information about the Payroll Giving Quality Mark Awards see www.payrollgivingcentre.com.

National Payroll Giving Excellence Awards

The National Payroll Giving Awards Event is held annually in the autumn to celebrate the efforts of employers, charities and professional partnerships in promoting Payroll Giving in the workplace. Any employer who has achieved a Bronze, Silver or Gold Payroll Giving Quality Mark Award Certificate is eligible to apply for entry to the National Payroll Giving Awards.

The Awards and Event are funded by HM Government, organised in conjunction with the Institute of Fundraising and administered by the Payroll Giving Centre. The Payroll Giving Quality Mark Awards Certificates are issued annually to employers with a Payroll Giving scheme in place and achieve specified levels of participation.

Payroll Giving Consortia

Some employers do not allow individual charities into the workplace to promote their causes. Usually, this is either because the employer is concerned about setting a precedent of allowing charities into the workplace or sees no relevance to the approach being made by that particular charity. 

So what is likely to appeal to such an employer? The development of charity consortia, particularly those formed by small local charities operating within a defined geographical area, can be a particularly appealing proposition for businesses.

Not only does the option of presenting a consortium to employees to support through Payroll Giving appeal to employers but in the workplace the opportunity for an individual to give to a number of causes with one donation is also very popular.

For further information on setting up a Payroll giving consortium see the WCVA Information Sheet. For an example of a charity consortia in Wales see www.swanseacharitypartnership.org.uk.

Professional Fundraising Organisations

A Professional Fundraising Organisation (PFO) is an organisation which promotes payroll giving to employees. They undertake workplace campaigns and represent a 'basket of charities' for employees to select from. Currently approximately 80% of all new payroll givers in the UK are signed up by PFO canvassers. The Association of Payroll Giving Organisations represents both Payroll Giving Agencies and Payroll Giving Organisations.

To find out more about how to get started with Payroll Giving book onto one of Giving Wales popular Introduction to Payroll Giving training courses.