Why set up Payroll Giving?

28th June 2024

  • For employees, it offers a simple, pre-tax way to support causes they care about, maximising the impact of their donations.
  • For charities, it’s a steady, tax-efficient funding stream that saves on administrative costs.
  • For employers, it can demonstrate their commitment to social responsibility. Plus, any matching payments or costs associated with running the scheme can also be offset against profits, thereby reducing Corporation Tax

However, a recent survey by the Charities Aid Foundation (CAF) highlighted that only 4,000 UK employers currently offer Payroll Giving and the number of employees donating to charity through payroll giving has declined by 13 per cent since 2020.

This drop in donations means that local charities are potentially missing out on “millions of pounds” at a time when the rising cost of living is having a huge impact, as they try to balance paying increased running costs alongside greater demand for their services.

Dan Insley is a partner at Streets Whittles, a Chartered accountancy firm working with businesses and individuals across Essex and Suffolk.  The company has a long association with ECF and has provided a payroll service on a pro bono basis since the Foundation started in 1996.

Dan said, “Payroll Giving is a convenient and effortless way for employees to voluntarily donate to registered charities directly from their salary, eliminating the need to make manual bank transfers or paperwork.

“Interestingly, not many employers offer Payroll Giving and few employees seem to be aware that the system exists.  This is surprising as there are clear tax benefits to both the individual and the employer and setting up a Payroll Giving Scheme is quite straightforward.

“There are a number of approved Payroll Giving Agencies who can work with your payroll department or provider to set up a process and add the salary deductions into your payroll system.  Once established, the agency will facilitate the process of deducting donations from employees’ salaries and distributing them to their chosen charities.”

Perry Norton, head of development at ECF said, “Businesses are often judged by the difference they are making in their local communities and it’s a trend we have been seeing for some time.

“People are paying more attention to how companies engage with and contribute to the communities where they operate. This can include everything from environmental sustainability initiatives to charitable donations, support for local events, allocating time for staff volunteering, and encouraging staff to use their skills and expertise through charity trusteeship.”

Companies who actively demonstrate their commitment to supporting their communities can enjoy a range of benefits, including enhanced reputation, increased customer loyalty, and improved employee morale.  As a result, many businesses are incorporating community support and social responsibility into their core values and strategic planning, recognising that it’s not just good for society but also good for business.

Perry explained, “With around 5,000 registered charities in Essex and the same number of voluntary and community groups, it can be difficult to know who to give money to and where it will have the greatest impact.

“At ECF we work with businesses helping them to establish an approach that fits with their corporate ethos, while making an immediate difference and having a lasting impact on the lives of local people.

“One of the easiest ways for businesses to engage their staff in supporting their community is to adopt a Payroll Giving scheme which is a tax efficient way for individuals to support charities.

“If businesses set up a charitable fund with us, staff can become fully involved in fundraising and making decisions about which charities to support.  We introduce them to grassroots organisations they may not be aware of and are in need of funding.”

If your business would like to discuss ways to support your community, please contact Perry Norton at ECF on 01245 355947 or email perry@essexcf.org.uk