Payroll Giving Week is an initiative launched in 2020 by charities that wanted to increase the visibility of Payroll Giving and its benefits.
The first Payroll Giving week was in February 2021 and was successful in raising awareness of Payroll Giving as a way of supporting charities across the UK. The initiative was developed from an idea of the Payroll Giving Forum, which is a collective of charities who run successful Payroll Giving schemes.
In 2021, Payroll Giving Week not only raised the profile of charitable donations through payroll, but it also raised an additional £146,000 for charities in the UK.
In the UK, more than 8,500 employers facilitate Payroll Giving for their employees. Over a million people donate to charities through Payroll Giving. In doing this they have raised over £2 billion for charitable causes.
In 2022, Payroll Giving week runs from 7th – 13th February
What is Payroll Giving?
Also known as ‘Give As You Earn’ (GAYE), Payroll Giving schemes operate in the UK as well as Australia, the USA and a number of other countries. It is a scheme where employees make a donation to a charity, or charities, of their choice directly from their gross salary. Donations are deducted from employees’ salaries after National Insurance contributions have been deducted, but before tax, which means tax relief is applicable on the donation.
In contrast to traditional fundraising methods, payroll donations to charities increased by 10% during the first lockdown of the Covid 19 pandemic. There was also an uplift of nearly 15% in the value of donations, as well as an increase in corporate giving.
Benefits of Payroll Giving for employees
Payroll Giving is the most tax efficient way for an employee to make a charitable donation. The amount of tax relief that applies depends on the employee’s tax band. Based on a £10 charitable donation:
- For a standard rate tax payer (20%), the actual cost to the employee in real terms is £8
- For a higher rate tax payer (40%), the actual cost to the employee in real terms is £6
- For the additional rate tax payer (45%), the actual cost to the employee in real terms is £5.50
Payroll Giving is easy and convenient to set up for employees and also protects personal information. Schemes and payments are administered by the employer, so there is no need for employees to provide personal details such as bank account information or even email addresses. Employees can also donate to one or multiple charities of their choice.
Benefits of Payroll Giving for employers
Any employer in the UK can offer Payroll Giving to their employees, regardless of the number of employees in their organisation. There are no set up costs for employers offering schemes, though some Payroll Giving Agencies do charge a processing fee. For companies that pay the processing fee, they can claim tax back via their corporation tax, meaning more money goes to the chosen charities. Offering Payroll Giving to employees can benefit employers by:
- Showing a level of commitment and care to their employees
- Boosting the company’s reputation
- Improving staff morale, motivation and mental well-being
- Demonstrating support for good causes
- Enabling employers to match donations, which is tax deductible
- Receiving the Payroll Giving Quality Mark Award for being a company that cares
Benefits of Payroll Giving for charities
Payroll Giving is a scheme that is highly beneficial for charities, as it provides them with regular and reliable income. This allows them to better plan for the future, as well as to focus more attention on the aims of the charity.
By receiving donations through Payroll Giving, as opposed to more traditional means of fundraising, charities do not need to apply for Gift Aid. Tax relief is available at the time of donation rather than the charity having to apply for Gift Aid at a later date. This saves the charity both time and money for the administration of Gift Aid recovery.
Another benefit of Payroll Giving for charities is that the full value of tax relief is available. With Gift Aid, only 25% tax relief applies. When taxpayers are in higher bands and donate through Payroll Giving, the full value of tax relief applies to the donation. For more information on this, check out our blog that discusses Payroll Giving vs Gift Aid in more detail.
“This is particularly beneficial for donations from higher-rate taxpayers. A 45% taxpayer can see a donation’s value increase by 88% meaning £100 out of the donor’s pocket becomes £188 going to the charity.” www.payrollgivingweek.com
Finally, donating to charity through Payroll often yields charities larger donations, particularly with higher rate taxpayers. The attrition rate for Payroll Givers is also lower than normal charitable donors in times of economic downturn. Payroll donors, on average, make contributions to charity for an average of 8 years.
How can PayCaptain help?
PayCaptain has a Payroll Giving scheme built into the application which makes it quick and easy for the employee to make donations direct from their gross pay to the charity or charities of their choice. Charitable donations can be made either as a one-off donation or a regular payment, administered by PayCaptain. Within the solution there is also the option for employers to match their employees’ donations.
In summary, Payroll Giving is a valued benefit for employees as it enables them to donate to a charity or charities of their choice in the most tax efficient way. Donations are paid from gross pay, before tax. Employees receive their net pay and know that their charitable obligations are met. PayCaptain has the functionality built into the payroll solution for the benefit of employees, employers and charities alike.
To learn more about how PayCaptain can help your business, contact us for an informal, no obligation chat. We’ll be happy to demo PayCaptain for you!
More information on Payroll Giving and Payroll Giving Week is available here.
PayCaptain Payroll Solutions Limited, www.paycaptain.com is an HR/FinTech company that delivers a fully automated cloud payroll service. The solution contains many unique and innovative features for employees, helping them to take control of their pay and increase their financial well-being. PayCaptain is a payroll solution that helps employers pay their workforce, regardless of income and personal circumstances. The solution also incorporates functionality that is specifically designed to positively impact financial resilience for people struggling with money, or vulnerable and low-income employees.
PayCaptain is the first B-Corporation certified payroll company in the world. To read more about B-Corporations, visit www.bcorporation.net