Questions
ABOUT PAYROLL GIVING
- What is Payroll Giving?
- How does the tax break actually work?
- How does Payroll Giving differ from Gift Aid?
- Why is Payroll Giving so important for charities?
- How much is donated to charity through Payroll Giving?
What is Payroll Giving?
Payroll Giving enables employees to give to any UK charity straight from their gross salary (before tax is deducted), giving immediate tax relief of up to 50% on their donations.
How does the tax break actually work?
The full donation is taken out of each employee’s gross salary, meaning that his or her overall income tax liability is reduced. For example, a £10 gross salary deduction would reduce the overall tax liability of a basic rate taxpayer (paying tax at 20%) by £2.00, of higher rate taxpayers (paying 40% tax) by as much as £4 and of super rate taxpayers (paying 50% tax) by as much as £5. So that £10 donation costs £8.00 (for basic rate taxpayers), £6 (for higher rate taxpayers) or £5 (for super rate taxpayer). Further examples are given in the table below.
| Employee pledges | Cost to standard rate taxpayer | Cost to higher rate taxpayer | Cost to super rate taxpayer |
| £5.00 per month | £4.00 | £3.00 | £2.00 |
| £8.00 per month | £6.40 | £4.80 | £4.00 |
| £10.00 per month | £8.00 | £6.00 | £5.00 |
| £15.00 per month | £12.00 | £9.00 | £7.50 |
How does Payroll Giving differ from Gift Aid?
Employees that choose to give through Payroll Giving benefit from full income tax relief on their donations, but with Gift Aid it is the charity that gets tax relief at the basic rate. By giving through Gift Aid, UK taxpayers are entitling charities to claim basic rate tax already paid to HMRC back against the value of their donations (raising the value of each gift by as much as 25%). However, highest rate taxpayers can potentially claim back the difference between their highest rate of tax (50%) and the basic rate (20%) that has been/is being claimed in Gift Aid by a charity. For example, on a £100 donation, the individual could potentially claim £37.50.
Why is Payroll Giving so important for charities?
The real benefit of Payroll Giving for charities is that it forms a sustained, regular income stream that charities can rely on. But it’s not only charities that benefit, donors also get immediate tax relief and employers get a Quality Mark award for demonstrating commitment to the causes that their employees care about. So, everybody wins!
How much is donated to charity through Payroll Giving?
Currently, employees donate over £104 million to Payroll Giving each year but, with the introduction of the new Quality Mark scheme and Grants programme, we are hoping to see millions more going to good causes on an annual basis than ever before. Ivan Lewis MP, Economic Secretary to HM Treasury, sets a challenge to UK businesses and their employees, has set a target of £100 million for Payroll Giving in 2006, saying:
"Payroll Giving is something that every organisation can get involved in, whatever their size. I hope that the coming financial year will be a record year of donations raising in excess of £100 million for good causes." "
WHY SIGN UP TO PAYROLL GIVING
- Why should businesses offer Payroll Giving to staff?
- Why should smaller businesses get involved?
- What are the benefits for employees of giving through the payroll?
Why should businesses offer Payroll Giving to staff?
Payroll Giving is vital for charities and there are real advantages for businesses too. This is a great way for employers to demonstrate social responsibility and their commitment to good causes in the local community and beyond, and it can be a real perk to offer employees. There are virtually no set up costs in signing up to the scheme and all modern payroll systems can handle the donation systems.
And now, with the new Quality Mark, employers that sign up to Payroll Giving are presented with a certificate and logo for use in your corporate literature. The Quality Mark also incorporates an Awards scheme for employers that succeed in generating sustainable income streams for UK charities by promoting the scheme to staff and achieving minimum participation rates.
Why should smaller businesses get involved?
Through Payroll Giving, even the smallest companies with minimal budget to spare have the opportunity to generate that vital level of support for charities that they might not otherwise afford to give.
What are the benefits for employees of giving through the payroll?
Payroll Giving is easy for donors. It’s just a case of filling in one simple donation form, from which employees can choose to donate any amount to any UK charity. The donations are transmitted via a Payroll Giving Agency to the employees’ chosen charities and, because it comes off their gross salary, employees get immediate tax relief.
WHAT EMPLOYERS NEED TO KNOW
- Which charities can employees give to?
- Can the employer nominate a charity partner?
- What does an employer have to do if they want to sign up?
- How do I find out about Payroll Giving Agencies?
- How much does it cost to put a scheme in place?
Which charities can employees give to?
Employees can give to any registered charity or charities simply by completing one donation form. The employer only makes one deduction for each employee’s total donations and the Payroll Giving Agency distributes the amounts to the recipient charities. Many employees choose to donate to more than one charity.
Can the employer nominate a charity partner?
The employer can certainly nominate a charity to promote to their employees, but employees must be notified that they can choose to support any UK charity, not only the one being promoted.
What does an employer have to do if they want to sign up?
Payroll Giving is easy for employers, all you have to do is to sign up to a Payroll Giving Agency (PGA) who will do all the hard work for you, distributing donations to your employees’ chosen charities. Your PGA will talk you through what you need to do and distribute the donations to the selected charities. Almost all payroll software accommodates Payroll Giving, making it easy to set up and administer. Click here to find out more.
How do I find out about Payroll Giving Agencies?
There are around nine HMRC-registered Payroll Giving Agencies (PGAs) and these are all listed on our useful links section.
How much does it cost to put a scheme in place?
Most employers say that there are no identifiable costs of putting schemes in place. Those that do attribute a cost to the scheme usually say that it costs between £100 to £200 (including staff time) to set it up.
PAYROLL GIVING - THE PROCESS
- What is a PGA and why do we need one?
- How much do PGAs charge?
- What is a PFO and what is the benefit of working with one?
- Why do we need to sign a Payroll Giving contract?
- What does the contract contain?
- What is a Payroll Giving mandate (sometimes called an Authority to Deduct, or Charity Choice form)?
- What happens to the Payroll Giving mandates / forms?
- Can an employee keep their chosen charity private from their employer?
- What does an employer have to do each month?
- How will the charity know who their payroll donors are?
- What happens if the donor wants to remain anonymous?
What is a PGA and why do we need one?
Before you can begin to make deductions from pre-tax pay you must have a contract with a Payroll Giving Agency. All PGAs are registered charities. Click here to see a list of HMRC approved PGAs.
How much do PGAs charge?
Most PGAs make a small administration charge (0-4%) which is deducted from the employee’s donation before being sent on to the charities. A growing number of employers choose to pay the administration charge on behalf of their employees to ensure that their full donation is received by the charity.
What is a PFO and what is the benefit of working with one?
Many medium-sized and larger employers choose to use a Professional Fundraising Organisation (PFO) to promote the Payroll Giving scheme to staff members. PFOs can saves the employer time and presents the scheme to employees in an informed, yet unbiased way. PFOs represent a basket of charities and will come into your place of work to promote Payroll Giving to your staff. Employees can choose to donate to any UK registered charity. Click here to see a list of PFOs.
Why do we need to sign a Payroll Giving contract?
A contractual agreement will secure your working relationship with a PGA and provides HMRC with the necessary audit trail for pre-tax payroll deductions. The contract authorises the employer to commence deductions.
What does the contract contain?
The contracts are very simple and contain all the relevant information to comply with the legislation surrounding pre-tax deductions from pay and the role of the PGA. By signing the contract, the employer commits to making deductions on behalf of employees that wish to participate in the scheme and to forward these monies to the PGA each month.
What is a Payroll Giving mandate (sometimes called an Authority to Deduct, or Charity Choice form)?
This is a form that an employee must complete to authorise the employer to make deductions from pay. Employees simply complete one form, identifying the names of the charity or charities they want to support and how much they wish to give.
What happens to the Payroll Giving mandates / forms?
The employer simply forwards the completed forms to the PGA so that they know which charities receive the money from each employee’s pay.
Can an employee keep their chosen charity private from their employer?
Yes - if an employee wants to keep their choice of charity a private decision, they can simply forward the completed form to the PGA themselves. Employers can use their own forms, or those supplied by the PGA, a PFO
or a charity.
What does an employer have to do each month?
Employers forward employee’s payroll deductions to the PGA, usually once a month, including a list of people that have donated and the amount they have had deducted during that period. This list enables the PGA to distribute monies according to the wishes of each employee. If a new donor has started giving in the month the employer should forward any additional Payroll Giving Forms completed at the same time. Your PGA will give you further advice and support about how running your Payroll Giving scheme smoothly.
How will the charity know who their payroll donors are?
The PGAs can provide charities with disbursement statements upon request. The statements ensure that charities are given the names, addresses and (in some cases) the workplaces of their donors so that they can write to the donor and thank them.
What happens if the donor wants to remain anonymous?
All forms allow the donor to donate anonymously to the charity or charities chosen. The PGA then simply marks the donor as ‘anonymous’ on the disbursement statements.
PROMOTING PAYROLL GIVING
- What is the best way to promote the scheme to our employees?
- Who should do the promoting?
- I am self-employed - can I give to charity through Payroll Giving?
What is the best way to promote the scheme to our employees?
We have a number of suggestions of ways to promote Payroll Giving in your workplace. Click here to download our top tips for promoting Payroll Giving or visit our ‘Go for Gold’ page.
Who should do the promoting?
There are three main ways of promoting Payroll Giving and they are:
An internal promotion . An enthusiastic, motivated individual or group of staff can act as your in-house Charity Champion(s), promoting Payroll Giving to colleagues. This can be a very successful approach and your Payroll Giving Agency will always be able to help provide additional help and guidance.
Charity promotion . Invite a representative from a charity or group of charities (a consortium) to present their cause and the Payroll Giving scheme to your staff. Your employees can choose whether to support those charities or another of their choice.
Employ a Professional Fundraising Organisation . PFOs specialise in workplace fundraising and their teams of trained fundraisers can visit your organisation, explain to employees how Payroll Giving works and its benefits and answer any queries they might have. Generally, they represent a ‘basket of charities’ designed to appeal to all employees, but your employees can choose to support any UK charity through the scheme.
Click here to view our published materials page to download some materials that you could use to promote the scheme in the workplace.
I am self-employed - can I give to charity through Payroll Giving?
Donors must be on a PAYE scheme to give through Payroll Giving. However, if you are a self-employed person that employs others whose income tax is calculated via PAYE, you can still put a scheme in place for your employees.
ABOUT THE QUALITY MARK
- What is the Payroll Giving Quality Mark?
- What is the aim of the Quality Mark?
- How will my organisation be recognised and rewarded?
- How can I claim my award?
- Who funds the Quality Mark?
What is the Payroll Giving Quality Mark?
Launched in January 2006, it’s a new scheme that recognises and rewards organisations of all sizes for making Payroll Giving available to their staff . The Quality Mark comprises a certificate and logo, as well as Bronze, Silver and Gold Awards. The Awards reward employers for fostering a culture of committed giving in the workplace by actively promoting Payroll Giving.
What is the aim of the Quality Mark?
The Payroll Giving Quality Mark aims to provide sustainable income sources for UK charities by increasing participation in Payroll Giving.
How will my organisation be recognised and rewarded?
At its most basic level, you will receive a certificate and logo for use on your letterheads, websites and other literature, simply for making Payroll Giving available to your staff. This acknowledges that you have implemented Payroll Giving and demonstrates your commitment to the good causes your employees care about.
Awards are available for organisations that achieve minimum staff participation rates and employer support as outlined below:
- Bronze Award - 1% employee participation in Payroll Giving
- Silver Award - 5% employee participation in Payroll Giving
- Gold Award - 10% employee participation in Payroll Giving + pay the administration charge, match donations or demonstrate that they have carried out an active promotion of Payroll Giving during the past 12 months
The Certificates are a symbol of outstanding commitment, recognising those employers that are making a difference together through Payroll Giving, benefiting good causes and employees alike.
How can I claim my award?
Your Payroll Giving Agency will monitor the employee participation rates you have achieved by October each year and allocate an Award in line with the criteria. If you are eligible for an Award, your PGA will issue the Award between April and June each year. Alternatively, if you think you qualify for an award, you can approach your PGA directly.
Who funds the Quality Mark?
The Payroll Giving Quality Mark is funded by HM Government, administered and promoted by the Institute of Fundraising.
ABOUT THE PAYROLL GIVING CENTRE
What is the Payroll Giving centre?
It is a comprehensive resource centre for information on Payroll Giving, aimed at the general public, charities, businesses and the media. It can be accessed by emailing via this website to [email protected], by calling 0845 602 6786 or by writing to: Payroll Giving Centre, PO Box 52709, London, EC3P 3WX.
ABOUT NATIONAL PAYROLL GIVING AWARDS EVENT
- Why do we have a National Payroll Giving Awards Event
- Who Funds the National Payroll Giving Awards Event
- What are the Quality Mark and Awards Certificate
Why do we have a National Payroll Giving Excellence Awards Event
The first National Payroll Giving Awards Event is held to celebrate the efforts of employers, charities and professional partnerships in promoting Payroll Giving in the work place. Any employer who has achieved a Bronze, Silver or Gold Payroll Giving Award Certificate is eligible to apply for the National Payroll Giving Awards.
Please see the section National Payroll Giving Excellence Awards for further details.
Who Funds the National Payroll Giving Awards Event
The Awards and Event are funded by the Cabinet Office, organised in conjunction with the Institute of Fundraising and administered by the Payroll Giving Centre.
What are the Quality Mark and Awards Certificate
The Payroll Giving Quality Mark and Award Certificates are issued annually to all employers with a Payroll Giving scheme in place and achieve specified levels of participation.