The benefits of setting up payroll charity donations in the workplace

While 35% of Americans give money to charity through payroll, only 4% of us do in the UK. This is all the more remarkable since Oxfam describes payroll giving as the easiest, most tax-efficient way to donate.

“Because donations are made before tax, a percentage of the donation is contributed by the taxman, so donors can afford to be even more generous,” explains Steve Harvey, new products manager at Oxfam.

“In the case of standard rate tax payers, the tax is 22% of the donation. Givers who earn above the higher tax threshold of £33,000 are even better off as the cost to the taxman is 40% of the donation.”

The secret £1bn

Payroll giving was introduced in 1987, yet it remains one of the least understood means of donating to charity.

A recent Oxfam/YouGov survey of 2,327 adults found that one-third of the UK workforce would donate an average of £9.60 a month through their salary if they knew how. Oxfam estimates that this could add almost £1bn to charity coffers.

As charities find it increasingly difficult to recruit new donors through traditional methods such as direct mail, telephone calls and the dreaded ‘charity mugger’ or ‘chugger’, they are increasingly looking to the workplace as a recruiting ground. Many HR departments, however, view these developments with some concern.

Implications for HR

Linda Chick, senior HR consultant at specialist employment consultancy PES, says that while there are clear tax advantages to payroll giving, companies should be wary of rushing in just because of these.

“They should bear in mind that they will be undertaking all of the administration and promotion work for the charity,” she says. “It becomes another complication for the HR department to manage and for the accounts department to pay.

“Furthermore, in my experience, very few employees take advantage of payroll giving. I feel that if individuals wish to give to charity it is their personal business, rather than something else for overstretched HR departments to handle on top of their existing responsibilities. I also have concerns about ‘giving fatigue’, given the number of times individuals are approached for donations,” she adds.

Maurice Cheng, chief executive of the Institute of Payroll Professionals, says: “These schemes can become incredibly complex for HR. In the worst-case scenario, you have each individual employee giving to a different charity, and you have some employees who have stopped giving for a certain time because they are on sickness absence or maternity leave. For this reason, it is often simpler to hire a Give As You Earn agency to do all the hard work.”

Getting help

John Austin-Brooks, business development manager at Sharing the Caring, the professional fundraising division of the Charities Aid Foundation, says: “We work with companies to run their giving schemes. We can do everything from the payroll practicalities through to the all-important internal promotion. People assume these schemes are difficult to set up, but once they’ve got us on board, they’re actually very simple.”

There is, however, a cost associated with using an agency like Sharing the Caring. When it recruits a donor for a charity, it charges the charity a one-off fee – an amount Austin-Brooks is unwilling to divulge. He does, though, explain that the charity will usually recoup that fee within the first year. Many companies prefer to administer and promote their schemes themselves, or at least to cover the administration costs, to ensure that as much money as possible reaches the charity.

Conscientious lawyers

Law firm Addleshaw Goddard is one such company. It set up a workplace giving scheme in 2006, as part of a strategy to address concerns raised during an opinion survey that the firm was not giving enough back to society. Around 10% of its workforce now gives on a monthly basis. The firm funds the administrative charges for its scheme and, during December, matches people’s contributions, using money that would have otherwise been spent on paper Christmas cards.

“The role for HR is to raise awareness among employees of the opportunity, to manage the relationship with the supplier of the service and also to maintain the numbers of people involved through ongoing communication about the scheme,” says Marcus Jamieson-Pond, the firm’s corporate social responsibility manager. “It can be time consuming and there are pitfalls to overcome, but there is a fundamental reason why an employer should broker that relationship: it is the right thing to do.”

Rational altruism

There is a lot involved, but a well-run workplace giving scheme can bring benefits as well as costs. Stephen Lee, professor of non-profit organisations at Henley Management College, says: “Increasingly, company stakeholders are looking to see what a business achieves beyond its own bottom line. A well-publicised, efficiently-run giving scheme can make a company more attractive to prospective and existing employees, and even to clients.”

If it really is the case that even a firm of lawyers can be motivated by altruism, then it cannot be long before the rest of the business community starts to follow suit, and we in the UK become as enthusiastic about workplace giving as employees already are on the other side of the Atlantic.

Case study: Rufus Leonard

Three years ago, London-based brand and digital media consultancy Rufus Leonard decided to set up a workplace giving programme for its 70 employees. From the outset, HR manager Lucy Kay wanted to focus on just one charity rather than spreading the firm’s efforts across too many. So she e-mailed staff, asking them to nominate their preferred charity. The top five were related to children, so the company agreed to develop a relationship with the National Society for the Prevention of Cruelty to Children (NSPCC).

Since then, Rufus Leonard has raised around £9,000 through a range of events. It has auctioned items donated by clients, and held a ‘school fete’ in the office, which involved staff paying to throw wet sponges at the chief executive. During the football World Cup in 2006, it turned the design studio into a replica Wembley stadium, and last month it held a fundraising Derby Day. It also has an ‘honesty box’, where staff can contribute the equivalent cost of postage, phone calls and couriers that they have used for personal reasons.

“Doing all this sends out a clear message to potential staff and clients about the sort of people we are,” argues Kay. “Interviewees have started asking what we do to give to charity, especially in the past 18 months.

“Furthermore, because we have built a strong relationship with them, people from the NSPCC frequently visit us to talk about how our donations are being spent. This is having a great effect on staff morale. In the past two years, we’ve seen a 75% increase in staff satisfaction in the employee survey.”

She offers this advice to anyone who is considering setting up a scheme: “Don’t rush headlong into it. Be clear about why you want to do it, ensure you involve your staff in planning the scheme, and make sure senior management has a clear understanding of the long-term potential benefits of running the scheme. Then, when it’s up and running, constantly make sure everyone knows what is happening, the impact on the company, and how much of a difference you are making to your charity.”

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