The Payroll Giving Scheme is free for companies to set up and provides a tax-efficient way for employees to donate.
But what is Payroll Giving? Payroll Giving allows employees to donate directly to their charity or charities of choice from their wages before tax.
How Payroll Giving Works
Employers must set up a Payroll Giving scheme and employees can then sign up and donate to charity directly from their salary.
Employees’ donations are taken after National Insurance contributions have been deducted and before tax. This means that employees can enjoy as much as 45% tax relief depending on their tax bracket.
How Does A Business Set Up Payroll Giving?
A business will first have to find a Payroll Giving Agency. The agency will then work with the chosen charities to transfer the money over to them every month.
When choosing a Payroll Giving Agency, businesses may want to find out whether they charge an administration fee. Employers can choose to pay these so charities receive all of the Payroll Giving donations. Alternatively, it can be taken from the employee’s donations.
Businesses can find Payroll Giving agencies that have been approved by HMRC. Alternatively, they can visit APGO (Association of Payroll Giving Organisations) for further information.
The Benefits Of Payroll Giving Schemes
Payroll Giving offers a range of great benefits to employees, employers, and UK-registered charities. It is a quick and easy way for people to support their favourite charities.
Here are some of the main benefits:
Charity benefits of Payroll Giving
Charities benefit from regular payments that they can rely on. Sporadic donations are great, but it is easier to plan how the money can be spent when they know what will be given and when.
Gift Aid is a great way for charity donations to enjoy tax relief. However, it does involve a lot of time and effort to process this. This does not have to be done with Payroll Giving. This is because your donation is taken after your National Insurance contributions and before income tax.
Employee benefits of Payroll Giving
Payroll Giving offers employees an easy way to give to charities. After an employee signs up for Payroll Giving it is taken directly from their wages. This makes the whole process of charitable donations more straightforward than ever before.
Tax relief on donations ensures that they go even further. This gives the employee peace of mind knowing they have given in the most efficient way possible.
Employer benefits of Payroll Giving
Companies can benefit from Payroll Giving as it helps to create a stronger community within the workplace. It can also help a business’s public image and help to illustrate the core values to customers.
FAQs
Can employees get benefits from charities under the Payroll Giving scheme?
Employees can receive low-value items including newsletters, badges, or stickers.
If a charity offers benefits including free or discounted tickets or entrance to properties or events it will be ineligible for Payroll Giving.
Why do people set up Payroll Giving?
Payroll Giving is a great way to support eligible charities. This can enhance the reputation of a business and is a great way to display the business’s stance on corporate social responsibility.
Do employee contributions continue if they move to a different company?
If an employee is contributing via Payroll Giving, leaving their role will end this. The final donation would come from their last pay.
To continue making contributions to their chosen charity, an employee will have to ask their new employers to set up Payroll Giving for them.
Conclusion
The Payroll Giving scheme is a quick and easy way for employees to donate money to a chosen charity. If there are different charities the employee wants to support, it is also possible to give to more than one charity.
Employers can promote payroll giving among their teams. There are even a variety of ways to match employees’ donations to encourage people to join.
An HR payroll team or accountant will be able to set up the scheme by contacting a dedicated Payroll Giving Agency.
Because the scheme sees donations deducted from employees’ pay before tax, it is also one of the most efficient ways to give to charity.
Sources
https://www.freshbooks.com/en-gb/hub
https://squareup.com/gb/en/glossary
https://www.sumup.com/en-gb/invoices/dictionary/
https://fmpglobal.co.uk/resources/useful-info/what-is-payroll-giving/
https://www.bliss.org.uk/support-bliss/how-your-company-can-help/payroll-giving