The Payroll Giving Scheme: What You Need to Know

The Payroll Giving scheme, also known as Give as you Earn (GAYE) or Workplace Giving, has been introduced in the UK to allow employees to donate regularly from their salaries (or pensions, if retired) and get immediate tax relief on their donations. We have put together the basic things one should know about the scheme, depending on who they are:

The Employer/Company Perspective

All official rules for Payroll Giving are listed in here. Employers do not have to run a Payroll Giving scheme but, in practice, most do and all it takes is for an employee to ask (and a company to agree). We’ve summarised what you should keep in mind:

Setting Up

• In order to run Payroll Giving the company needs to contract a Payroll Giving Agent registered with the HMRC. You can see here the list with all Payroll Giving agents approved by the HMRC;
• Payroll Giving agencies must be registered charities, “approved by HMRC for the purpose of acting as an agency under the Charitable Deductions (Approved Schemes);” You may also come across other entities providing this service. When trying to decide the best way forward, keep in mind that such providers will subcontract HMRC-approved agents. This means that you might have to pay twice – once for their software, and once for the percentage charged by the Payroll Giving agent. This also increases the level of your paperwork and chances of errors.
• The usual amount an agent charges is 4.5% of every processed transaction, but there are cheaper options – for example, you may opt for a fixed-price package, depending on the number of employees your company has.

The Details

• The agent needs to provide employees with a signup form (preferably online) which serves to authorise the employer for the deduction, and inform the agency;
• Payroll Giving agencies cannot pass the employees’ details on to charities without the donor’s clear consent;
• Employees do not need to disclose what charities they are giving to their employers – they can send the names of the charities directly to the agency; ideally, you would use a platform allowing each employee to have an individual account where they see their history, apply for new payroll giving donations and amend old ones;
• There is no limit on the number of charities employees can support;
• Make sure your provider also offers you ongoing technical support;
• Gift Aid cannot be claimed on Payroll Giving donations (because, as Payroll Giving donations are subtracted from salaries before taxes, the government has already applied a tax relief on them);

Easy Steps Afterwards

1. Your employees sign up via the link/form provided by the agent.

2. On a monthly basis, the Payroll Giving agent builds a report and sends it to your payroll team. This report summarises which employee is donating how much, and the total amount to be deducted from their payroll slip for the next month. Your payroll team applies the deduction.

3. The Payroll Giving agent needs to locate and establish contact with the charities selected by employees, vet them and collect their bank account information to send them the donations.

4. The agent should provide you with the option to match your employees’ donations, although this is a feature that is not mandated by law. The companies that have it and use it, however, will see a significant uptick in employee satisfaction.

4. The agent invoices the company and then settles with the charities after receiving payment (usually within 60 days).

Note that once an employee signs up for the Payroll Giving scheme, the salary deduction starts the following month. This is due to the fact that all donations are compiled at the end of the month when the previous month payroll has already been completed.

The Employee Perspective

If you have a cause or charity you want to support on an ongoing basis, then a Payroll Giving scheme is probably the easiest way for you to not have to make monthly arrangements to donate money. You can arrange for your chosen sum to be extracted from your monthly wages by your company, as long as they are running a Payroll Giving scheme. The donations will be taken out before tax is deducted. So start by asking them whether they have this option for their people.

Here are a few things to keep in mind:

1. You can’t donate to a community amateur sports club (CASC) through Payroll Giving.
2. There is no minimum amount you can donate, but the standard is £1. The tax relief you get depends on the rate of tax you pay. To donate £1, you pay:

• 80p if you’re a lower rate taxpayer
• 60p if you’re a higher rate taxpayer
• 55p if you’re an additional rate taxpayer

We hope you enjoy using this great tool to do good in the world, and find the right causes and charities to support. If you’re struggling with that, have a look here. If you are looking to develop your CSR strategy, or get started on one, read our guide here.

(KindLink is the technology platform supporting corporates in managing their CSR, offering features ranging from CSR strategy development and Payroll Giving scheme to measuring SDGs, employee engagement and volunteering opportunities marketplace)