Feature – In depth: Payroll giving

Case studies: Argos Retail Group, Wanadoo

Article in full
According to the old saying, charity begins at home but growing interest from UK employers means it could well start in the workplace.

The reason: American-born payroll giving, which allows employees to donate money to the charity of their choice, tax free, direct from their salary. And after a slow start since its inception in the UK during the 1980s, renewed government assistance and a 2005 -launched initiative, mainly aimed at small- and medium-sized organisations, has seen payroll giving rising steadily up the corporate agenda culminating in record donations of £83m last year.

Regardless of organisational size, the government pays the tax on each donation, so that every £10 that a base-rate taxpayer donates, the cost to the employee will be £7.80.

Wendy Green, chief press officer at Charity Aid Foundation (CAF), says: “All employers really must do is collect the money, send it to us, and we will send it on, it is as simple as that. Obviously, there are some large charities which are popular, but staff can donate to smaller, local organisations too. It’s their choice where the money goes. The advantages are that the employee is saving money on donations, the charity is receiving a regular, steady income and the employer is seen to be integrating corporate social responsibilities.”

The largest financial donor through payroll giving is the Royal Bank of Scotland (RBS), which operates a double match scheme where the company doubles any donation made by their employees. Nicola McGowan, assistant manager of media relations at RBS, explains: “Community investment programmes are very important to us. Fundraising for local schools and local charities are essential because this is what matters to our employees.

“We don’t let corporate big-wigs tell our staff where they should put their donations, it is up to the individual.” And the government has shown consistent support for payroll giving by adding, removing and adjusting legislation during the past five years in order to increase the scheme’s popularity and effectiveness.

In March 2000, the government made two crucial changes to payroll giving. Not only did it remove the £1,200 ceiling and allow unlimited individual donations to be made, it also agreed to supplement all donations with an extra 10% until 2004.

The removal of the donation ceiling allowed for huge one-off payments during times when charities were desperate for funds. The Asian tsunami was one such instance, when £2.1m was donated.

“We were obviously able to collect many sizeable donations in a very short space of time, something that would have been difficult before the cap was lifted,” Green explains.

At the beginning of 2004, the government decided once again to help contribute to payroll giving and sought to promote the scheme within small- and medium-sized firms with 500 employees or less, an area where payroll giving appeared less popular.

This was done through grants of up to £500 to cover set-up costs and a government promise to match all donations up to £10.

Overall, government help has seen payroll giving’s income escalate rapidly over the past five years, and the last recorded yearly donation stood at £83m, a £30m leap from 2000.

However, problems do exist for providers of the payroll giving scheme, and although it has been in place in the UK for almost 20 years, an RBS survey has revealed that only half of the working population actually know what payroll giving is – a significant problem.

“Getting the message out there about payroll giving is the biggest hurdle of all. We do encourage all employees who use the scheme to spread the word and try to take the concept to new organisations when they move. Where we can, we also ask employers to encourage the scheme as much as possible within their organisations,” admits Green.

The problem of getting the message across also exists for employers. Carol Hamilton, Community Pru executive at Prudential, where payroll giving has been available to employees for over ten years, says: “We have had to make special efforts to make our employees aware the benefit exists. However, since we decided to match donations for certain charities in 2003 the amount of participants in the scheme has certainly picked up.”

Prudential organises road shows, distributes leaflets and posts messages on its company intranet to encourage more employees to take part. “Having the options presented to them has helped us say, ‘remember you can give to charity as well’,” explains Hamilton.

There is also a belief that the scheme is time consuming and demanding to run. According to Green, however, this is a misconception because the provider will accept the majority of the administration and responsibility. “We need to change employers’ minds, there can be administration involved, but that’s what we are here for.”

Her view is shared by Prudential’s Hamilton: “It is not an onerous task. We did not have to take on new staff, we manage it all internally, and the technology available today makes it even easier to control.”

With many employers not fully understanding the concept of payroll giving, CAF and other providers attend exhibitions, provide workshops and organise events to try and raise the scheme’s profile.

National Giving Week, last held in October last year, is one such event, appealing to all employers to do something for charity, whether it is matching donations pound for pound, or arranging charity fundraisers.

“This was the second year we have run the campaign, and although it is a good opportunity for us to raise charity money, it is also a chance for us to raise payroll giving’s profile, which is extremely important,” Green explains.

Case Study: Argos Retail Group
Out of its 23,000 employees, 2,800 staff at Argos Retail Group take part in its give as you earn scheme.Lorna Liggit, charities manager at Argos, would like more employees to take part, but admits it can be difficult to convince new staff to join. “The challenge is keeping it high profile and encouraging our staff to use the scheme,” she says.

The charities team constantly promotes the scheme to employees via the intranet and various Argos publications, reminding staff that the benefit is available.

Argos also welcomes visits from fundraising organisation Hands on Helping, which supports payroll giving providers by presenting to employees and explaining the benefits of tax-free giving. “We promote via the Argos Post, but more importantly with regular visits from Hands on Helping, to stores, distribution centres and head office to inform employees about the scheme,” explains Liggit.

Argos was also involved in National Giving Week, in October last year, when it showed its support for tax-free giving by matching all staff donations pound for pound for an entire month. Argos pays all administration costs (4% per donation) to its provider, Charities Aid Foundation, ensuring that all employee donations go in full to their chosen charities. The last recorded yearly donation from Argos was in the region of £70,000.

Case Study: Wanadoo
Broadband provider Wanadoo employs 500 staff, of which 40 take part in the payroll giving scheme which it has been running since August.Andy Archer, talent reward manager at Wanadoo, explains: “We decided at the start of the year we wanted to take advantage of the scheme because of the grants that are available from the government for smaller companies. We also thought, being a relatively small company, it would be a manageable scheme to run.”

Wanadoo was given the full £500 grant from the government to help set up its payroll giving scheme and promote it to staff. “We have had regular visits from our provider, Workplace Giving UK, [when it ] will go through promotional ideas with us and also spend the day talking to employees and explaining payroll giving’s benefits,” says Archer.

Provided it is a UK charity, employees can donate to the charity of their choice, which according to Archer is “a very popular aspect of the scheme among employees. The fact that our staff can give to local community charities seems to be the real benefit.”

Wanadoo does not have a total amount that it is aiming to reach through donations each year, but Archer says: “We can’t force people to join, but I would be pleased if we have 30% of staff participating within a year.”