Just how beneficial and widespread are payroll-giving schemes?
Payroll giving, also known as give as you earn, allows employees to donate to UK charities directly from their pay before tax, but after national insurance contributions (NICs).
From an employee’s perspective, donating to charity becomes simple and tax efficient. But for an employer, there is the opportunity to match these donations. Not only will this help demonstrate its corporate social responsibility, but also allow it to offset these payments against profits, helping to reduce its tax bill.
However, there are costs involved. Employers must use an HM Revenue and Customs-approved payroll agency, which might charge an administration fee. Agencies usually deduct this from employees’ donations before passing them to the charity, but employers can opt to pay the fee so the charities get more money. Organisations can also deduct any costs incurred in running the scheme from their business profits before tax.
The Chartered Institute of Personnel and Development’s (CIPD) Reward management survey, published in April 2022, found 20% of employers offered all their employees a payroll-giving scheme. However, our research revealed several divides.
For instance, while 38% of large employers, employing 250 or more people, offered this perk, just 9% of small- and medium-sized workplaces, employing fewer than 250 people, did likewise. Or, while 32% of retail, hospitality, catering, leisure, and cleaning sector firms provided this benefit, just 19% of legal, financial, and other professional service firms offered their well-healed staff such a facility.
Why don’t more employers offer payroll giving? It might be the case that employers, especially smaller ones, are unaware of payroll giving. Also, until recently, many workers have experienced a fall in their real earnings, meaning they had less disposable income for donating. Against such a backdrop, workplaces might have shied away from offering payroll giving.
With wages now increasing faster than inflation, it might be the time for HR teams to consider whether payroll giving makes sense for their organisation and its people.
Charles Cotton is senior pay and reward adviser at the Chartered Institute of Personnel and Development (CIPD)
